Her IRA Can Go to Charity Tax-Free When She Dies, While Her Kids Get the Money That Isn’t Taxed. It Takes One Line on a Form

She’d already done the thinking part, as a retiree with a traditional IRA, a Roth IRA, and a brokerage account, when she wrote a gift to her church into her will and split everything else among her kids. Then her financial planner suggested a trade: leave the church the traditional IRA and leave the kids the rest.

If you own a traditional IRA and want to give to charity when you die, naming a charity as your IRA beneficiary can stretch every dollar. The charity keeps the whole balance, and your kids inherit the assets that carry the least income tax.

Why Your Kids Keep Less of an Inherited IRA

Money in a pretax IRA hasn’t been taxed yet. When your kids inherit it, they generally won’t owe tax until they withdraw money. Then each withdrawal counts as taxable income. Most adult children also face a firm deadline. An individual beneficiary who isn’t an “eligible designated beneficiary” (a surviving spouse, a minor child, a disabled or chronically ill person, or someone not more than ten years younger than you) must empty the account by December 31 of the year containing the 10th anniversary of your death. That can push big withdrawals into their peak earning years.

A qualified charity skips all of that. Charities are exempt from federal income tax under 26 U.S.C. § 501(a), so when the church cashes out your IRA, the full amount goes to its work. Your estate also gets a deduction for charitable gifts under 26 U.S.C. § 2055(a).

What Your Kids Should Inherit Instead

Three kinds of assets carry far less tax for your heirs:

• A Roth IRA. A qualified distribution made to a beneficiary after the owner’s death isn’t taxable income under 26 U.S.C. § 408A(d). Your kids still have to follow the RMD rules that apply to Roth beneficiaries, but the withdrawals come out tax-free.
• A taxable brokerage account. Inherited property generally gets a new cost basis equal to its fair market value on the date of death. That’s the “step-up,” and it wipes out the capital gains you built up during your lifetime. If they sell, the IRS treats the gain or loss as long-term, regardless of how long they’ve held it.
• Life insurance. Death benefits generally aren’t part of gross income under 26 U.S.C. § 101(a)(1).

Who Gains the Most From This Swap

It works best if you already give to a cause and own a mix of accounts. When a pretax IRA is nearly all you have, there’s little else to direct to the kids. Married? A surviving spouse can treat an inherited IRA as her own, a choice other heirs don’t get, so the math changes. And leaving a Roth IRA to charity wastes its tax-free status on an organization that already pays no tax.

How to Set It Up Before It’s Too Late

1. Get the beneficiary designation form from your IRA custodian. The form decides who inherits the account, and it can override your will.
2. Ask the charity for its exact legal name and federal tax ID, and write both on the form.
3. Want to split one IRA? Assign percentages, say a share to the church and the rest to your kids. The account can be divided into separate shares, and those shares get their own RMD treatment if they’re set up by the end of the year after your death.
4. Name contingent beneficiaries, the backups who inherit if your first choice can’t.
5. Update the Roth IRA and life-insurance beneficiary designations, and the brokerage account’s transfer-on-death designation or your will, so those assets go to the kids.

Give From the IRA While You’re Still Here

You don’t have to wait. Once you’re age 70½, a qualified charitable distribution (QCD) lets your IRA custodian send money straight to a charity tax-free. For 2026, the cap is $111,000, up from $108,000 under IRS Notice 2025-67. The check has to go directly from the trustee to the charity, and donor-advised funds don’t qualify.

(QCDs are one of several tax-smart ways to give while you’re alive. We walked through the rest, from donor-advised funds to gifts of appreciated stock, in a free charitable giving guide.)

Mistakes That Can Cost Your Kids

A shared IRA can backfire. A charity isn’t a person, and when an IRA owner dies before the required beginning date with a beneficiary that isn’t an individual, the 5-year rule applies. Splitting the account in time avoids that. So does paying out the charity’s share early. A beneficiary who has received its entire benefit by September 30 of the year after death doesn’t count when the IRS decides who the beneficiaries are.

The Roth needs to clear a five-year waiting period before its earnings come out tax-free, and the RMD rules are still changing too. Under Announcement 2026-7, until the remaining final regulations take effect, taxpayers must use a reasonable, good-faith reading of the law. Missing a required withdrawal can cost 25% of the shortfall.

Pull the beneficiary designation form for your traditional IRA this week. Put the charity’s name on that one line, and it’s done.

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