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Good Planning is Recommended When Leaving IRAs to Charities

06.05.19 written by

Several ways exist for individuals to leave assets to their favorite charities. The following are some examples of how that can be done:

  1.  Outright gifts to charities;
  2. Using your will and trust to make gifts to charities by making specific gifts in those documents; 
  3. Naming charities as beneficiaries of life insurance policies;
  4. Creating Charitable Trusts;
  5. Establishing a charitable gift annuity;
  6. Establishing a donor-advised fund; or
  7. Naming the charities as beneficiaries of your IRAs or other retirement assets.

Completing the beneficiary designation document for an IRA is a very easy process.  You can name individuals, trusts, or charities.  It is very easy to complete the beneficiary designation form and name a charity.  However, sometimes IRA custodians require charities to open IRA accounts with the custodian. After that IRA account is established, then funds can be transferred into the charity’s IRA. This process can be burdensome on the charity because sometimes charities are required to provide additional information about the charity.  Some of the requested information includes the names, addresses, and other personal information about the charities’ Board of Trustees.  This may sometimes be unworkable due to the size of the charity. Therefore, there may be a simpler solution to leave your IRA to a charity than simply naming the charity or charities as beneficiaries on the beneficiary designation form.

For example, it may be easier to establish a Donor Advised Fund with a local foundation. Then, on your IRA beneficiary designation, simply name your Donor Advised Fund as the beneficiary of your IRA. In all likelihood then, the Donor Advised Fund’s organization will handle the paperwork as it relates to obtaining the IRA funds from your provider. Therefore, the transfer of an IRA from an individual to a charity at death can be simplified with the use of a Donor Advised Fund.

If interested in this type of charitable planning, please make sure that you contact your estate planning attorney and CPA for further information so that your specific situation can be addressed.

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

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