Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

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1210sda
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Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by 1210sda »

We are planning on leaving our entire T-IRA's to charities. (About 1/3 of our portfolio). (I'm required to take RMD's, my wife will too in a year and a half).

If we do this after the second death by making the Charities the beneficiaries, we will have the additional financial security that a larger portfolio provides while we are living.

If we do it while still living (through the use of annual RMD's/QCD's), we will accomplish our goal of leaving our IRA's to charity plus getting a tax benefit for the year of the contribution. But, our portfolio would be reduced by the amount of the RMD/QCD and would provide overall less financial security. This might not be a significant risk in the early years of retirement, but could become critical if we live a very long life.

We are currently weighting these two options, trying to determine which we feel would be more appropriate for us.

At the present and for the foreseeable future, we do not need the RMD to fund our lifestyle. We would just be re-investing the RMD's.

What would you do?
Are there other considerations that we have not addressed?
stan1
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by stan1 »

You didn't state the value of your portfolio.

If I had a $2M portfolio I would do QCDs now and set the IRA beneficiaries to the charities (or our Donor Advised Fund which will pay out to the charities).

If I had a $5M+ portfolio there are plenty of other assets to pay for end of life expenses. I'd consult with my estate planning attorney to figure out the best approach for me.

If I had a $500K portfolio it seems too early to be gifting in large amounts.

Your personal situation may be different but hopefully this gives you some ideas to consider. There is no one size fits all answer.
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1210sda
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by 1210sda »

Stan1,

Our portfolio "should" be more than enough to meet our needs.

Still, one tends to worry about living too long or having to spend a long time in a nursing home.

We are leaning to one of the two options, we just wanted the benefit of others experiences or logic.

Thanks for responding.
IowaFarmBoy
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by IowaFarmBoy »

I've struggled with similar questions. I think we have likely "over-saved" but we won't know that till we are both gone. If we run short of money late in life, there aren't really any good options to get more so I lean toward trying to hang onto it.

I think Stan1 has raised a good question. It really depends on how much chance you think there is that you will need this money. I don't think it has to be an all or nothing choice between your options. I would consider starting out by donating enough to cover your RMD with the idea that you would keep an eye on your portfolio and be willing to adjust this plan. The first year of RMDs is something like 3.6% and since you have other resources, you really aren't giving up that much in total. If at some point, your investments have done poorly or your expenses look like they will climb, you could stop making the QCDs and keep the RMD. If things are going smoothly, you can continue with the plan with increasing confidence that you will be ok.

Another thing to consider is that if you take the RMD, the amount you can retain will be reduced by the taxes. So it will have an even smaller impact on your portfolio.
earlyout
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by earlyout »

Very intrigued by this question since I just changed the beneficiaries for all of my TIRA to charities. My plan all along had been to keep the TIRA available should I have unusual LTC expenses or other medical costs and continue to use the RMDs for ongoing living expenses. I had not thought of donating from the TIRA on an annual basis as a way to lower my income taxes. Does anyone know if any of the more robust retirement planning software packages can look at this option? How large would the annual donations from the TIRA have to be to compensate for the loss of the standard deduction?
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1210sda
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by 1210sda »

earlyout wrote: Mon Nov 23, 2020 1:58 pm How large would the annual donations from the TIRA have to be to compensate for the loss of the standard deduction?
I would be using Qualified Charitable Distributions (QCD). This would not affect the use of the Standard Deduction. The tax benefit from QCD's is that while it counts as part (or all) of your RMD, it is not taxable to you.
earlyout
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by earlyout »

Good point. Thanks. The idea becomes more attractive since it would lower the amount of Social Security that is taxable.
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1210sda
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by 1210sda »

earlyout wrote: Mon Nov 23, 2020 3:57 pm Good point. Thanks. The idea becomes more attractive since it would lower the amount of Social Security that is taxable.
I have three sources of income as a retiree. Dividends, RMD's and Social Security. The only one I have direct control over is my RMD's and that's due to the QCD decision. It also, as you indicated, reduces the amount of Social Security that is taxable.
truenorth418
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by truenorth418 »

The way I am looking at it is while I may have enough to tide me over until my death, of course I do not know the future.

So for now I am planning to wait until my death to give my IRA money to the charities, just in case something untoward happens where I need the money for myself. I realize I will have to pay some taxes on the money once RMDs begin.
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by 1210sda »

Bump, bump
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David Jay
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by David Jay »

stan1 wrote: Mon Nov 23, 2020 1:00 pmIf I had a $2M portfolio I would do QCDs now and set the IRA beneficiaries to the charities (or our Donor Advised Fund which will pay out to the charities).
I do not believe that QCDs can be distributed to your personal DAF.
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bltn
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by bltn »

Unless I had much more in savings than I needed or wanted spend, I would take the RMD s, donate the portion I chose, and wait until after my wife and I died to leave the remainder to charity.
Everybody s idea of financial security is different.
stan1
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by stan1 »

David Jay wrote: Tue Nov 24, 2020 12:09 pm
stan1 wrote: Mon Nov 23, 2020 1:00 pmIf I had a $2M portfolio I would do QCDs now and set the IRA beneficiaries to the charities (or our Donor Advised Fund which will pay out to the charities).
I do not believe that QCDs can be distributed to your personal DAF.
Correct, a QCD cannot be directed into a DAF.

You can set the DAF to be a beneficiary of the IRA if you only want to keep a current list of charities and distribution plan in one place. Also assumes there is already a DAF.
Last edited by stan1 on Tue Nov 24, 2020 1:03 pm, edited 1 time in total.
stan1
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Re: Planning on leaving entire T-IRA to Charity. Now or after we both are gone??

Post by stan1 »

bltn wrote: Tue Nov 24, 2020 12:38 pm Unless I had much more in savings than I needed or wanted spend, I would take the RMD s, donate the portion I chose
Rather than doing all the RMD and then donating in cash it is better to do the QCD for the amount you choose to donate then take the RMD for the rest each year. No downside of doing the QCD other than a little extra work with your brokerage. Positive is that you don't owe taxes on that portion of the RMD which should be worth the extra work if you are able and willing. Also may not be worth the effort if the amount of charitable giving is small.
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