Charitable Beneficiary named with Natural Person Beneficiary
Client who is currently taking RMDs has named a charity (with a pecuniary amount) as a primary beneficiary along with his children (pro-rata). Since the charity is a non-natural person, will the other beneficiaries lose the ability to stretch out their IRAs, or will they be able to separate the IRA upon the client’s death, distribute the charity’s portion and use the stretch out for each child?
Permalink Submitted by Alan Spross on Thu, 2011-12-08 18:36
The children will be able to create separate accounts no later than the end of the year following father’s death, but this beneficiary structure will be costly to them if the separate accounts are not created in time, or the charity is not paid off by 9/30 in the year following the year of death. Since the father is apparently beyond his RBD, the IRA RMDs would be based on his remaining life expectancy if the separate accounts were not created or the charity paid off before the deadlines.