Recently, retirement accounts have become a favored asset to leave to charity because the assets often have never been taxed for income tax purposes. If you leave these assets to your children or other heirs, they can incur an income tax liability in addition to estate taxes that may have already been paid by your executor. If, on the other hand, you leave the assets to a qualified charity, such as Gonzaga, you can avoid this double taxation.
Many financial planners are now advising their clients who wish to include a charity in their estate planning to leave retirement account assets to charity and use other assets such as long-term appreciated property to make their bequest to family. There’s a hidden advantage to this strategy: You not only avoid the double taxation problem but your heirs, who receive the appreciated property, are generally entitled to a stepped-up basis to the property’s fair market value at death.