Charitable Beneficiary Designations
Tax Avoidable on Charitable Beneficiary Designation for IRA or Qualified Plan. – Generally, neither a retiree’s estate nor a tax-exempt charity is subject to income tax on amounts the charity receives as a beneficiary of the retiree’s qualified retirement plan or IRA. However, the retiree must carefully structure the charity’s beneficial interest in order to obtain a charitable deduction for estate tax purposes. (Ltr. Rul. 200425027.) See Chapters 2, 4, and 5 of the treatise for discussions of charitable beneficiary designations.
IRA Distributions Paid Directly to Charities. – A retiree age 70 ½ or older may exclude from taxable income certain distributions paid by his or her IRA directly to a qualified charity. The amount of excludable charitable distributions for a given year is limited to the lesser of (1) $100,000, (2) the amount of the payments to the charity, or (3) the portion of IRA funds otherwise deemed potentially taxable. (I.R.C. § 408(d)(8); Notice 2007-7, 2007-5 I.R.B. 395.) See Chapter 5 of the treatise for a discussion of the taxation of IRAs.