Sep 1, 2006 12:00 PM

By Christopher R. Hoyt, professor, University of Missouri-Kansas City School of Law, Kansas City, Mo

If you are thinking about naming a trust with a charitable beneficiary as the recipient of some of your retirement assets, here is a word of advice: Don't! With the important exception of a charitable remainder trust (CRT), such a trust can pose problems for the mandatory payouts from the retirement account as well as challenges for claiming charitable income tax deductions for the charitable gifts made by the trust. If a person would like to make a charitable bequest of some retirement assets, the best way to accomplish that is to name the charity as a beneficiary of the retirement account on the beneficiary designation form provided by the retirement plan administrator.¹

What if it is too late to make a change? What can be done after a person has died and the trustee or the personal representative learns that a retirement account will be paid to such a trust or to an estate that will in turn make a charitable bequest? There are administrative steps that can be taken to minimize the potential problems. First, it may be helpful to satisfy all of the charitable bequests before Sept. 30 of the year that follows the year of death. This may eliminate the problems that a charitable beneficiary may pose for mandatory distributions from a retirement account after death. The next challenge is to avoid any adverse income tax problems. The greatest concern is that the trust or the estate may have to recognize taxable income from the retirement plan distribution but will not be able to claim an offsetting charitable income tax deduction.

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

Click here to download the 2011 Trust Glossary

50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

Click here to view the most up to date guide (September 2011)

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