IF YOU DECIDE to make a charitable donation upon your death, you won’t get an income tax deduction, which you could receive if you made the gift during your lifetime. You will, however, shrink the size of your taxable estate.
You could simply name a charity in your will to receive some portion of your estate. But here’s an intriguing possibility: Donate your traditional IRA. As mentioned earlier in this chapter, beneficiaries (other than a spouse) of a traditional or Roth IRA have to draw down the account, but they can do so over many years. Those who inherit traditional IRAs will have to pay income taxes on the taxable portion of the withdrawal. Still, if your beneficiaries are smart, they can draw down the account slowly and get the benefit of decades of tax-deferred growth.
What if you doubt your beneficiaries will take advantage of the stretch IRA? What if it looks like Congress will eliminate the stretch IRA and instead force most beneficiaries to empty inherited IRAs within five years? You might name a charity as beneficiary of your traditional IRA, while bequeathing your Roth IRA and other assets to your children or other family members. By giving your traditional IRA to charity, you’ll shrink your taxable estate and get rid of the IRA’s embedded income tax bill.
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