New Planned Giving Option Discovered? Restricting IRA Beneficiaries?


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In conversations with an advisor and a nonprofit client last week, we stumbled upon a potential planned giving option that I have never considered or heard discussed before.  Did you know that many or most IRA plans allow you to restrict how your beneficiaries receive an inherited IRA?  You could essentially create an income stream from the IRA with the remainder going to charity.

The idea came from this simple scenario.  A woman looking to leave her IRA to my client inquired whether it can be set up to give fixed income to her husband for life and the remainder to the charity client after the husband’s passing (or, directly to the charity if he predeceased her).  And, she didn’t necessarily want to give the husband access to the principal.  Hmmm.

So, I took a quick look online and quickly discovered that IRA plan administrators typically offer individuals plenty of control over how their beneficiaries can receive their inherited IRAs.  One typical option allows you to fix the first beneficiary with a fixed annual payment (not sure how that works out but it does) with no access to the principal.  And, then you can choose the charity to be the contingent beneficiary.

Click the picture and you can see how TransAmerica does it. Or, click here and see how John Hancock offers restrictions on their forms.

Ironically, in discussing this issue, we also mentioned that the nonprofit had a gift annuity program that could do the same thing – fixed income and remainder charity.  All the donor needed to do was list the nonprofit as primary beneficiary and sign a separate agreement with the charity to establish a CGA for her spouse (if alive upon her passing) based on the ACGA rate applicable for her husband at that time.  And, the conclusion was that IRA to CGA made more sense!  Better for the charity, too.

Still, I plan on fleshing out the options with IRAs as I am convinced that IRA planning will become more important for planned giving discussions as the Baby Boomers finally move into planned giving territory.




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