Gifting Retirement Assets Wisely: How to Transfer IRAs, 401(k)s & More

Transferring retirement assets such as IRAs and 401(k)s can be a powerful way to support loved ones or charitable causes, but it requires careful planning to maximize benefits and minimize tax consequences. Understanding the latest IRS rules and strategic options is essential for making wise decisions—especially for business owners considering a 401 (k) pooled employer plan in Riverview.

Annual Gift Tax Exclusion and Lifetime Exemption

• Annual Gift Tax Exclusion: For 2025, you can gift up to $19,000 per recipient without triggering gift tax reporting requirements. Married couples can combine their exclusions for a total of $38,000 per recipient.
• Lifetime Gift and Estate Tax Exemption: The exemption is $13.99 million per individual in 2025, or $27.98 million for married couples. This exemption is set to increase to $15 million per individual in 2026.

Gifts exceeding the annual exclusion reduce your lifetime exemption but do not immediately trigger taxes unless your total gifts surpass the exemption threshold.

IRAs

• Direct Transfers: You can transfer IRA assets to another IRA account holder through a trustee-to-trustee transfer, which avoids taxes and penalties.
• Inherited IRAs: Non-spouse beneficiaries must generally withdraw the full balance within 10 years, per the SECURE Act.
• Qualified Charitable Distributions (QCDs): If you are age 70½ or older, you can transfer up to $108,000 of IRA funds directly to charity in 2025, tax-free (though not deductible).

401(k)s

• Direct Rollovers: You can roll over a 401(k) to another qualified plan (such as an IRA or another 401(k)) without tax consequences if done correctly.
• Beneficiary Designations: Always keep beneficiary forms updated to ensure assets transfer according to your wishes.
• Pooled Employer Plans: For business owners, a 401 (k) pooled employer plan can streamline administration and offer cost efficiencies for small businesses, making it easier to manage and eventually transfer retirement assets.

• Tax Implications: Distributions from traditional IRAs and 401(k)s are generally taxable to the recipient. Roth accounts, if qualified, can be distributed tax-free.
• Charitable Giving: Consider using QCDs for tax-efficient charitable gifts if you meet the age requirement.
• Estate Planning: Large gifts in 2025 can help lock in the higher exemption before potential reductions in 2026.

1. Review Contribution and Gifting Limits: Stay updated on annual and lifetime limits to avoid unnecessary taxes.
2. Consult a Financial Advisor: Professional guidance is crucial for complex transfers, especially with IRAs, 401(k)s, or pooled employer plans.
3. Update Beneficiary Designations: Ensure all retirement accounts reflect your current wishes.
4. Consider a 401 (k) Pooled Employer Plan in Riverview: For business owners, this can simplify plan management and enhance employee benefits.
5. Document Gifts Properly: If you exceed the annual exclusion, file IRS Form 709 to track your lifetime exemption usage.

A 401 (k) pooled employer plan in Riverview allows multiple employers to participate in a single retirement plan, reducing administrative burdens and potentially lowering costs. This structure is ideal for small businesses seeking to offer competitive retirement benefits while simplifying compliance and future asset transfers.

Final Thoughts

Gifting retirement assets—whether through IRAs, 401(k)s, or pooled employer plans—requires strategic planning to maximize benefits and minimize tax exposure. By understanding current IRS rules, leveraging annual and lifetime exemptions, and considering innovative solutions like a 401 (k) pooled employer plan in Riverview, you can transfer wealth efficiently and wisely.

For personalized advice on gifting retirement assets or setting up a 401 (k) pooled employer plan, contact Target Retirement Solutions today.