ira giving

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.




Did yesterday’s election help the chances for the IRA Rollover?

Probably not.

I wish that I could report that immediate IRA giving was back on (or really close).  Check out this article from  (the cool picture is from ThinkAdvisor, too)

Not good news for nonprofits fundraisers looking for an extra boost from IRA gifts. In sum, the whole “tax extender” package is projected to cost $85 billion and no one in Congress has revealed where the funds will come from to “pay” for these tax deals. Yikes.

IRA Rollover Update – Almost there?

We’re getting closer to having an IRA giving option again.

The House Ways and Means Committee actually voted yesterday to permanently extend the IRA Rollover! (click here to read more about this as well as some other cool potential legislation they passed – no reason to comment yet on the rest as the likelihood of actual enactment seems too slim)

Don’t get too excited though.  The Senate is doing something completely different with tax extenders this year, which makes us wonder how and when it will all turn out (check out this article for a more indepth discussion).

We’ll see by the end of the year or even next year what happens on this.  Stay tuned.


More interesting opportunities from Fiscal Cliff version of IRA law

One of the stranger parts of the standard IRA giving rules, to me at least, is that donors can not use the Charitable IRA Giving Provision until they reach age 70.5 (according to the IRS – the day after your half-birthday).  This was meant literally – don’t request that IRA gift until you reach that actual date (even though you are obviously turning 70.5 in the particular year).

For donors interested in taking advantage of IRA giving, and who are turning 70.5 in January this year, it appears that you can take advantage of the two retroactive features of the IRA reinstatement (either matching a December IRA withdrawal with a check to a charity or instructing your IRA administrator to transfer IRA funds to a charity – if either happen in January after you officially turn 70.5).

In other words, it appears as though donors who were not able to use the IRA giving provision in 2012 (because they were not yet 70.5) might have a chance to use it in January (as long as they turn 70.5 before using it) for 2012 under this special rule.

Of course, anyone turning 70.5 in January 2013 does not have to take their first RMD until April 1, 2014!  Since they are not required to withdraw funds from their IRAs yet, this loophole may not mean much.   Anyway, if such people want to use the IRA giving law to offset their expected RMDs for 2013, they should probably wait until February to make their IRA gifts in lieu of RMDs.

This last point is an interesting one for people turning 70.5 in January.  Technically, you will not have to take your RMD until April 1, 2014 – pushing off the tax bite until 2014’s tax return.  But, you will also have a 2014 RMD, so that year you could have a double RMD tax hit.  Maybe making a gift to charity from your IRA is a nice way to lesson that tax bite? Just a thought.