Inherited IRA

Record numbers of IRA/401k millionaires and the SECURE Act

Here is the headline that caught my attention this morning:

There’s now a record number of 401(k) and IRA millionaires, according to Fidelity (click to view the article)

Not surprising.

Oh, did you notice the big IRA/retirement plan law changes at the end of 2019?  The SECURE Act?

Let me put this very succinctly.  Quietly, Congress made a few major changes to IRAs and retirement accounts with the SECURE Act.  Mainly, they sought to encourage people to have more retirement savings (like required minimum distributions now start at age 72, not 70.5; if you are working past age 70.5,  you can now continue to add to your IRA as long as you have earned income; and a few other points).

But, there is one huge change that runs right into the article above – Congress finally killed the Stretch IRA!

Look it up online – even though IRAs and other retirement accounts are heavily taxed, the big solution offered to large IRA account holders has been the so-called Stretch IRA.  These plans allowed the IRA account holders to choose a child or grandchild to inherit the IRA but then take the funds out over the recipient’s life expectancy – which could be a really long time.  This was the gold standard solution that lawyers to offered their clients.

Now those plans are trash! New law requires most recipients to take out the inherited IRA funds within 10 years!  Not so great for million dollar IRAs going to younger people – for lots of reasons.

Anyway, if you are interested in hearing my take on the new law, and some opportunities it offers the nonprofit world, click here to check out my recent webinar on the topic.


New Planned Giving Option Discovered? Restricting IRA Beneficiaries?


IRA pic









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.




Anything New Out There – Something About Inherited IRAs?

Small news blip a few days ago – something about the Supreme Court ruling that Inherited IRAs are now being subject to creditor claims in bankruptcy.

Click here to read an excellent piece on the topic from my favorite financial writer, Deborah Jacobs, summarizing the new legal revelations (as well as links to other background pieces).

What does it have to do with Planned Giving?

Actually, nothing directly.

But, as I have been stressing more and more in training sessions (click to check out our latest virtual sessions), IRAs will most likely become extremely important for planned giving among the baby-boomers. So, any extra comfort level you might have about IRAs, the better! Check out that article and other pieces from Deborah Jacobs on Forbes.

Ok, so what about the Charitable IRA Rollover?  Any updates?

Sorry, it’s probably a few months away from any real news on that front.