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Posted October 19th, 2018

Time to Simplify Charitable IRA Beneficiary Distributions?

The process of receiving fund left through IRA designations is often time consuming, complex, expensive and, in some cases, in violation of the custodian’s fiduciary duties and federal tax law.

For example, many IRA custodians or administrators have adopted a process that requires charities to establish an “inherited IRA” in order to receive their charitable IRA beneficiary distributions as intended by the IRA account owner. Unfortunately, this procedure was not designed with charitable beneficiaries in mind and places an unreasonable burden on qualified charities to collect IRA gifts from deceased donors. The IRA custodians apparently developed this administrative process in response to tax reporting requirements.

The rank-and-file employees of the IRA custodians often have little or no knowledge of the applicable law regarding charitable beneficiaries and often take the position that the standard process must be followed in order to receive a charitable IRA gift.

As a result, there are now several grassroots efforts underway in the charitable sector to address this situation. The most recent effort involves seeking an IRS Private Letter Ruling to clarify the process and a judicial proceeding to provide legal precedent. In addition to myself, the effort is being organized by Jeff Comfort at Oregon State University Foundation, Lisa Smith at Hadassah and Michael Kenyon, President and CEO of the National Association of Charitable Gift Planners.

You can download the prepared letters from me and the National Association of Charitable Gift Planners for more information about this effort and how charitable organizations can help by clicking here.

by Jon Tidd, Esq

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