How A Charitable Trust Could Save Your IRA
By: Bob Carlson - April 30, 2018
You can provide security for your heirs, make an IRA last for years after you, solve several estate planning problems, and help a charity. All you have to do is join the growing trend of naming a charitable trust as the beneficiary of your traditional IRA.
A goal of many IRA owners is the Stretch IRA. They want their children to benefit from the tax-deferred compounding of the IRA for years to come. So, they name their children as primary beneficiaries and expect they’ll take only the required minimum distributions (RMDs) each year unless they have a real need for a larger distribution. Perhaps the IRA could help fund their children’s retirements.
A lot can go wrong with that strategy.
The children might invest poorly or decide to spend the assets quickly and wastefully. They also might not understand the tax rules governing an inherited IRA and unknowingly trigger early taxes and even penalties.
The strategy also could fall victim to the looming war on the Stretch IRA. The Obama administration proposed several times to eliminate the Stretch IRA. It would have required an IRAs to be fully distributed within five years within five years of the original owner’s death. There’s a bipartisan group in Congress that supports the change. The support is likely to increase as budget deficits grow.
Naming a charitable remainder trust (CRT) as IRA beneficiary can keep your plans on track.
The CRT strategy is very flexible. Here’s an example of how it can be used.
Article Source: Forbes
** Disclaimer Required by IRS Circular 230** Unless otherwise expressly approved in advance by the undersigned, any discussion of federal tax matters herein is not intended and cannot be used 1) to avoid penalties under the Federal tax laws, or 2) to promote, market or recommend to another party any transaction or tax-related matter addressed.