Catherine Posted January 28 Report Share Posted January 28 Hi folks, I have a lovely grey area. Elderly lady made a church the beneficiary of her IRA so they would get $$ after she passed on. This change was submitted to them very shortly before she died. Custodian refused to honor it (due to their delay in processing the request, as can be seen from her date of death and the date the papers were submitted). Instead her son gave the amount she wanted them to have from the estate funds to replace what they did not get from her IRA. Does that count as a per-will/per-trust/per-paperwork donation, or not? Only those things called for in the will or trust is allowed as charitable deduction - but she did everything she could to get a distribution from her IRA, and the custodian mucked it up. Opinions? Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted January 29 Report Share Posted January 29 18 hours ago, Catherine said: Does that count as a per-will/per-trust/per-paperwork donation, I don't see how. Sec. 642(c) clearly states that the donation must be made pursuant to the terms of the governing instrument. 18 hours ago, Catherine said: Instead her son gave the amount she wanted them to have from the estate funds to replace what they did not get from her IRA. Legal issue. Was there an attorney involved? If son was heir he could have made the donation personally after receiving funds from the estate. 1 Quote Link to comment Share on other sites More sharing options...
BrewOne Posted January 29 Report Share Posted January 29 If no tax would have been due if the beneficiary had been changed to the church, looks like a legal matter. Further thought: As you point out, for a charitable deduction, the charity must be listed in the instrument; however, it also has to be noted that they are receiving the money from income, not corpus. It looks like it will end up as income to the estate... Interesting stuff 1 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted January 29 Report Share Posted January 29 Who was the final beneficiary that the funds were paid to? The estate or the son? I think this determines where the income goes and where the deduction for the charitable contribution. I am pretty sure that if the son's SSN is on the paperwork as the beneficiary, he takes the funds into income via a 1099R and provided he files a Sch A and the charity gives him a receipt, there is no problem with him taking the deduction. Did the son write the check from his personal fund? Or did the check come from the estate of decedent? This is a real stretch, if the funds were paid to the estate, could you argue that the paperwork showing the attempt to make the contribution was an addendum to her will? It was clearly her intent and if she knew the trustee was going to deny her wishes, she could have amended her will. Tom Longview, TX Quote Link to comment Share on other sites More sharing options...
Catherine Posted January 29 Author Report Share Posted January 29 45 minutes ago, BulldogTom said: It was clearly her intent and if she knew the trustee was going to deny her wishes, she could have amended her will. She was dying; there were only a couple of weeks between the attempt to get the distribution for her church and when she passed on. That's why the issue with the custodian could not be fixed; she was already gone before it was known they didn't like the way the paperwork was filled out. I'll check with her son to see where the funds were paid to; I know the contribution came out of the estate accounts. That could be counted as money not paid to him. Quote Link to comment Share on other sites More sharing options...
Catherine Posted January 29 Author Report Share Posted January 29 From my memory, there was a large-ish 1099-R paid to her estate. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted January 29 Report Share Posted January 29 Why do people make their estates beneficiaries of their retirement accounts? I will never understand that... 2 minutes ago, Catherine said: From my memory, there was a large-ish 1099-R paid to her estate. Life would be so much easier if people named a person as their beneficiary. Tom Longview, TX 2 Quote Link to comment Share on other sites More sharing options...
Catherine Posted January 29 Author Report Share Posted January 29 Well, yeah, and I tell them all the time, but I can't make them listen! In her case, she hung on literally for years (incurable cancer) because her husband's health was failing and he needed someone to advocate for him (dementia, among other issues). She outlasted him barely seven weeks. No energy, time, or mobility to deal with anything but the absolute essentials for several years beforehand. I tried. I really did. As it was, I'm still working on the dregs of the 2022 returns. We got 2020 & 2021 filed the day before she passed on. Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted January 30 Report Share Posted January 30 6 hours ago, BulldogTom said: Why do people make their estates beneficiaries of their retirement accounts Sounds like she did not have a named beneficiary so it went to her estate. 6 hours ago, Catherine said: there was a large-ish 1099-R paid to her estate. And without a charitable contribution under section 642(c) the estate will likely have taxable income. 7 hours ago, BulldogTom said: could you argue that the paperwork showing the attempt to make the contribution was an addendum to her will? A legal question. I could not sign the 1041 and take the charitable deduction without a legal document. 6 hours ago, Catherine said: I know the contribution came out of the estate accounts. That could be counted as money not paid to him. And not deductible by the estate as either an income distribution or a charitable deduction. Unfortunately sounds like son was acting without any sound legal advice. Most likely it could have been resolved before son made the donation from the estate funds. 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted January 31 Author Report Share Posted January 31 On 1/29/2024 at 11:11 PM, DANRVAN said: Unfortunately sounds like son was acting without any sound legal advice. Most likely it could have been resolved before son made the donation from the estate funds. Ah, it gets better! The attorney told the son (or so son reports) that the paperwork to direct the custodian to send $X to the church does qualify as a written directive. I've asked him to get me a copy of that email. 1 Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted February 1 Report Share Posted February 1 You really have to give the son credit for carrying out the "will" of his mother, even though it was not in her "will". Otherwise he could have personally received a benefit as an heir to her estate. 17 hours ago, Catherine said: that the paperwork to direct the custodian to send $X to the church does qualify as a written directive. I would go with that and claim the charitable deduction up to the amount of total income received by the estate. Also consider electing accrual accounting and short first year to match deductions against income. 1 Quote Link to comment Share on other sites More sharing options...
Medlin Software, Dennis Posted February 1 Report Share Posted February 1 1 hour ago, DANRVAN said: You really have to give the son credit for carrying out the "will" of his mother, even though it was not in her "will". Otherwise he could have personally received a benefit as an heir to her estate. Rare indeed, kudos! Likely as common as (what used to be) common sense. 1 Quote Link to comment Share on other sites More sharing options...
Catherine Posted February 2 Author Report Share Posted February 2 Yes, he deserves credit for following her wishes. It was a hefty chunk-o-change, too. Quote Link to comment Share on other sites More sharing options...
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