IRA Bequests & Paying Less In Taxes
Pastors usually incorporate teaching on generosity as a part of their church’s annual generosity campaigns. They may hit some of the major passages on stewardship, and a few obscure ones too. But the one thing that each one is convinced of is this: the most important principle in understanding stewardship is that God is the owner of everything. If we can grasp that spiritual truth then much of what follows falls in place.
The Bible teaches that God is the owner of all things. Every blessing we have has come from Him. We can’t take credit for anything or claim that we possess anything because we have earned it or deserve it. It’s all God’s and all that we have is from God. God is the owner and we are stewards that have been entrusted to care for the resources he has provided.
Stewards? What does that mean? A steward is a person who manages the owner’s possessions in a way that is consistent with the owner’s values. A steward doesn’t manage based on what he or she sees fit, a steward manages in a manner that is consistent with the goals and desires of the owner.
This principle can be illustrated by imagining 10 apples on a table. The 10 apples represent the blessings of God in our lives. If you’re like me, you may have grown up hearing about stewardship in terms of tithing (the practice of giving God 10% of your household income through the local church). God gives us 10 apples and wants 1 in return. That’s simple math that any elementary student can understand.
The problem with teaching stewardship that way is that it seems to suggest that if we give God His “one” apple, we have 9 remaining that we can use however we choose. That’s simply not how it works. They’re ALL God’s apples. You can give one or none, but they’re all His. Furthermore, people like you and me are accountable to the owner for how we use all 10 of them, not just whether or not we have given one to Him on Sunday.
Thomas was a widower who had a great love for his Church. As an individual who had directly benefited from the ministry he had received, Thomas wanted to thank the Church with a gift from his estate.
Thomas told his advisor that he wished to make a bequest to his Church. Thomas' estate included some stocks, real estate and an IRA. Thomas' advisor recommended that he give the appreciated stock and real estate to his children and leave his IRA to the Church.
If he gave the stock and real estate to his children, those assets would receive a step-up in basis at his death. His children could then sell them without paying tax. However, if he gave his children his IRA, the IRA would be subject to estate and income tax. After paying all of these taxes, very little would be left for his family. By giving the IRA to his Church, he could make a generous gift and avoid any additional tax for his estate and children. If Thomas wished to leave more to his children, he could do so through a life insurance policy which would pass to his children tax free.
The apostle Paul wrote, “A person who is put in charge as a manager (steward) must be faithful.” (1 Corinthians 4:2, NLT) That faithfulness encompasses our resource management during life as well as at the end of life. Good stewards show diligence in planning so that assets that would be heavily taxed can be given to fund God’s Kingdom without significantly impacting gifts to the heirs.
Your Church has provided experienced advisors to help you evaluate your assets and develop an estate design that will do the very same for you and your family. Through faithful stewardship you can provide for your family and give a transformational gift that will leave a lasting spiritual legacy.
