Number of Beneficiaries for IRA Accounts
There is no limit to the number of beneficiaries an individual can designate for an IRA (Individual Retirement Account). You can name multiple beneficiaries, and you can also specify the percentage of the account each beneficiary should receive.
Naming a Non-Profit Organization as a Beneficiary
Yes, you can name a non-profit organization as a beneficiary of your IRA. This can be an effective way to make a charitable contribution.
Tax Implications for Beneficiaries
Individual Beneficiaries
- Traditional IRA:
- Inherited IRAs: The beneficiary will need to take required minimum distributions (RMDs) based on their life expectancy or within a ten-year period, depending on their relationship to the deceased and the year of death.
- Taxation: Distributions from a traditional IRA are subject to ordinary income tax. The amount distributed is added to the beneficiary’s taxable income for the year.
- Roth IRA:
- Inherited IRAs: Generally, beneficiaries must distribute the inherited Roth IRA within ten years of the owner’s death.
- Taxation: Distributions from a Roth IRA are typically tax-free if the account was open for at least five years before the owner’s death.
Non-Profit Organizations
- Tax-Exempt Status: Non-profit organizations typically do not pay taxes on the distributions they receive from an IRA, due to their tax-exempt status.
- Full Amount Received: The non-profit will receive the full amount of the IRA balance without having to pay income tax on the distribution.
Summary
- Number of Beneficiaries: Unlimited
- Non-Profit Beneficiary: Allowed
- Tax Implications:
- Individuals: Subject to ordinary income tax on distributions (traditional IRA) or tax-free distributions (Roth IRA, subject to conditions).
- Non-Profits: Distributions are generally tax-free.
This arrangement can be part of strategic estate planning, especially for those wishing to support charitable causes while also managing tax implications for their heirs.
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