Many retirees want to leave a legacy that reflects both their values and their relationships—with support for loved ones and charitable causes that matter to them.

But when it comes to naming a charity as a beneficiary on an IRA, a few small missteps can create big tax complications.

That’s why we created a short video to help simplify the topic. If you’re considering charitable giving through your retirement accounts, this video walks through five essential things to know before you name a nonprofit or church as an IRA beneficiary.

Watch the Video:

Our Associate Financial Advisor, Adriaan, covers 5 Common Mistakes to Avoid When Leaving Your IRA to a Charity

Key Considerations for Charitable IRA Gifting

1. Name the Charity Directly on the Beneficiary Form

This allows the funds to pass directly to the charity without going through probate. Because charities are tax-exempt, they receive the full value of the distribution, and it won’t be considered income to your estate.

2. Separate IRA Accounts Can Help Protect Heirs

If both a charity and individuals inherit from the same IRA, and the charity’s share isn’t paid out by the IRS deadline, the individual beneficiaries may lose the ability to stretch distributions—resulting in a faster payout timeline and potentially higher taxes.

To avoid this, consider setting up a dedicated IRA account for the charitable portion.

3. Reverse Your Bequests for Better Tax Results

Many people leave charitable gifts in their will and pass retirement accounts to family. But this can create unnecessary taxes for heirs.

A smarter approach may be to leave the IRA to the charity and leave non-retirement assets to family members. Since charities don’t pay income tax, and your heirs won’t be taxed on non-IRA assets, this approach may result in more efficient wealth transfer overall.

4. Avoid Roth Conversions on IRA Funds Going to Charity

Charities don’t pay income tax—so converting a traditional IRA to a Roth before donating it often results in an unnecessary tax hit. If your IRA is going to a nonprofit, a Roth conversion generally doesn’t make sense.

5. Be Careful Naming a Charity as a Trust Beneficiary

A charity is considered a “non-designated beneficiary” because it has no life expectancy. If you name a charity inside a trust that inherits your IRA, it can disrupt the payout timeline for the other trust beneficiaries, forcing them to take distributions sooner than expected.

Bonus: New Gifting Options Under SECURE Act 2.0

Recent updates to the law now allow a one-time transfer from your IRA to fund a Charitable Gift Annuity (CGA). This new strategy lets you:

• Satisfy your required minimum distributions (RMDs)
• Create a reliable stream of income for yourself (or your spouse)
• Support a cause you care about

It’s an innovative way to align your values, income needs, and tax strategy—all in one move.

Let’s Talk Through Your Giving Goals

Every situation is unique, and charitable giving strategies should match your broader financial plan.

If you’re thinking about using your IRA to support a nonprofit or church—or just want to be sure your beneficiaries are set up the right way—we’re here to help.

Give us a call at 517-435-4040 or email us at questions@richmondbrothers.com to schedule a quick, no-obligation visit. We’d be happy to walk through your options so you can feel confident in your legacy.