[FREE DOWNLOAD] How to Collect IRA Proceeds

Today we welcome back a special guest on the blog: Stelter’s Senior Technical Consultant, Lynn Gaumer, J.D. Lynn returns to provide us with steps you can take to collect IRA proceeds.

Naming a charity as a beneficiary of an IRA is easy…

Collecting the proceeds is harder.

Charitable organizations often highlight the ease and flexibility of naming a charitable organization as the beneficiary of an IRA. And rightly so.

The beneficiary designation forms are easily accessible through the IRA administrator or downloadable off the website. A donor simply needs to fill in some information, sign and date the form, and return it to the IRA administrator. The process takes a relatively short period of time.

But let’s look at the transaction from your side.

You receive notice that a loyal donor has passed away and named your organization as beneficiary of an IRA. Depending on the IRA administrator, you may experience lengthy delays in processing.

Many IRA administrators make it easy for you to collect the proceeds with a simple claim form and a death certificate. The proceeds are paid in one lump-sum payment—usually within 60 to 90 days.

However, some IRA administrators request highly sensitive information. They may request that your organization open a stretch or inherited IRA account for your organization to receive proceeds. In these cases, the IRA administrator requires personal information such as a driver’s license number, the Social Security number of one of the officers of the charity and a home address. The IRA administrator may cite either compliance issues or the Patriot Act as a reasoning for the personal information.

Stop

If you are asked for personal information:

1) Stop.
2) Pick up the phone.
3) Push back.

I am a member of the Leadership Institute for the National Association of Gift Planners. This highly experienced group of planned giving professionals meets twice a year to discuss issues that impact charitable giving. What seems to be a perennial issue for this group is that far too often charities experience lengthy delays when IRA administrators mandate that the charity, as a beneficiary, open an inherited or stretch IRA account to claim its proceeds after the donor passes away.

Best Practice

The consensus of the Leadership Institute group is that if you are faced with this request, stop, pick up the phone and push back.

Unfortunately, this is going to take some time, but your team members should not be divulging personal information to IRA administrators.

Do not get shuffled around from person to person through a toll-free number. It is best to work with one identifiable person (preferably legal counsel) and try to develop a rapport with that one person. Try to get that personal representative’s direct telephone line or email.

Bonus

For your written communications: Jeff Comfort, Vice President of Principal Gifts and Gift Planning of the Oregon State University Foundation and member of the National Association of Charitable Gift Planners’ Leadership Institute, created a sample letter that many nonprofit development officers have used to push back when faced with these challenges.

We are sharing Jeff’s letter with you so that you can customize it for your own communications with IRA administrators.