Skip to Content

Q & A: Inheritance Basics

Many families have questions about inheritance. Learn the answers to some of the more common questions related to this important topic.

Q. My wife contends that she can inherit my retirement plan assets tax-free upon my passing. I’m not so sure. Who’s right?
A. For the purposes of harmony in your home, you’re both right. Your wife is correct in that she has the ability to defer taxes on your retirement plan assets through, for example, a spousal rollover IRA. You are also right, however, in that whenever your wife makes a withdrawal from the spousal rollover, she will pay income tax on the amount withdrawn.

Q. I plan to leave my 401(k) to my children after my lifetime. How much will they pay in taxes?
A. It depends. Because this type of inheritance is treated as ordinary income, the taxes your children owe will depend on the marginal tax rate in which they fall. One of the downsides of leaving a 401(k), IRA or other retirement plan asset to your children is that they may likely receive it during their peak wage-earning years—when they’ll lose the greatest percentage to taxes. If they don’t want it all in a lump sum, they can, in most cases, stretch out their distributions (and hence some taxation) over their lifetimes beginning the year after your passing.

Q. I’d like to make a charitable donation from an IRA. What’s the next step?
A. You can designate the YMCA of San Diego County as the beneficiary of a percentage of your IRA assets. The full value of the funds given to us will then go to support our mission (income taxes will not erode their value). To make your gift, you simply need to complete a beneficiary designation form, naming the YMCA of San Diego County as beneficiary and specifying the percentage to go to us. This designation is completely revocable during your lifetime, and your estate will receive an estate tax charitable deduction for our share.

Have More Questions?

We are here to help! Feel free to contact Shelly McTighe-Rippengale at smcrip@ymca.org or 858-292-9622 x107.

eBrochure Request Form

Please provide the following information to view the brochure.

A charitable bequest is one or two sentences in your will or living trust that leave to the YMCA of San Diego County a specific item, an amount of money, a gift contingent upon certain events or a percentage of your estate.

an individual or organization designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan

Bequest Language

I, [name], of [city, state, ZIP], give, devise and bequeath to YMCA of San Diego County [written amount or percentage of the estate or description of property] for [purpose of gift or general] purposes.

able to be changed or cancelled

A revocable living trust is set up during your lifetime and can be revoked at any time before death. They allow assets held in the trust to pass directly to beneficiaries without probate court proceedings and can also reduce federal estate taxes.

cannot be changed or cancelled

tax on gifts generally paid by the person making the gift rather than the recipient

the original value of an asset, such as stock, before its appreciation or depreciation

the growth in value of an asset like stock or real estate since the original purchase

the price a willing buyer and willing seller can agree on

The person receiving the gift annuity payments.

the part of an estate left after debts, taxes and specific bequests have been paid

a written and properly witnessed legal change to a will

the person named in a will to manage the estate, collect the property, pay any debt, and distribute property according to the will

A donor advised fund is an account that you set up but which is managed by a nonprofit organization. You contribute to the account, which grows tax-free. You can recommend how much (and how often) you want to distribute money from that fund to the YMCA or other charities. You cannot direct the gifts.

An endowed gift can create a new endowment or add to an existing endowment. The principal of the endowment is invested and a portion of the principal’s earnings are used each year to support our mission.

Tax on the growth in value of an asset—such as real estate or stock—since its original purchase.

Securities, real estate, or any other property having a fair market value greater than its original purchase price.

Real estate can be a personal residence, vacation home, timeshare property, farm, commercial property or undeveloped land.

A charitable remainder trust provides you or other named individuals income each year for life or a period not exceeding 20 years from assets you give to the trust you create.

You give assets to a trust that pays our Association set payments for a number of years, which you choose. The longer the length of time, the better the gift tax savings to you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members at a minimal cost.

You fund this type of trust with cash or appreciated assets—and receive an immediate federal income tax charitable deduction. You can also make additional gifts; each one also qualifies for a tax deduction. The trust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. When the trust terminates, the remaining principal goes to the YMCA as a lump sum.

You fund this trust with cash or appreciated assets—and receive an immediate federal income tax charitable deduction. Each year the trust pays you or another named individual the same dollar amount you choose at the start. When the trust terminates, the remaining principal goes to the YMCA as a lump sum.

A beneficiary designation clearly identifies how specific assets will be distributed after your death.

A charitable gift annuity involves a simple contract between you and the YMCA where you agree to make a gift to the YMCA and we, in return, agree to pay you (and someone else, if you choose) a fixed amount each year for the rest of your life.

Personal Estate Planning Kit Request Form

Please provide the following information to view the materials for planning your estate.