Beneficiary designations live outside your will. Updating one is usually a single form, and it can be one of the most tax-efficient ways to leave a legacy gift.
How it works
Most retirement accounts (IRAs, 401(k)s, 403(b)s) and life insurance policies let you name beneficiaries directly with the account custodian or insurer. These designations supersede whatever your will says — the assets pass directly to the named beneficiaries.
You can name a nonprofit as a primary beneficiary (receiving 100% of the asset), a partial beneficiary (e.g., 25%), or a contingent beneficiary (receiving the asset only if a primary beneficiary predeceases you).
Why donors choose this option
There’s no attorney needed — most custodians provide a one-page form on their website. Updates are immediate and revocable.
For retirement accounts specifically, beneficiary designations to nonprofits are particularly tax-smart: those assets would otherwise be subject to income tax when inherited by an individual, but pass to a nonprofit tax-free.
Tax considerations
Inherited retirement-account assets are generally subject to federal (and sometimes state) income tax for individual heirs. A nonprofit, as a tax-exempt entity, pays no such tax — so designating a nonprofit as beneficiary of a retirement account can mean the full value reaches the cause rather than being reduced by taxes.
Life insurance proceeds are generally not taxable as income to either an individual or nonprofit beneficiary, so the tax advantage is less pronounced — but the simplicity of a beneficiary change still makes life insurance a clean way to make a legacy gift.
Getting started
Contact your account custodian or insurer (or log in to their website) and request a beneficiary change form. You’ll need the nonprofit’s legal name, address, and EIN — which the nonprofit can provide if you ask.
