Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

7.4 I NCOME T AX T REATMENT OF C HARITABLE G IFTS FROM A T RUST OR E STATE .....................374 Introduction to trust income tax rules, “DNI,” and the NIIT ............................................374 DNI deduction, retirement benefits, and charity ................................................................376 Charitable deduction under § 642(c)...................................................................................376 Timing of charitable deduction for trust or estate ..............................................................383 Transfer benefits to charity to avoid “separate share” and other rules .............................384 How to name a charity as beneficiary through a trust .......................................................387 7.5 S EVEN “W HICHES ”: T YPES OF C HARITABLE E NTITIES ..........................................................388 Suitable: Public charity ........................................................................................................388 Suitable: Private foundation ................................................................................................388 Suitable: Donor-advised fund..............................................................................................389 Suitable: Charitable remainder trust ...................................................................................389 Income tax rules for CRTs; IRD deduction ........................................................................390 Solving planning problems with a CRT .............................................................................393 Reasons NOT to leave benefits to a CRT ...........................................................................396 Suitable: Charitable gift annuity .........................................................................................397 Usually unsuitable: Charitable lead trust ...........................................................................398 Unsuitable: Pooled income fund .........................................................................................398 7.6 Q UALIFIED C HARITABLE D ISTRIBUTIONS ...............................................................................399 Where to find the law ..........................................................................................................399 Who can make QCDs: Individuals over age 70½ ............................................................399 From IRAs only (but not ongoing SEPs or SIMPLEs) ...................................................400 How much? $100,000 per year per IRA owner ................................................................401 Requirements applicable to charity and donation ............................................................401 Income tax aspects; effect on basis....................................................................................401 How to do it; how to report it..............................................................................................402 Using QCDs for the RMD; other planning uses and pitfalls ..........................................403 7.7 L IFETIME G IFTS OF R ETIREMENT B ENEFITS ............................................................................404 Lifetime gifts from distributions .........................................................................................404 Give your RMD to charity...................................................................................................405 Gifts from a pre-age 59½ “SOSEPP” .................................................................................406 Gift of NUA stock ................................................................................................................406 Gift of other low-tax lump sum distribution.......................................................................407 Give ESOP qualified replacement property to CRT ..........................................................407 7.8 P UTTING IT A LL T OGETHER .....................................................................................................408 8.1 IRA S : I SSUES FOR I NVESTORS .................................................................................................409 Various investment issues for IRAs ....................................................................................409 A. IRA contributions, distributions, rollovers.............................................................409 B. Prohibited transaction from standard brokerage account form.............................409 C. IRA and nonIRA transactions matched for wash sale purposes ...........................410 Investment losses and IRAs.................................................................................................410 CHAPTER 8: INVESTMENT ISSUES; PLAN TYPES...............................................................409