Beneficiary is estate, but estate goes to charity
We are encouraging a client to change their IRA beneficiaries from the estate. They currently have the estate named as the beneficiary of the IRA. The will then directs the residuary to be paid out in percentages–65% to various charities and 35% to individuals.
I want to make sure that I am correct in my thinking, that the charitable contribution under this arrangement does not qualify for the dni deduction like the individuals. It is possible to recieve a charitable deduction to offset the dni, but only if certain requirements are met.
If I am on track thus far, what are the situations that would disqualify the charitable deduction and cause taxes to be paid?
Permalink Submitted by Al Fry on Fri, 2007-11-02 15:18
The charities (or charitable trust if many charities) should be named directly for their share. If not, the estate might have to pay income taxes on the IRAs first, then the estate would make the distribution. If the charities are paid out prior to September 30 in the year following death, they will not be beneficiaries on the Designation date. Then individuals could be named for the other share. It might be safer to divide the IRA, so that the charity is the only bene on one and not the other. Then they can name individuals on the other one.