Contents

§ 9.10 RETIREMENT PLAN ACCOUNTSpercent in the instance of larger estates. At a cost to the heirs of less than 25percent of the assets, an individual can have 100 percent of IRD assets devotedto a charitable purpose.A surviving spouse can roll over an inherited retirement plan distribution toan individual retirement account and thereby avoid paying income tax in theyear of receipt. 288 No other individual, however, can do this. If someone willinherit large amounts of taxable retirement plan assets from a single, widowed,or divorced individual, he or she may be able to accomplish something close to arollover by having the retirement plan assets distributed to a charitable remaindertrust 289 rather than to the heirs or the probate estate.(c) Potential Problems and SolutionsOverview. The transfer of retirement plan assets to charitable organizationsand charitable remainder trusts involves multiple areas of legal specialization.These areas of the law include the retirement plan rules (chiefly, the EmployeeRetirement Income and Security Act (ERISA)), estate taxation, income taxationof estates, the law of tax-exempt organizations, and the laws regarding charitableremainder trusts.It is not enough to solve the problems that exist solely in one area of the law.Every area could pose a significant problem that could prevent a donor or acharitable organization from obtaining the optimal result. The situation is furthercomplicated by the paucity of law; the legal authority that is precisely onpoint consists of IRS private letter rulings. 290Retirement Plan Issues. As a general rule, the assets in a retirement plan mustbe distributed over an individual’s life expectancy beginning at age 70-1/2, sothat the retirement plan account should be nearly empty at the time of the individual’sdeath. 291 An exception is that an individual can add the life expectancy ofthe individual who is named as the successor beneficiary (for example, a spouse)so that there will be assets in the plan at the time of death to transfer to the successorbeneficiary. The problem is, of course, that a charitable organization does nothave a life expectancy, nor does the probate estate. Consequently, naming either acharity or the probate estate as a successor beneficiary will force distributions tobe made over the donor’s single life expectancy, so that nothing may be left forthe charity at death.The solution is to name an individual as the first successor beneficiary and acharitable organization as the contingent beneficiary. Within nine months ofdeath, the first beneficiary can disclaim some or all of the assets so that they passto the charity. 292 The charity can take several practical steps to assure that theproperty will in fact be disclaimed, such as obtaining a letter of intent.Another problem is that, after an individual’s death, all assets must generallybe distributed from the individual’s retirement plan account within five288 IRC § 402(c)(9).289 In general, see Chapter 12.290 See, e.g., Priv. Ltr. Rul. 9237020.291 IRC § 401(a)(9).292 IRC § 2518. 305