Charity IRA beney cant take lump sum?
I sit on a Non-Profit Board 501-C charity. They were left 5% of a Donors IRA. Wells Fargo bank is telling them that they have to setup a new inherited beneficial IRA and have their share transferred to that new account.
a. Doesn’t a charity 501-C not have to pay taxes on any gifts left to them including an IRA?
b. Does a charitable organization have to setup an inherited beny IRA to avoid some kind of tax?
c. does the IRS make a charity setup an inherited beny IRA and then they can cash out of it to avoid some kind of tax?
or
d. since they are a charity, there is no tax on the IRA amount left to them and they can just ask for the lump sum of their share?
any help would be appreciated
Thank you,
Douglas
Permalink Submitted by J Futch on Fri, 2016-07-08 16:20
I think this is a systemic issue. The bank is required to report the distribution and it has to be reported using the charity’s TIN. To issue a 1099 using the charity’s TIN, the charity must have an account set up at the bank. So, the charity’s share is moved from the decedent’s IRA to the charity’s inherited IRA and then disbursed from there so the 1099 can be issued correctly. Hope that helps.
Permalink Submitted by Alan - IRA critic on Fri, 2016-07-08 17:33
I agree. d is correct. The charity will just request a lump sum distribution from the inherited IRA. No taxes will be due. Establishing these separate accounts on time also affects the other beneficiary’s RMDs.