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.
By comparison, a CRT is a charitable trust that can actually solve some of the estate-planning challenges posed by retirement assets and, at the same time, make a significant charitable gift. The advantages stem from the fact that a CRT, like a retirement account, is exempt from income tax.2 Thus, a donor can reap income tax benefits during his lifetime by contributing to a CRT some of the appreciated employer stock that was received as part of a lump-sum distribution from a company retirement account.3 A transfer at death to a CRT can serve as something close to an individual retirement account (IRA) rollover for retirement distributions made from the account of an unmarried individual. Until recently, only a surviving spouse could rollover an inherited retirement plan distribution. But with the passage of the Pension Protection Act of 2006, nonspouse beneficiaries may avail themselves of the rollover option for company retirement plan distributions made after Dec. 31 of this year.4
A CRT also can provide a combination of the estate tax benefits of a credit-shelter trust with the income tax benefits of something like an IRA rollover.5 However, even a CRT should be avoided in some situations, such as when there is a nonspouse beneficiary of a CRT and the CRT will be funded with retirement assets from a decedent's estate that will be subject to the estate tax.6
The problem, of course, is that much of the value of a retirement account represents deferred income taxes. For example, if a person liquidates a $100,000 IRA in one year, that individual must report $100,000 of income and pay about $40,000 of income taxes (federal and state), thereby leaving only $60,000 to invest. While the money is in the retirement account, the $40,000 of deferred income taxes can be invested to produce investment income for the individual. Once the taxes are paid, the higher income stream is eliminated.
The objective of tax-deferral applies over a person's lifetime and after death as well. Unlike virtually every other asset that a decedent may leave to beneficiaries, retirement accounts do not receive a step-up in basis. Instead, beneficiaries report distributions that they receive from a decedent's retirement account as taxable income. It is treated as income “in respect of a decedent” (IRD).7
Congress does not allow the income taxes to be deferred forever. After a person's death, a retirement account must be liquidated. The general rule is that the account must be liquidated over a time period no longer than the life expectancy of the account's oldest designated beneficiary.8 A designated beneficiary is basically a technical term to describe a human being.9 The deferral period could extend over 60 years when a young beneficiary is named (See “Life Expectancy,” p. 44). But the rules change if any one of the beneficiaries of a retirement account is not a designated beneficiary — such as a charity, the estate, or a trust (although certain look-through trusts10 are exceptions).11 The mandatory payout depends on the decedent's age. If the decedent died after his required beginning date (RBD) (usually April 1 following the year that the individual attained age 70 1/2),12 then the maximum time period is the life expectancy of a person who was the same age as the decedent.13 What's worse, if the decedent died young (that is to say, before his RBD, such as at age 69), then the account must be liquidated in just five years.14
This can be illustrated by applying the rules to the IRAs of two hypothetical men, one who died at age 85 and the other at 55. Assume that each had provided that an IRA would be payable to a look-through qualified terminable interest property (QTIP) trust15 for a spouse and a child (spouses are ages 80 and 50, respectively, and children are ages 52 and 22, respectively). If there are no charitable beneficiaries, the IRA must be liquidated over a term not longer than the life expectancy of the oldest designated beneficiary: the spouse.16 According to the life expectancy table, the mandatory liquidation period would be 10 years for the trust established for the 80-year-old spouse and 34 years for the trust established for the 50-year-old spouse. In oversimplified terms, the $100,000 would not have to shrink to $60,000 until 10 or 34 years, respectively, and in the meantime, the $40,000 could produce investment income that would benefit the beneficiaries. On the other hand, if one of the beneficiaries of the trust is a charity — even as just a remainderman or a contingent beneficiary17 — then the alternative rules apply: The IRA must be liquidated either over a term not longer than the life expectancy of the decedent or over a strict five-year period. The IRA payable to the trust established by the 85-year-old man would have to be liquidated over 7.6 years, and the IRA for the trust established by the 55-year-old man would have to be emptied in just five years! The $40,000 income tax liability would have been fully paid and would not produce investment income for the family.
This scenario demonstrates why a popular alternative to a CRT — a QTIP trust with a charitable remainderman — should not be used for retirement assets.18 It also illustrates why a charitable lead trust should not be a beneficiary of a retirement plan account.19
By comparison, a CRT would not be a problem for the 85-year-old man and could actually prove very beneficial for the estate and the beneficiaries. Because the trust is tax-exempt, it can receive the entire $100,000, even as a single lump-sum distribution, and reinvest the entire amount. Neither the estate nor any beneficiaries of the CRT would report any taxable income when the CRT receives the distribution.20 A charitable remainder unitrust (CRUT) could then pay a stated percentage (for example, 5 percent) of the entire $100,000 balance to the 80-year-old widow for life, then to the child for life and then distribute the remaining proceeds to a charity. As long as the trustee could earn more than a 5 percent yield, the CRT's balance would never fall below $100,000. Not only does the family benefit from having the $40,000 invested on their behalf, but the charity benefits as it, rather than the government, ultimately receives the $40,000 to apply to a charitable purpose designated by the donor. However, a CRT would not work for the 50-year-old widow and the 22-year-old son, because the projected term of such a CRT would exceed the legal limit.21
DODGE TAX BULLETS
When it comes to IRAs, estate planners who are working on smaller estates need to rethink the common practice of having a single trust consolidate all of the decedent's assets. An IRA is itself a trust with its own beneficiary forms.22 Unlike the primary trust, virtually every distribution from an IRA is taxable income. Thus, rather than have the IRA's assets pour over into the main trust, it can often be more advantageous to operate the two trusts in tandem — the main trust and the IRA — and then to make distributions from each trust in the most optimal manner. If there is concern that a spendthrift beneficiary might loot the IRA assets, a solution could be to establish a separate conduit trust as the beneficiary of the IRA.23 Either way, it may be better to operate with two trusts in tandem rather than a single trust.
For example, assume that an individual has a living trust that provides that after his death the trust should make a $200,000 charitable bequest. He also has a $300,000 IRA that is payable upon his death to that trust. The trustee is faced with the prospect of receiving $200,000 or $300,000 of taxable income from the IRA and then hoping to claim an offsetting $200,000 charitable income tax deduction.
How could this be structured better? First, rather than make the charitable bequest from the trust, change the IRA's beneficiary designation to make the charitable bequest directly from the IRA. The IRA owner could state that two thirds of the IRA (that is to say, about $200,000) should be paid to the charity, so that only the remaining $100,000 would be paid to the trust. This way the trust would have to cope with only $100,000 of taxable income. Without a charitable beneficiary, the trustee may have an easier time qualifying the trust as a look-through trust so that the $100,000 could be distributed over the life expectancy of a beneficiary. By never having to report the $200,000 as income, the trustee also would be freed from worrying about whether the charitable payment qualified for a charitable income tax deduction. Instead, the Form 1099-R that the IRA issues to report the $200,000 taxable distribution would be sent directly to the tax-exempt charity. No income tax would be due, even if the charity were a private foundation that normally pays a 2 percent/1 percent IRC Section 4940 tax on its investment income.24 Some people prefer to have a separate IRA that will be fully payable to a charity and then plan withdrawals from all of their IRAs in such a way that the “charitable IRA” retains the target balance (for example, $200,000).25
If it is too late to change the IRA beneficiary designation, the trustee can take steps that may eliminate potential problems. First, if the entire charitable bequest can be distributed before Sept.30 of the year that follows the year of death, then the charity will not be considered a beneficiary of the IRA.26 This may permit the trust to receive payments over the life expectancy of the oldest beneficiary of the trust. As a way to avoid potential problems, some trusts contain instructions that no retirement plan distributions can be paid to a charity or to any other beneficiary that is not a designated beneficiary after Sept. 30. The IRS has approved this arrangement in several private letter rulings.27 If this arrangement is adopted, the IRA would distribute $200,000 to the trust and, before Sept. 30, the trust would issue a check to the charity for $200,000.
That leads to a second problem. When the trust receives the $200,000 check it will have $200,000 of income, but will it be entitled to an offsetting $200,000 charitable income tax deduction? Probably not, unless the trust had instructions to use IRD to satisfy charitable bequests. In 2003, the IRS issued a revenue ruling that clarified that paying a charitable bequest did not entitle a trust or an estate to claim either a charitable income tax deduction nor a distributable net income (DNI) deduction.28 Again, this legal issue could have been avoided completely if the charity had been named as a beneficiary on the IRA form rather than making the charitable bequest through an intermediary trust or through the estate.
The IRS has approved an innovative solution to this problem, especially when a charity was entitled to receive either the residue or a fraction of an estate. When either a decedent's will or trust instrument, or a state's applicable law, authorized the executor or a trustee to use any asset for any distribution, the IRS permitted the executor to “assign” retirement accounts and deferred annuity contracts to the charity. Neither the estate nor any other beneficiary reported any taxable income when the distributions were made to the charity. Instead, only the charity reported the income.29
KEEP IT SIMPLE
Charitable bequests from retirement accounts work much more smoothly when the payments are made directly from the retirement account to the charity rather than indirectly through a trust. By naming a trust that has a charitable beneficiary as the recipient of retirement assets, a person runs the risk of accelerating taxable distributions to other beneficiaries and of triggering taxable income to the trust that may have no offsetting charitable income tax deduction. With a little planning, a lot of tax grief can be avoided. CRTs, though, are exempt from the income tax and can therefore offer income tax advantages as beneficiaries of retirement accounts.
- Please note that we are referring in this article not to lifetime gifts from individual retirement accounts but to bequests. The recently adopted Pension Protection Act of 2006 added Internal Revenue Code Section 408(d)(8), which permits individuals over age 70 1/2 to make lifetime charitable gifts from their individual retirement accounts (IRA) in 2006 and 2007.
- IRC Section 664(c).
- Generally, every distribution from a retirement plan, an IRA or 403(b) plan is taxed as ordinary annuity income. IRC Sections 402(a) and 72(a). However, a person who receives employer stock as part of a lump-sum distribution from a qualified retirement plan (but not an IRA) has to recognize as income only the purchase price that the plan paid for the stock rather than the full value of the stock. IRC Section 402(e)(4)(B); Treasury Regulations Section 1.402(a)-1(b)(2)(i). The built-in gain — net unrealized appreciation (NUA) — is not taxed in the year that the stock is received. Instead, NUA is taxable when the stock is sold. NUA qualifies for long-term capital gain treatment even if the recipient held the stock for less than one year. Notice 98-24, 1998-17 I.R.B. 5. In a series of private letter rulings (PLRs), the Internal Revenue Service approved of charitable gifts of such stock to a charitable remainder trust (CRT). Employees who terminated employment with a company received lump-sum distributions from the company qualified retirement plan that included employer stock. Each employee contributed the stock to a CRT and rolled over the cash portion of the distribution to an IRA. The Service concluded that each employee's taxable income was only the original purchase price that the plan had paid for the stock, but the employee was able to claim a charitable income tax deduction based on the much higher value of the stock that included the stock's NUA. The employee had no income when the CRT received or sold the stock. PLRs 200335017 (May 27, 2003), 200302048 (Oct. 15, 2002), 200215032 (Jan. 10, 2002), 200202078 (Oct. 19, 2001), 200038050 (June 26, 2000) and 199919039 (Feb. 16, 1999). Also, income in respect of a decedent (IRD) is not automatically taxed to a decedent's estate. Instead, it is taxed to whomever has the right to receive it. IRC Section 691(a); Treas. Regs Section 1.691(a)4(b)(2); Revenue Ruling 64-104, 1964-1 C.B. 223. Beginning in 2007, a qualified retirement plan can make a tax-free trustee-to-trustee transfer of a deceased employee's retirement account balance to an IRA that will benefit any person, including someone other than the spouse. IRC Section 402(c)(11), as added by Section 829 of the Pension Protection Act of 2006. For a planning strategy that uses a CRT as an alternative to an IRA rollover for nonspouse beneficiaries, see Christopher Hoyt, “Stretch This,” Trusts & Estates, February 2006, at p. 50.
- The 2007 effective date applies to the year of the distribution rather than to the year of the decedent's death. Thus, if an employee died in 2005 or 2006, it may be advantageous to delay the distribution until 2007 when this new law becomes effective. The provision applies to a decedent's account at a company retirement plan, but not to a decedent's IRA. Furthermore, the transfer must be a trustee-to-trustee rollover. A surviving spouse still has the advantage of also being able to rollover a cash distribution that she or he received from the plan, provide that the rollover is completed within 60 days. Nonspousal beneficiaries will not be able to rollover such cash distributions.
- Christopher Hoyt, “When a Charitable Trust Beats A Stretch IRA,“ Trusts & Estates, May 2002, at p.21.
- Normally, a person who receives income in respect of a decedent (IRD) can claim an income tax deduction for the federal estate tax that was attributable to the IRD. Internal Revenue Section 691(c). However, IRS Private Letter Ruling 199901023 basically prevents a person who receives an IRD distribution from a charitable remainder trust from ever deducting the estate tax. It does this by categorizing the federal estate tax as 4th tier corpus and categorizing the remaining portion of the IRD as 1st tier ordinary income. Note: This will normally not be an obstacle for leaving IRD asset to a charitable remainder trust for a surviving spouse. Usually no estate tax is due if the surviving spouse is the sole noncharitable beneficiary of a CRT. IRC Section 2056(b)(8).
Example: Assume that $100,000 of IRD is distributed to a CRT that has a $40,000 estate tax liability associated with it. Under the Service's conclusion, the $40,000 will be 4th tier corpus and the remaining $60,000 will be 1st tier and will be fully taxable as ordinary income, subject to an income tax rate of up to 35 percent. By comparison, had the beneficiary received the $1000,000 of IRD directly, he or she would have been able to deduct the entire $40,000 of federal estate tax and therefor pay income tax only on the net $60,000: an effective tax rate of only 21 percent (35 percent times net taxable income of $60,000). IRC Section 691(c).
- IRC Section 691(a); Treas. Regs. Section 1.691(a)4(b)(2); Rev. Rul. 64-104, 1964-1 C.B. 223.
- Treas. Regs. Section 1.401(a)(9)-5, Q&A 5(a)-(c) and Q&A 6.
- IRC Section 401(a)(9)(E); Treas. Regs. Section 1.401(a)(9)-4, Q&A 1.
- A look-through trust (also known as a “see-through trust”) is a trust where if certain criteria are met (for example, a copy of the trust instrument is given to the IRA administrator, etc.), the trust can be named as a beneficiary of either an IRA or any other type of qualified retirement plan account and then each of the individuals who are beneficiaries of the trust will be considered beneficiaries of that account or plan. Treas. Regs. Section 1.401(a)(9)-4, Q&A 5 and 6. Otherwise, the trust might have caused the retirement account to have a beneficiary that was not a designated beneficiary.
- Neither a charity nor the decedent's estate will qualify as a designated beneficiary as neither has a life expectancy. Treas. Regs. Section 1.401(a)(9)-4, Q&A 3.
- The required beginning date (RBD) is the first date that a distribution must be made from an IRA, qualified retirement plan or 403(b) account to the account owner in order to avoid the 50 percent penalty tax. IRC Section 4974; Treas. Regs. Section 54.4974-2, Q&A 1 and 2. For IRAs, the RBD is always April 1 following the calendar year that the IRA account owner attains age 70 ½, even if the individual is still working. IRC Section 408(a)(6); Treas. Regs. Section 1.408-8 Q&A 3. For qualified retirement plans and IRC Section 403(b) plans, it is also that same date although there is an exception for people who are still working past that date. The RBD for a qualified retirement plan or a tax-sheltered annuity is the later of (a) April 1 following the calendar year that the account owner attains age 70 ½ or (b) April 1 following the calendar year that the employee separates from service (for example, somebody who works past age 71). IRC Section 401(a)(9)(E); Treas. Regs. Section 1.401(a)(9)2, Q&A 2. Individuals who own 5 percent or more of a business are not eligible for this later RBD: Their RBD is April 1 following the calendar year that they attain age 70 ½.
- Treas. Regs. Section 1.401(a)(9)-5, Q&A 5(a)-(c) and Q&A 6.
- IRC Section 401(a)(9)(B)(ii); Treas. Regs. Section 1.401(a)(9)-3, Q&A 1(a) and 2. For example, if an employee died on Jan. 11, 2006, the entire interest must be distributed by Dec. 31, 2011.
- The IRS recently issued further guidance for the criteria when a qualified terminable interest property (QTIP) trust that will receive retirement plan distributions will qualify for a marital estate tax deduction. Rev. Rul. 2006-26, 2006-22 I.R.B. 1 (amplifying Rev. Rul 2000-2 and Rev. Rul. 89-89). See also Natalie Choate, “IRS Rejects UPIA 10 Percent Rule,” Trusts & Estates, July 2006, at pp. 18-21.
- Treas. Regs. Section 1.401(a)(9)-5, Q&A 5(a)-(c) and Q&A 6; see also PLRs 200528031, 200528035, 200444033, 200444034, 200410019 and 200317041.
- Treas. Regs. Section 1.401(A)(9)-4, Q&A 1(a) defines beneficiaries to include remainderman and contingent beneficiaries.
- Both a QTIP trust that has a charitable remainderman and a CRT offer similar estate tax benefits: There is no estate tax paid when either the first spouse or the surviving spouse dies. A transfer to such a trust will qualify for an estate tax marital deduction upon the death of the first spouse who established the trust and then, when the surviving spouse dies and the trust's assets are transferred to a charity, the surviving spouse's estate can claim an estate tax charitable deduction for the entire amount. The practical advantage of a QTIP trust over a CRT is that there can be invasions of trust principal to pay for a spouse's financial emergency from a QTIP trust but not from a CRT. Thus, a QTIP trust with a charitable remainderman may be an acceptable estate planning arrangement for most types of assets. However, the estate planner should consider establishing a separate CRT to receive retirement assets because the favorable income tax treatment offered by a CRT may outweigh the potential advantage of using principal to support the spouse. When the trust terminates, the CRT will be able to make a gift of the entire $100,000, whereas the QTIP trust would only have $60,000 after paying $40,000 of income taxes. See PLR 199820021. The husband named as the beneficiary of his IRA a QTIP trust that would pay income to his wife for life and then the remainder to a charity. The charity was treated as a beneficiary, even though it only had a remainder interest. The IRS applied the 1987 proposed regulations rather than the 2002 final regulations, but the outcome after the husband's death would be similar under current law.
- A charitable lead trust (CLT) is the inverse of a CRT: The trust makes a stream of payments to a charity for a period of years (for example 10 or 15 years) and then the remainder interest is distributed to noncharitable beneficiaries. IRC Sections 2055(e)(2)(B) (estate tax charitable deduction) and 2522(c)(2)(B) (gift tax charitable deduction). Such a trust can provide significant estate and gift tax savings but only rarely does it provide income tax benefits. With a grantor-type CLT, it's possible to claim a charitable income tax deduction in the year that property is contributed, but then in future years the donor must report the trust's taxable income without any offsetting charitable income tax deductions. IRC Section 170(f)(2)(B); Treas. Regs. Section 1.170A-6(c)(1). A common objective with a CLT is to distribute a larger amount to family members than the tax calculations assume. In simplified terms, the taxable portion of the trust is the present value of the assumed remainder interest when the trust terminates (for example, $100,000) but the settlor hopes that with terrific investing the trust assets may actually be worth $150,000 at that time. The problem with funding a CLT with retirement assets is that unlike a CRT, a lead trust is not exempt from income tax. It is taxed as either a grantor or a nongrantor trust. IRC Sections 170(f)(2)(B) and 671-677 (“grantor trusts”); Treas. Regs. Section 1.170A-6(c)(1). Either way, the liquidation of the retirement account will disgorge vast amounts of taxable income that will exceed any offsetting charitable income tax deductions. Consequently, instead of having $100,000 or $150,000 when the trust terminates, there will be only $60,000 (this is, of course, simplified). It makes little economic sense to pay estate tax on the assumption that the parties will receive $100,000 when they will instead receive only $60,000 as so much of the value of a retirement account represents deferred income taxes. Again, in simplified terms: The assets will quickly shrink from the original $100,000 to just $60,000 because $40,000 of income taxes were paid.
- The CRT should be named as a beneficiary on the retirement plan account forms. PLRs 199901023 (Oct. 8, 1998), 199634019 (May 24, 1996), 199253038 (Oct. 5, 1992) and 199237020 (June 12, 1992).
- To qualify as a CRT, the present value of the remainder interest (the charitable tax deduction) must be at least 10 percent of the value of the contributed property. IRC Section 664(d)(2)(D). This effectively limits the maximum term of a CRT to about 50 years, which is less than the life expectancy of a 22-year-old individual. For this and other technical issues with funding CRTs, see Hoyt, supra at note 5.
- IRC Section 408(a).
- A conduit trust is a look-through trust in which the governing trust instrument requires all retirement plan payments that are received by the trust to fully redistributed to the primary intended beneficiary. That way, no retirement assets accumulate in the trust. For purposes of computing the mandatory IRA distributions, a contingent beneficiary of a conduit trust — such as a charity — is not considered. Treas. Regs. Section 1.401(a)(9)-5, Q&A 7(c)(3), Example 2. In one situation, the IRS authorized conditions for a conduit trust to convert into an accumulation trust, which could be useful if the beneficiary develops a drug problem or encounters other challenging situations. PLR 200537044 (March 29, 2005).
- Neither the donor's estate nor the heirs will recognize taxable income if a retirement plan makes a distribution directly to a charity or to a CRT. Instead, IRD is taxed to whomever has the right to receive it. The planning strategy is to have the income taxed to a tax-exempt charity. IRC Section 691(a); Treas. Regs. Section 1.691(a)4(b)(2); Rev. Rul. 64104, 19641 C.B. 223; see also PLRs 200002011 (Sept. 30, 1999) and 200012076 (Dec. 29, 1999) (charitable bequests of employee stock options); 199723038 (March 11, 1997) (public charity); 199838028 and 199818009 (private foundation); 199901023 (Oct. 8, 1998) and 199634019 (May 24, 1996) (charitable remainder trust). With respect to private foundations, neither the estate nor beneficiaries have any taxable income when an IRA goes to a private foundation; there is no 2 percent IRC Section 4940 private foundation investment income tax on distribution from a retirement plan, but yes, there is a 2 percent tax on investment income earned from an annuity contract. PLRs 200425027 (Feb 27, 2004) and 199826040 (March 30, 1998). No “self dealing” private foundation tax if private foundation is required by terms of living trust to pay to the estate “IRD” assets in order to pay recomputed estate tax. See also PLRs 199939039 (June 30, 1999), 199838028 (June 21, 1998), 9818009 (Jan. 8, 1998), 199341008 (July 14, 1993) and 199633006 (May 9, 1996).
- The mandatory distributions from multiple IRAs after age 70 1/2 can be satisfied by withdrawals from just a single IRA. Treas. Regs. Section 1.408-8, Q&A 9.
- The date when the beneficiaries of a qualified retirement plan or an IRA are determined for purposes of the mandatory post-death distributions is Sept. 30 of the calendar year that follows the calendar year of the account owner's death. Treas. Regs. Section 1.401(a)(9)-4, Q&A 4. The minimum distributions will be computed based only on the beneficiaries who still have an interest on this determination date. If a beneficiary's interest is eliminated between the time that the account owner died and the determination date for example by a cash out or a disclaimer — then that beneficiary will not impact the required minimum distributions (RMDs).
- For examples of restrictions accepted by the Service, see PLRs 200453023, 200432027, 200432029 and 200235038.
- Rev. Rul. 2003-123, 2003-50 IRB 1200, citing Crestar Bank (Estate Of James A. Linen) v. IRS, 47 F. Supp. 2d 670 (E.D. Va., April 1999); Van Buren v. Commissioner, 89 T.C. 1101 (1987); and Riggs National Bank v. U.S., 352 F.2d 812 (Ct. Cl. 1965).
- PLRs 200617020 (Dec 8, 2005) (IRA where residue of estate was left to a charity), 200511174 (Feb 8, 2005) (IRAs and 401(k) plan where residue of estate was left to charity); PLRs 200526010 (March 22, 2005) (IRAs payable to trust with charitable residue); 200452004 (Aug. 10, 2004) (IRAs and deferred annuity contracts to charitable residuary) and 200234019 (May 13, 2002) (IRAs and 403(b) accounts where portion of the estate went to charity). In PLR 200618023 (Jan 18, 2006), the will did not specifically authorize the executor to make non-pro rata distributions, but the executor asserted that such distributions were permitted under state law and the annuity contracts were assigned to the remainderman charitable beneficiaries. The state was not identified.
These are the numbers provided by the government
|Age||# of Years Left|
|Source: Table A-1 of Treasury Regulations Section 1.401(a)(9)-9 (“single life”), required by Treas. Regs. Section 1.401(a)(9)-5, Q&A 5(a) & 5(c) and Q&A 6.|