Death and taxes are the two certainties in life we have always heard of but there may be something we can do about the latter. If leaving money to charity is important to you and part of your estate planning, leaving traditional IRA assets has its advantages. According to the Investment Company Institute, the latest data shows traditional IRAs held about $11 trillion at the end of Q1 in 20221. This is double the amount that was held back in 2012.

 

The advantage of donating IRA assets at death can be an income tax trifecta- no tax on annual growth, no tax on contributions, and no tax on assets at death. These tax efficient strategies can be favored over traditional donations of cash or investment assets in a taxable account. Remember, any IRA assets going to heirs must be depleted within 10 years now1. Flexibility is another advantage of leaving IRA assets to a charity since a donor can name different charities and different amounts to donate.

 

Making these changes is usually easier with traditional IRAs than a will. An IRA owner can name multiple charities and with different percentages. You can also move assets from other IRAs into it via direct tax-free transfers. Lastly, when an IRA owner is age 72 or older, they are required to take required minimum distributions, withdrawals do not have to be taken from each IRA. Using IRA assets is a great way to deepen philanthropic efforts within the family.