Retirement fund balances can be rolled over to a spouse after your death without estate tax consequences. However, many people are unaware that the unused portion of their retirement plan can be taxed up to 70% when they are given to a child or other heir after the death of the owner and his or her spouse. A gift of retirement assets to Lafayette College can avoid estate and income taxes and benefit a program or department that is meaningful to you. Here are ways to do this:

• Designate Lafayette College as a beneficiary of your retirement fund.
• Designate Lafayette College as a contingent beneficiary after the death of your spouse.
• Fund a charitable remainder trust through Lafayette College with the retirement plan's proceeds that will pay income to a survivor. Your advisor will help you create the trust in your will.

Leaving retirement assets to Lafayette will ensure that your estate will receive a charitable deduction for the full value of the donated assets. Retirement plans often represent a significant portion of an individual's estate and it is important to consult with your attorney or financial planner.

Example of donating retirement assets to Lafayette rather than an heir: Martin's estate will be taxed at the top rate. Among his assets he has retirement assets of $300,000 and appreciated securities also valued at $300,000. He would like to leave $300,000 to his daughter and $300,000 to Lafayette. If he leaves the retirement assets to his daughter and the stock to Lafayette, the retirement assets will be subject to both estate and income taxes, leaving his daughter with as little as $90,000. No tax will be paid on the stock's appreciation because it's going to a charity and Lafayette will receive the full $300,000 value of the stock.

If Martin leaves the retirement assets to Lafayette and the stock to his daughter, the $300,000 in retirement assets will pass to Lafayette with no estate or income tax due. His daughter will have to pay estate tax on the stock, but she won't have to pay income tax and will receive most of the $300,000 stock value. Also, she will get a stepped-up basis in the appreciated stock, which will reduce or eliminate capital gains tax on a later sale of the stock.