IRAs are unique assets at the time of death primarily because income has not been paid on those assets. So if you have $100,000.00 retirement account and you leave it to Susie, Susie doesn’t really get $100,000.00 retirement account she has to pay income tax on it at her rate when the retirement account pays out to her. And the laws were recently changed for retirement accounts in that it used to be you could extend out and let the account grow income tax free for a very long time. Now for most beneficiaries a retirement account must be paid out within 10 years, which means that the income tax must be paid within 10 years.

So they’re not great assets to pass at death to your loved ones and family, however, they’re great assets to pass at death to charity. And the reason is, is because if it’s a $100,000.00 retirement account the charity gets the full value of the $100,000.00 because the charity isn’t required to pay income tax.

The other benefit to naming a charity as a beneficiary on a retirement account is that it bifurcates the charity from the rest of the estate plan. So if someone leaves in their will or trust a charitable gift and its, perhaps, a percentage amount, that charity really should if they’re doing their fiduciary duty audit that estate tax return to make sure that they’re getting the accurate percentage of the estate for their charitable gift. If it’s a dollar amount the audit is not at risk. But you still have the charity involved in the settlement of the estate whereas if the charity is named as a beneficiary on a retirement account they’re bifurcated, they only have information as to that retirement account, and it’s income tax efficient. And it’s a great way to make charitable donations at one’s death.