Charitable bequest from non Roth retirement plans

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afan
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Joined: Sun Jul 25, 2010 4:01 pm

Charitable bequest from non Roth retirement plans

Post by afan » Mon Sep 25, 2017 11:16 am

Let's say you want to make charitable bequests as part of your estate plan.
You have assets in non Roth retirement plans and you want to use SOME of this money for the bequests to charities.
You want the rest of the money in those plans to go to your heirs.
How do you go about doing this?

Some vendors will not let you give them a long list of beneficiaries for a plan, so if you have, say, a dozen charities in mind, each getting a specific fraction of the total, that would not work.

If you are leaving the rest of the non Roth retirement plan to a trust on behalf of your heirs, then, I have heard, that trust cannot also have non-person beneficiaries if you want the heirs to be able to stretch their distributions. So you could not have a single trust as beneficiary. Is that correct?

Could you get around this requirement for human beneficiaries if the trustee were instructed to make the distributions to the charities right away and hold the amounts for the individual heirs and exercise the option to stretch if that seemed appropriate? At that point it would have only human beneficiaries, since the charities would have gotten their money. Could it then stretch the distributions on behalf of the humans? Or would having the charities in there at the start ruin it for stretching?

Would you be better off having two trusts, one for the charities and one for the human heirs? One could set up the beneficiary designation leaving X percent to the trust for the charities and 100-X left to the second trust, which would be for the human beneficiaries. The trustee for the charity trust could instructed to make the distributions promptly, emptying and closing the trust. The second trust would be a standard accumulation trust for the heirs.

Since the charities would get their share without paying income taxes on the distributions, I don't see why the IRS would care whether the charities left the money in the retirement plan or took it out, but apparently it does care.

Or is their some better way to handle this? Am I making something simple seem complicated? I tend to do that.

N.B I am not a lawyer.

Anyone know? bsteiner?
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