Charity and children as Qualified Plan and IRA Beneficiaries
Any issues with naming a charitable beneficiary as a % beneficiary along with individual beneficiaries on Qualified Plans, IRAs, etc.. as long as the charity is removed by 9/30 of year following death of participant?
Permalink Submitted by Alan - IRA critic on Mon, 2019-06-10 15:37
You mentioned the key risk, that of not paying off the charity by the beneficiary determination date. Actually, the separate account rules allow for that date to effectively be extended to 12/31 of the year following participant’s death if separate accounts are established by the individual beneficiaries. However, use of the separate account rules are less risky for an IRA than a qualified plan, because for the qualified plan the administrator controls separate accounts and also RMD distributions are you can never to be totally sure how the administrator will handle this if the charity is not paid off by 9/30.
Permalink Submitted by Bob on Mon, 2019-06-10 17:38
Delete
Permalink Submitted by Bob on Wed, 2019-06-12 14:01
One Last Follow Up–To avoid problems, is the best practice to have a named charitable beneficiary and other non-individual entity beneficiaries (trust, see thru or not, or Estate, if it ends up being a beneficiary), out by 9/30 deadline no matter what type of retirement plan (qualified plan, IRA, etc…) it is?
Permalink Submitted by Alan - IRA critic on Wed, 2019-06-12 16:06
DIstributions to a charity should preferably be made by 9/30. But if there are multiple individual beneficiaries the separate account rules should be used in addition in order for each individual to be able to use their own age. For a qualified trust, the 9/30 date is critical because the separate account rules do not apply to trusts. If the beneficiary is a non qualified trust, it is treated as an estate for RMD rules and for deaths prior to the RBD the 5 year rule will apply regardless of distribution to a charity. That said, if the plan is NOT an IRA and the beneficiary is an estate or NQ trust, distribution dates do not matter because these plans typically require a lump sum distribution regardless of the age the decedent passes. An IRA owner that is concerned about individuals meeting these deadlines may want to consider naming the charity the beneficiary of it’s own IRA account.