Gary W. Pelletier, CLU, ChFC, AIF®

Northeast Planning Associates, Inc.

Corporate, Estate

& Financial Planning


Naming a Charity as Beneficiary of Retirement Account

| February 19, 2019
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Towards the beginning of a new year is often a good time to review the named beneficiaries on your investment accounts.  This is important to do this on an annual basis as life can change quickly and it may not be on your radar to make sure your wishes are followed should something unexpectedly occur. 

While most people name family members, charities are also a common beneficiary.  Unfortunately leaving retirement assets to a charity or church is harder than it should be.  The issue is that many IRA providers require that a beneficiary of an IRA first open up an inherited IRA with the IRA provider, after which the beneficiary can choose to withdraw the money whenever they please.

Seems like a pretty harmless and standard requirement, right?  Unfortunately, for non-person beneficiaries like charities, the process of opening up an inherited IRA can be rather complex and burdensome.  Often times when opening up a beneficiary IRA, names, addresses, family/job info, taxpayer ID numbers and the like can be required of each board member.  This is something that those governing the organization may not want to do, and for those smaller outfits like a local church without much, if any, staff, the account-opening process can be quite overwhelming.

In place of naming the charity directly as a beneficiary, you may instead want to consider a Donor Advised Fund as a conduit to getting the money to charities.

Typically, Donor Advised Funds are well-staffed and familiar with all the account-opening processes.  This will allow the charities to simply collect whatever the donor intended without the administrative hassle.  As an added advantage, these funds allow flexibility to make changes to the charitable beneficiaries from time to time even after the death of the retirement account owner.

If you have some charitable intent with your retirement assets, it’s worth having a conversation about the best way to benefit your cause without administrative hurdles in place.

Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.

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