Looking Beyond the 10-Year Rule: How a Charitable Remainder Trust May Help Extend IRA Income

The SECURE Act significantly changed how inherited IRAs are distributed¹. In many cases, non-spouse beneficiaries must withdraw the entire balance of an inherited IRA within 10 years of the account owner’s demise². If clients want their beneficiary to receive longer-term income, pairing an IRA with a Charitable Remainder Trust may be the solution.

A Potential Strategy for Extending IRA Benefits

A Charitable Remainder Trust (CRT) is an irrevocable trust that can be named as the beneficiary of an IRA. When structured properly, a CRT can provide income to designated beneficiaries over a longer period of time than the standard 10-year distribution window.

The process generally begins when the IRA owner works with an estate planning attorney to establish a CRT and names the trust as a beneficiary of the IRA. When the account owner passes, the proceeds from the IRA are distributed into the CRT tax-free. The trustee then distributes money from the CRT annually to a beneficiary for their lifetime, or a specified period up to 20 years. At the end of the period, the remaining funds are distributed to designated charitable organizations.

For individuals who are charitably inclined, a CRT may help achieve two important goals:

• Ensure a stream of income to beneficiaries
• Support charitable causes through a future legacy gift

An IRA account owner should carefully discuss the appropriateness of this strategy with their tax and legal professionals.

Oftentimes clients choose to name a corporate trustee, such as Stifel Trust Company, to ensure all the rules are followed and the terms of the trust are strictly adhered to. When Stifel Trust Company is serving as the trustee the client’s trusted Stifel financial adviser remains front and center as the trust’s relationship manager.

Creating a Lasting Charitable Legacy

Many IRA owners prefer that their charitable gift continue supporting organizations over time rather than being distributed as a single lump sum. This is where Stifel Charitable’s Legacy Gift Fund may provide additional flexibility.

The IRA owner establishes a Legacy Gift Fund and names Stifel Charitable Inc. for the benefit of their fund, as the charitable beneficiary of the CRT. The IRA owner designates the charities that will receive distributions from the fund, and the timeframe over which these distributions will occur.  Since the Legacy Gift Fund will not receive any assets until the income period of the CRT ends, there are no fees to establish or maintain the fund until the final distribution is made to Stifel Charitable Inc.

Is This Strategy Right for You?

A strategy involving an IRA, a Charitable Remainder Trust, and a Stifel Charitable Legacy Gift Fund may be worth considering for individuals who wish to balance family income objectives with charitable giving goals.

To learn more about whether this approach may fit your circumstances, speak with your Stifel Financial Advisor. Consult with qualified legal and tax professionals before making any estate planning decisions.

¹ https://www.irs.gov/forms-pubs/about-publication-590-b

² https://public-inspection.federalregister.gov/2024-14542.pdf

Trust and fiduciary services are provided by Stifel Trust Company, N.A., Member FDIC, and Stifel Trust Company Delaware, N.A., Member FDIC (collectively, “Stifel Trust Companies”). Stifel Trust Companies are affiliated with Stifel, Nicolaus & Company, Incorporated, Member SIPC & NYSE, each a wholly owned subsidiary of Stifel Financial Corp. Unless otherwise specified, references to “Stifel” may mean Stifel Financial Corp. and/or any of its subsidiaries. Non-deposit products purchased from or held by Stifel and/or Stifel Trust Companies are not insured by the FDIC, are not deposits, and may lose value. None of Stifel, Stifel Trust Companies, nor affiliated companies provide legal or tax advice.