IRA DB Partially Payable to Charity
IRA owner died in 2007. 50% of DB is payable to a charity. I suggested the charity take out 50% of the RMD for 2007, then request 50% of the balance after the other bene takes out their 50% of the RMD. Then the personal bene can do a stretch on their balance. Does this sound correct?
Permalink Submitted by Alan Spross on Mon, 2007-08-20 23:18
It would be fine, but appears to contain some unnecessary steps.
Since the amount payable to the charity will satisfy 401A(9)B, if the 50% share is made payable to the charity in a lump sum, the RMD requirement will be automatically satisfied without even determining if the decedent had satisfied the requirement. That will also get the charity’s interest out long before the critical date of 9/30 following year of death. Don’t know whether this can be easily explained to the IRA custodian. 401(A)9 applies to distributions regardless of the tax status of the distribution eg. tax free to charity, return of basis to beneficiary, or even NUA under a 401k plan.
This will also preserve some tax deferral for the eventual designated beneficiaries as well, since no part of their interest needs to be distributed prior to 2008, when they should have separate accounts using their own single life divisors.