Savvy Investors Use IRAs for Charitable Contributions

If you’re passionate about making a lasting difference—both for your loved ones and the causes you care about—then using your IRA to benefit a charity may be a smart and impactful option. IRAs can be a powerful vehicle for charitable giving. Still, they come with a few traps that, if not handled correctly, could reduce the benefits for your chosen charity and your family.

At RFG Wealth Advisory, we’ve seen how thoughtful planning can maximize generosity and tax efficiency. Here’s what you need to know if you’re considering leaving a portion of your IRA to a charitable organization.

Charitable Contribution Basics

Start by naming the charity directly on your IRA beneficiary form. Being specific here ensures the funds will go straight to the organization, avoiding probate, simplifying the process, and keeping the distribution from being counted as income to your estate. It’s a simple step with significant advantages.

We also recommend setting up a separate IRA account for the charitable portion. If you lump charitable and individual beneficiaries together under one IRA, delays or IRS deadlines could unintentionally impact your heirs, forcing them to take distributions sooner than planned. Separate accounts help avoid this issue and preserve the full potential of each inheritance.

Use IRAs for Charitable Contributions Wisely

Another common pitfall is leaving non-retirement assets to family and using your will to gift to a charity. Consider reversing those bequests. Charities can receive retirement funds income tax-free, but your heirs cannot. Leaving IRA assets to a nonprofit could reduce the overall tax burden on your estate and result in more money going to your loved ones.

Thinking about converting to a Roth IRA? If you intend to leave those assets to a charity, think twice. Since charities are tax-exempt, they already avoid income tax on distributions, so paying tax now through a Roth conversion may unnecessarily reduce the value of your gift.

Lastly, be cautious about naming a charity as a trust beneficiary. Because charities don’t have a measurable life expectancy, their inclusion in a trust that inherits an IRA can cause accelerated distributions for other trust beneficiaries. It’s a small detail with big implications.

Want to learn more? Download our guide, “Avoiding Charitable IRA Beneficiary Mistakes”, to see how you can avoid these costly missteps.

If you’re considering making charitable gifts through your IRA or want to review your beneficiary strategy, we’re here to help.

Financial Success Doesn’t Happen by Chance.

Contact one of our advisors at, 940-464-4104, to schedule a time to discuss your legacy and investment goals. Or book a free 15-minute virtual Conference here.

RFG Wealth Advisory is an independent, fee-only Registered Investment Advisor. Our simple, transparent fee structure is easy to understand, and we always put your best interests first.