FAQ: What is an inherited IRA and how can I use it for charity?

An inherited Individual Retirement Account (IRA), sometimes known as a Beneficiary IRA, refers to an account that is created to hold the IRA or employee-sponsored retirement plan assets that someone has inherited after the death of the original owner. Typically, an inherited IRA is opened by a family member or a close friend who was named as the beneficiary of a retirement account. Although it is possible for a spouse to transfer the assets into an inherited IRA, most often the beneficiary spouse will direct the inherited funds into their own retirement account(s), essentially treating the assets as their own.

As inherited IRAs become a reality for more and more of our donors, we thought this would be a great time to answer some of our most frequently asked questions on inherited IRAs and how to use these assets to make a charitable gift.

1.  Can I make additional contributions to an inherited IRA?

Unfortunately, you cannot make additional contributions to an inherited IRA. You may withdraw the funds or transfer the assets to another qualified retirement account. You may also allow the account to grow on its own and then pass it down to future heirs.

2.  Do inherited IRAs have required minimum distributions (RMDs)?

If you are a non-spouse beneficiary of an inherited IRA you are subject to RMDs, but the exact requirements will depend on a number of factors, such as your relationship to the account owner and the year of death. Please consult with your personal tax advisor regarding your personal tax situation.

3.  Can I use an inherited IRA to make a charitable gift to Duke?

Yes, you can use an inherited IRA to make a gift to Duke! One simple option would be to name Duke University as a beneficiary of the inherited IRA. The company that manages the retirement account can help you update this information on the plan’s beneficiary designation form.

Another way to use an inherited IRA to make a gift is through a charitable IRA rollover. As with all charitable IRA rollover gifts, the donor must be at least 70 ½ years old and the rollover may not exceed $100,000 per year. Additionally, the funds need to be directly transferred from the plan administer (a.k.a. the plan custodian or trustee) of the IRA to the charity (Duke University). The donor should not accept any distributions of funds intended for a charitable IRA rollover.

Do you have additional questions about inherited IRAs or how to use these assets to make a gift to Duke? Please contact us if you would like to learn more.  We would be happy to talk with you and your advisors about what may be the best choice for you.

TAGS: retirement account designation Frequently asked questions Inherited IRAs

About the author

Gift Planning

giftplanning@duke.edu

Duke University’s Office of Gift Planning specializes in charitable gift planning for estates, charitable trusts and annuities, and other complex current and future gift plans.

For more information, please contact the Duke University Office of Gift Planning at 919-681-0464 or giftplanning@duke.edu.