Charity as contingent IRA beneficiary
Married clients, age 55 (H and in poor health), age 59 (W). W has IRA of $45K and H has IRA of $15K. H has 401k of $210K. They have named each other as primary beneficiary. They want to name a charity as contingent beneficiary on these items. If H dies first, W would roll the 401k into her IRA? If W dies first, how does the 401k pass to the charity? Should the contingent beneficiary be the charity or the estate? What guidelines can you provide me in structuring their estate plan re this matter? Can you refer me to any publications that could educate me on these matters? Thank you.
Permalink Submitted by Al Fry on Sat, 2008-01-26 17:19
Regardless of who dies first, the surviving spouse can take over and continue IRAs and rollover any 401(k) balances to an IRA. W is close to age 59 1/2 and could probably roll over into her own IRA. If W dies first, H may want to go to inherited IRA until he is 59 1/2. Contingent benes are then eliminated (unless both die simultaneously). Surviving spouse can then name a charity or any other bene they choose. A charity as direct bene is usually the better choice than estate, as the charity (if qualified) will pay no taxes. Otherwise, the estate would have to pay income taxes on the plans.
Permalink Submitted by Jennifer Walz on Sat, 2008-01-26 19:24
Thanks for your help!