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Question for the Money Doctors

Question submitted on Jan 15, 2014.

Question

Can proceeds from a 457(b), nonprofit 501(C)(3)organization (I think this is nonqualified plan be contributed to a charitable remainder trust? Thank you.

Answer

The 457 plan is a type of retirement plan that is available for governmental and certain non-governmental employers. For the most part, 457 plans operate similarly to a 401(k) or 403(b) plans.The key difference is that unlike with a 401(k) plan, there is no 10% penalty for withdrawal before the age of 59½ (although the withdrawal is subject to ordinary income taxation).

So, the answer is yes - you can put the proceeds of a 457b distribution into a CRT however, you will first pay tax on the gross distribution of the 457 and then gain a charitable contribution when the proceeds are put into the CRT.


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