[WSBAPT] Gift of Traditional IRA to Juridical Entity

[Marcus Fry]

David:
Safest and best bet is to split the IRA into two IRAs now (the amounts don’t have to be equal, whatever % they want to allocate to charity is the % of the overall IRA they spin off into a new IRA).  Then you will have a IRA with the child trust as beneficiary and another with the charitable institution as beneficiary.  There are some “fixes” at death when you have both a charity and a trust as % IRA beneficiaries of one IRA, but it is easiest to deal with it now.  Clients can still pull equally from the IRAs.  In fact, I find clients have a tendency to alter their estate plan as the IRAs grow, i.e., withdraw more out of the charity IRA as it has performed better than anticipated and want to leave a lesser amount to the charity, and they don’t have to sign new beneficiary designations, which can get completed incorrectly, lost in transit, etc.

Marcus J. Fry
Lyon, Weigand & Gustafson, P.S.
P.O. Box 1689
Yakima, Washington  98907
Telephone:  (509) 248-7220
Facsimile:  (509) 575-1883

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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of David Faber
Sent: Tuesday, June 27, 2017 11:56 AM
To: WSBA Probate & Trust Listserv
Subject: [WSBAPT] Gift of Traditional IRA to Juridical Entity

List:

I'm trying to understand how much flexibility I can bake into a trust arrangement for a client who wishes to leave a portion of their traditional IRA to a nonprofit entity and the rest in trust to the client's child. IRC  § 1.401(a)(9)-4 of course does not allow juridical entities as possible contingent beneficiaries of a qualified retirement plan account, but am I right in assuming that provided the client splits the QRP into separate tranches at the time of their death, any portion that is directed to an individual beneficiary (with proper contingent beneficiary language) would be able to be stretched irrespective of the gift to the juridical entity? Also, would you advise I have the beneficiary designation deal with the carving up of the QRP directly or should I have the trustee tackle that issue within the confines of trust instrument? I am leaning toward the former, but understand that there are sometimes pitfalls around plan administrators properly addressing the renaming and segregation of accounts.

Best,
David J. Faber
Faber Feinson PLLC
210 Polk Street, Suite 1
Port Townsend, WA 98368
(360) 379-4110

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