Trust Transfer of IRA to 501c3
Question about Trust Transfer of IRA to 501 (c ) (3) organization
Facts:
Decedent had IRA that was transferred into irrevocable trust before death (trust became irrevocable upon death).
Estate was not designated beneficiary of IRA.
Decedent passed away on 10/4/2009
Trust distributed 10% of IRA to 501 (c ) (3) organization which is not a private foundation on 1/22/2010
An additional contribution of $9,500 was put in this account by the 501 (c ) (3) organization from an unrelated party on 5/15/2013
Issue(s):
The IRA transfer was coded as a rollover, it should have been coded as a donation, is there any way to consider it a donation instead of a rollover for tax purposes?
Does the 5 year rule apply to this IRA and is it the only distribution option for this 501 (c ) (3) organization?
If the 5 year rule applies, does it apply to date decedent died (10/4/2009), or date the 501 (c ) (3) organization received the transferred IRA?
Can
What are the tax consequences for the 501 (c ) (3) organization of the IRA transferred from the trust 1/22/2010) and what should be done to minimize tax consequences.
What are the tax consequences of the additional contribution of $9,500 by the 501 (c ) (3) organization (5/15/2013) and what should be done to mitigate the tax consequences?
Permalink Submitted by Alan - IRA critic on Mon, 2015-10-26 19:08
After the owner’s passing, it sounds like the trustee of the trust had the IRA account assigned to the various beneficiaries of the trust. If so, the IRA custodian would set up inherited IRA accounts for each beneficiary including the charity, and this would be done as non reportable transfers with no 1099R issued. A non spouse inherited IRA can never be rolled over,so if there was a 1099R it will result in a taxable distribution. In most cases, the trust would take the distribution and then donate it to the charity. What was age of decedent at death, and was the charity named as a beneficiary of the trust?
Permalink Submitted by [email protected] on Mon, 2015-10-26 19:22
The decedents age at death was 90.The Charity was named as a beneficiary of the IRA, not the Trust. (I was given the wrong information)What actions would need to be made to rectify the situation?
Permalink Submitted by Alan - IRA critic on Mon, 2015-10-26 20:09
If the only beneficiary of the IRA was the charity, the RMDs do not matter since the charity would cash out the IRA tax free. There would be no 1099R issued to the estate or trust. The charity would usually be advised to deal directly with the IRA custodian and would have to secure a certified copy of the death Cert to have the IRA distributed to them. Are there other beneficiaries of the IRA? If so, then they would also have to establish inherited IRAs but at age 90 those IRAs needed to be drained by year end 2014.
Permalink Submitted by [email protected] on Mon, 2015-10-26 20:57
the IRA was distributed to the charity and the charity opened an inherited IRA account for the dollars. It sounds like to me the easiest way to handle the account is for the Charity to close the Inherited IRA account and open a new account thus eliminating the IRA account. If this is done are there any IRS documents that will be generated? Would there be any possibility of the Charity having a taxable event?thank you
Permalink Submitted by Alan - IRA critic on Mon, 2015-10-26 21:27
If the charity now holds an inherited IRA, they should just distribute it and then do what they wish with the funds. Not sure if the IRA custodian will issue a 1099R to the charity, but in any event the distribution will not be taxable. I doubt that the IRS would levy any kind of penalty for not closing out the IRA by 12/31/2014 inasmuch as the IRS was not going to receive any taxable distributions anyway.