Thou Shalt Not …

The same theory holds true if the donor keeps these assets during her lifetime and gives them away after death. If the donor leaves these assets to heirs, the heirs must pay the income tax. Again, the taxable event cannot be avoided.

Charitable bequests of these same assets are more appealing. Leaving a savings bond, commercial annuity, IRA or retirement plan to charity at death avoids the taxable event as the nonprofit benefits from a zero- income tax bracket. The donor’s estate becomes eligible for an estate tax charitable deduction, reducing potential estate taxes more.