Posted on January 27, 2005 at 16:58:54:
If your estate plan includes charitable donations, it’s often wise to fund them with an IRA or other tax-deferred retirement account. There are two advantages: the charities will owe no income taxes on the money; and any appreciated assets left to family or friends will be inherited at a stepped-up basis.
If there is more in the IRA than you want to leave to charity, it makes sense to split the funds and put just enough into an IRA with the charity as beneficiary. As the funds appreciate, you may want to withdraw from the charity IRA, especially as minimum distributions are required.
While one can leave the IRA directly to the charity, it may be preferable to leave it to a spouse or a marital trust, with funds going to support the organization at the death of the second spouse. Smart move: work with a knowledgeable tax professional who can suggest the best method to fund both family and charity.