While the process of making distributions to charities via beneficiary designations should be simple enough from the perspective of donors and their attorneys, the delays in charities receiving the funds can last for months or years rather than weeks. Notably, financial institutions are requiring charities and/or board members to set up an account before they will release the funds. To streamline the process for charities to claim their benefits, the state of Iowa enacted the RIFT (Release IRA Funds Timely) law.
What is included?
Annuities or insurance policies, payment on death (POD) accounts, securities registered in beneficiary form and pension, profit-sharing, retirement or other employment-related benefit plans.
Requirements and repercussions
Charities must present the financial institution with an affidavit with details such as:
- The donor’s name.
- A description of the property.
- Confirmation that the organization is a recognized charity.
If the financial institution fails to respond to the claim within 30 days of receiving the affidavit, the charity can take legal action to enforce the claim. If a court of law finds unreasonable delay in delivering the requested property properly described in the affidavit, the court may award not only reasonable hourly lawyer fees but also a penalty between $500 and $10,000.
Implications for charities
The law protects charities from being required to become customers of financial institutions before they can claim their rightful benefits. This prevents having to provide board members’ sensitive personal information, such as Social Security numbers, driver’s licenses or other financial information.
The Iowa RIFT law represents a proactive step toward protecting charities’ interests and ensuring they can efficiently claim benefits designated to them by their donors. Read more about the RIFT Project on the National Association of Charitable Gift Planners website.
A magna cum laude graduate of Cornell University, Christopher P. Woehrle earned his JD and LLM (Taxation) from the Widger School of Law at Villanova University, where he also is a member of the Graduate Tax Program Advisory Board. Chris is a member of the Pennsylvania Bar and teaches charitable gift planning and principles of wealth management in the LLM taxation program at the Widger School of Law.
