Pragya S. Murphy, MBA

How to Support Your Heirs for Their Lifetimes

Giving Voice Spring 2020: Giving Matters

By Pragya Murphy, Development Officer

Congress has tried to eliminate the Stretch IRA for years and now they’ve finally done it.

The Stretch IRA allowed a non-spouse beneficiary of an IRA to withdraw from the IRA over their life expectancy, essentially stretching its benefit into the next generation. This was particularly useful if you wanted to leave your IRA in a trust for your heirs.

In place of the Stretch IRA, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which went into effect on January 1, 2020, now requires all non-spouse beneficiaries to withdraw the entire balance from the inherited IRA within 10 years of the owner’s death. For many of us, this is not desired, because we likely want to give our heirs stability that lasts. However, there are other trust planning options to extend those benefits out over the life expectancy of your beneficiary.

You can still provide security for your heirs, make your IRA last for years after your lifetime and benefit a charity. All you have to do is name a charitable trust as beneficiary of your traditional IRA. This solution has been around since the Tax Reform Act of 1969; but now that the Stretch IRA is gone, it has become the only viable option.

From a tax perspective, the trust isn’t taxed on either the distribution from the IRA or the income and gains it earns. Your heirs likely will owe taxes on distributions from the charitable remainder trust just like you did when withdrawing from your IRA. The upside is that the charitable remainder trust can last much longer than the 10-year payout provisions contained in the SECURE Act. What this means is that for individuals wanting to extend the payout period, the charitable remainder trust becomes a practical vehicle to obtain all the benefits of the Stretch IRA with the additional incentive of benefiting a charity after the lifetime of your heirs.

A Few Points to Consider

  • A surviving spouse still has the ability to inherit the decedent’s retirement accounts and use them over the rest of their life.
  • Heirs will only receive an income stream and not a lump sum. If a lump sum payment to heirs is desired, a portion of the retirement account could be left directly to them.

The charitable benefit should be emphasized with your family. Not only can this choice provide about the same or more benefit to your heirs assuming average life expectancies, but it can also provide a substantial amount to charity as well.

Related Stories

3 men standing outside
News Releases February 15, 2024

More than $765,000 Distributed to Local Nonprofits

The Central New York Community Foundation recently distributed $769,999 in grants to local nonprofits.

Man and woman stand together
Stories February 12, 2024

Giving Perspectives: Susan & Michael Meath

The Community Foundation’s 5forCNY initiative, which invites community members to give back to the region ...

Artwork
Blogs December 27, 2023

Everson Museum Highlights Local Indigenous Artist

In July, the Everson hosted Frank Buffalo Hyde’s first solo exhibit in New York State, ...

hand holding growing money
Publications December 20, 2023

Financial Psychology Can Unlock Your Charitable Giving Intentions

Hear from Julia Trivisonno, a Senior Vice President and Key Private Bank Market Leader, on ...

Young girl standing next to bookshelf
Stories December 11, 2023

Making Literacy Accessible

The United Way of CNY recently used a $100,000 grant from our Literacy Initiative Fund ...

Man reading with young boy
Blogs December 4, 2023

Providing an Extra Boost to Help Students Thrive

Mike Nash, president at KS&R and Book Buddies Volunteer, shares how he saw the positive ...

collage of pictures of young girls doing art
News Releases October 30, 2023

More than $235,000 in Grants Awarded to Black-Led Organizations

Seventeen Black Equity & Excellence Fun grants, totaling $238,200, distributed to Black-led organizations.

Man standing in front of library
Blogs October 17, 2023

Fostering Grassroots Change through The Leadership Classroom

Jacob Gedetsis, founder and director of Write Out and lecturer and coordinator of the Writing ...

Blogs October 8, 2023

Reflections: A Data-Driven Approach for Equity

Frank Ridzi tells us about a new racial equity section on CNY Vitals, our 'state ...

3 men standing outside
News Releases February 15, 2024

More than $765,000 Distributed to Local Nonprofits

The Central New York Community Foundation recently distributed $769,999 in grants to local nonprofits.

Man and woman stand together
Stories February 12, 2024

Giving Perspectives: Susan & Michael Meath

The Community Foundation’s 5forCNY initiative, which invites community members to give back to the region ...

Artwork
Blogs December 27, 2023

Everson Museum Highlights Local Indigenous Artist

In July, the Everson hosted Frank Buffalo Hyde’s first solo exhibit in New York State, ...

hand holding growing money
Publications December 20, 2023

Financial Psychology Can Unlock Your Charitable Giving Intentions

Hear from Julia Trivisonno, a Senior Vice President and Key Private Bank Market Leader, on ...

Young girl standing next to bookshelf
Stories December 11, 2023

Making Literacy Accessible

The United Way of CNY recently used a $100,000 grant from our Literacy Initiative Fund ...

Man reading with young boy
Blogs December 4, 2023

Providing an Extra Boost to Help Students Thrive

Mike Nash, president at KS&R and Book Buddies Volunteer, shares how he saw the positive ...

collage of pictures of young girls doing art
News Releases October 30, 2023

More than $235,000 in Grants Awarded to Black-Led Organizations

Seventeen Black Equity & Excellence Fun grants, totaling $238,200, distributed to Black-led organizations.

Man standing in front of library
Blogs October 17, 2023

Fostering Grassroots Change through The Leadership Classroom

Jacob Gedetsis, founder and director of Write Out and lecturer and coordinator of the Writing ...

Blogs October 8, 2023

Reflections: A Data-Driven Approach for Equity

Frank Ridzi tells us about a new racial equity section on CNY Vitals, our 'state ...

View More