Do you want to use your IRA to help a charity, but also benefit your heirs? Instead of leaving your IRA directly to your children, you can leave it to a charitable remainder unitrust (CRUT) while still benefiting your children. With the SECURE Act making changes to rules about inherited IRAs, this may be an attractive estate planning option.
Under the SECURE Act, when a non-spouse inherits an IRA, the beneficiary must withdraw all of the assets in the inherited account within 10 years (with some exceptions, such as if the beneficiary is disabled or chronically ill). There are no required distributions during those 10 years, but it must all be distributed by the 10th year.
Instead of leaving an IRA directly to your heirs, an alternative is to leave the IRA to a CRUT. A CRUT is an irrevocable trust that provides the beneficiaries with income for a set number of years or for life. The beneficiaries receive a set percentage from the trust during their lifetime. When they die, the remainder in the trust goes to the charity (or charities) of your choice.
To name a CRUT as the beneficiary of an IRA, you must first put a provision in your will creating the CRUT. This needs to be done by an attorney. Then you can change the beneficiary on the IRA to the CRUT. While your heirs may receive less money overall than if they had stretched out the IRA, they should receive more money than if they were required to cash out the IRA after five years. Naming a CRUT as a beneficiary on an IRA also has positive estate tax implications. The estate will receive a deduction based on the remainder interest of the CRUT.
If you are interested in creating a CRUT, contact your attorney.