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IRA: A Sweet Way to Enhance Bequest and Save Taxes

Claude and Judy GianettoWhen Claude Gianetto'56, MD, and his wife, Judy, prepared their will in the mid-1970s, $25,000 would more than cover the full cost of attending Beloit for four years.

That was how the Boulder, Colo., couple decided to put a $25,000 unrestricted bequest to Beloit College in their estate plan 35 years ago.

Today at Beloit College, tuition, room, board and fees total more than $40,000 for just one year. So when they reviewed their will last October upon Claude's 75th birthday, the Gianettos decided they wanted to increase their bequest to the College to be more in line with current costs. But they didn't want to incur attorney fees for such a simple change in their will document.

A retired internist, Claude is appreciative of his Beloit experience. In addition to the lifelong friends he made through Beta Theta Pi and Buccaneer football, he has fond memories of professors who challenged him to accomplish far more than he thought possible. "Beloit was a very good experience that prepared me well for life," Claude says.

By looking at their IRA beneficiary designations instead of altering their will, the Gianettos have been able to avoid attorney fees. Their financial consultant, Jackie Johnson, vice president of The Wilkins Investment Group in Denver, advised Claude to name both Judy and the College as primary beneficiaries to his IRA. They designated $25,000 as the amount they want Beloit to receive from the IRA, to initially double the amount specified in their original estate plan. They plan to add a similar amount at age 80 and again at age 85 to reach a total of $100,000. The additions can be adjusted pending market behavior, a family crisis or health needs. "Who knows?" Claude says. "If I live beyond 85, Beloit College may benefit even more."

The strategy also removes taxable assets from Claude's estate down the road. Proceeds from a traditional IRA are always subject to income tax and could be subject to estate tax, too, depending on the size of the final estate and estate tax laws in force at the time. "It's a pretty sweet way to go, and it gives me total control of my gift," Claude says of his IRA gift plan.