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Donor beware: How some financial administrators are slowing IRA bequests

Some givers face hassles in making charitable IRA gifts, as the following article from the Washington Examiner outlines. Yet, despite these critiques, NCF’s expertise in handling testamentary gifts stands unique in the marketplace. NCF allows you to gift an IRA to your Giving Fund (naming us as the beneficiary) and leave detailed granting instructions to ensure the money goes safely to your favorite charities.

For American workers, the Individual Retirement Account is a tax-advantaged savings account for retirement. But in the nonprofit world, the IRA presents an opportunity for supporters to give. It is common for donors to leave their IRA, not to family beneficiaries who would face substantial income taxes from the inheritance, but to a charity that can receive it tax-free.

On the IRA owner’s death, the charity submits a “beneficiary form” – furnished by the IRA administrator – with the name and taxpayer identification number of the charity, and perhaps a corporate resolution that the signatory has authority to act for the charity, and a copy of the death certificate. In 60 days, a lump sum payment is made to the charity to fulfill the wishes of the decedent.

In recent years, however, many well-known IRA administrators (such as Fidelity, Charles Schwab, Ameriprise, and Vanguard) advised charities that they must create an “inherited IRA,” often called a stretch IRA or a beneficiary IRA, in order to receive the bequest. This is contrary to the law and to the nature of the instrument itself. Even worse, they demand that, because the charities are creating a “new account” for a “new customer,” they must comply with the Patriot Act – what provision they do not say – by providing personal, highly sensitive, and unnecessary information regarding not the charity, but its employees.

Read the full story at The Washington Examiner.
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