November 06, 2013

Is naming a charity as one of your beneficiaries always a good idea? No, it is not. If you want to arrange for charitable gifts from your IRA assets upon your death, you can certainly do that. However, it may not always be the best strategy from a gifting perspective to name the charity as one in a group of beneficiaries. This is an excellent time to consider creating a separate IRA for the amount to be paid to the charity upon your death. The charity, unlike your heirs, can receive the IRA benefit free of estate and income tax. Because of special tax breaks for charities, the IRA assets will be worth more to the charity than the after-tax amount that would be available to your heirs.

So, bottom line is that it may be a better strategy to gift your Roth IRA to your kids and your Traditional IRA to your charity of choice. *

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