A donor who inherits an IRA also inherits the ability to use the IRA to make qualified charitable distributions (QCDs), along with the limitations of this gift type.

To make a QCD contribution to charity, the beneficiary of the inherited IRA must be at least age 70 ½ at the time of the QCD. The age of the IRA’s original owner is not relevant, nor is the inheritor’s age at the time of the decedent’s death. The age that matters is that of the donor at the time they make the gift.

Solicitations for testamentary gifts from IRAs are often an easy ask. The donor can name a charity (or charities) to benefit from all or just a fraction of their IRA account without revising their will (and paying their attorney’s fees). Because of the ease of the ask and the prevalence of IRA holdings by donors, fundraisers should be aware when changes to IRA regulations might sway a donor towards an IRA gift.

Earlier this year, the IRS released proposed regulations that take a new position affecting required minimum distributions (RMDs) for inherited IRAs and the considerable financial penalty (up to 50%!) for failure to take an RMD. But don’t be misled by the word “proposed,” unlike proposed Federal regulations, proposed IRS regulations immediately go into effect. The upside of the IRS’s position is that it also enhances the attractiveness of testamentary charitable gift annuities (CGAs) and charitable remainder trusts (CRTs) funded by IRAs.

Collecting the funds, when a donor makes a charity the beneficiary of an IRA, can be challenging. There has been much discussion about IRA administrators who, with a few exceptions, require charitable beneficiaries to establish an IRA account to receive a distribution from the donor’s IRA, 401(k), 403(b), or other qualified plan.