We welcome back a special guest: Stelter’s Senior Gift Planning Consultant, Lynn Gaumer, J.D., to share a helpful resource on beneficiary distributions.
According to the National Association of Charitable Gift Planners (CGP), 43% of organizations experienced difficulty collecting beneficiary proceeds from one or more IRA administrators.
Naming a charity as a beneficiary of an IRA is easy…collecting the proceeds is harder.
Part 1: What The Donor Experiences
Our charitable organizations often highlight the ease and flexibility of naming a nonprofit 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 time.
But let’s look at the transaction from your side.
Part 2: What Your Nonprofit Experiences
This scenario may sound familiar: A donor names your organization as a beneficiary of an IRA and passes away. You call the IRA administrator to collect the proceeds. The IRA administrator requests that your organization open a stretch or inherited IRA account. 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.
(Of course, good cases abound, too. 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.)
What Should You Do?
You should not have to provide personal information to collect the death proceeds. There is a better way to respond to the IRA administrator’s requests.
If you are asked for personal information:
- Stop.
- Push back.
In response to this problem, the RIFT (Release IRA Funds Timely) project was created by members of CGP’s Leadership Institute. Spearheaded by Johni Hays, J.D., this group created a wealth of information and resources for you. And you don’t have to be a member of CGP to access the information.
Find informative articles and sample letters to send to IRA administrators on the Charitable Beneficiary IRA Distribution Resource Center page.
If you have information other nonprofits might be interested in, you’ll also find a prompt to share your comments. Together, we can make the IRA gift process as seamless for our organizations as it is for our valued donors.
This is good advice, but there are many bad actors out there still. Our most recent gaslighting and stonewalling adventure was led by two major national banks and one regional. Although we set out initially to stand firm and talk to the banks’ attorneys, we eventually relented on all three because there were hundreds of thousands of dollars at stake and it is nearly impossible to get access to, or get a response from, the legal departments of major financial institutions. In any event, we are less interested in pursuing litigation on our own than banks are willing to disregard the Internal Revenue Code and their legal requirements in appropriately administering IRA’s as trusts. This needs a class action suit and/or intervention from Congress.