Yes, a charity can be named as the beneficiary of an IRA, and for a traditional IRA it is often the most tax-efficient bequest available. Every dollar in a traditional IRA still owes income tax when withdrawn. A 501(c)(3) charity pays none of it, so the full balance passes intact. An individual heir does not get that result.
Why an IRA Is the Best Asset to Leave a Charity
Traditional IRA contributions went in pre-tax and grew tax-deferred, so no income tax has ever been paid on the account. That liability does not disappear at death. Federal tax law treats an inherited IRA as “income in respect of a decedent,” meaning the heir owes ordinary income tax on every distribution just as the original owner would have.1Office of the Law Revision Counsel. 26 U.S. Code 691 – Recipients of Income in Respect of Decedents
A child who inherits a $500,000 traditional IRA reports those withdrawals as taxable income, sometimes pushing themselves into a higher bracket in the process. A 501(c)(3) organization is exempt from federal income tax.2Office of the Law Revision Counsel. 26 U.S.C. 501 – Exemption From Tax on Corporations, Certain Trusts, Etc. The same $500,000 lands in the charity’s account with zero income tax attached.
This suggests a simple planning move: leave the IRA to the charity, and leave other assets to family. Real estate, stocks, and mutual funds get a stepped-up cost basis at death, which erases the capital gains tax on lifetime appreciation. Heirs receive those assets with little or no built-in tax; the charity receives the one asset that would have been taxed most heavily in anyone else’s hands.
Traditional IRA or Roth IRA?
If you hold both, send the traditional IRA to the charity and leave the Roth to your family. Traditional withdrawals are taxed as ordinary income.3Internal Revenue Service. Roth Comparison Chart Qualified Roth withdrawals come out tax-free because the contributions were already taxed. Sending the traditional account to charity eliminates a tax bill that would otherwise exist. Sending the Roth would waste a tax-free inheritance your heirs could have used.
How to Actually Name the Charity
The designation goes on the IRA custodian’s beneficiary form, not in your will. This is the point most people get wrong. The beneficiary form is a contract with the financial institution, and it controls the account regardless of what the will says. A will that leaves the IRA to a charity does nothing if the form on file still names an ex-spouse. If no form is on file at all, the funds usually default to the estate, which can pull the account into probate and cost it favorable tax treatment.4Internal Revenue Service. Retirement Topics – Beneficiary
Use the charity’s full legal name exactly as it appears in IRS records. Informal names often do not match the registered corporate name. Include the Employer Identification Number, which the charity will provide on request or which you can confirm through the IRS Tax Exempt Organization Search. The EIN pins down the entity and its tax-exempt status.
For split beneficiary designations, use percentages rather than dollar figures. “50% to The American Red Cross, EIN XX-XXXXXXX” holds up regardless of how the balance moves before your death. After you submit the form, ask the custodian for written confirmation and keep it with your estate papers. Forms get lost. Systems get migrated. Custodians merge. The confirmation is your proof.
Community Property and Spousal Consent
An IRA is generally not subject to the federal spousal consent rules that govern 401(k) plans under ERISA. But in a community property state, if the account was funded with earnings during the marriage, your spouse may have a legal claim to half. Naming a charity as primary beneficiary without a written spousal waiver invites a challenge later. Some custodians ask for the waiver as a matter of policy even where state law does not require it.
Review the Designation Every Few Years
A designation made today can quietly break in twenty years. Charities merge, rename themselves, lose tax-exempt status, or dissolve. If the named organization no longer exists at your death, the custodian’s default rules take over, and the funds may end up in your estate or with a contingent beneficiary you didn’t intend. Check the form every few years and after any major life event.
Splitting the IRA Between a Charity and Family
Naming a charity for part of the account and family members for the rest is easy to set up on the form, but it creates a timing problem after death that can hurt the individual heirs if nobody handles it.
The designated beneficiaries of an IRA are identified as of September 30 of the year following the owner’s death.5Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs) A charity is not a “designated beneficiary” for distribution purposes because it has no life expectancy. If the charity is still on the beneficiary list on that date, the IRS treats the account as having no designated beneficiary at all, and the individual heirs can be forced onto a five-year payout instead of ten.
The fix: pay out the charity’s share, or split the IRA into separate inherited accounts, before September 30 of the year after death. Once the charity is out, the remaining beneficiaries are measured on their own. Miss the deadline and it cannot be undone, so this belongs at the top of the executor’s checklist.
The Estate Tax Deduction for Larger Estates
For estates large enough to owe federal estate tax, the charitable designation delivers a second benefit on top of eliminating the income tax. Assets passing to a qualified charity are fully deductible from the gross estate, with no cap.6Office of the Law Revision Counsel. 26 U.S. Code 2055 – Transfers for Public, Charitable, and Religious Uses A $2,000,000 IRA to charity removes $2,000,000 from the taxable estate.
The 2026 federal estate tax exemption is $15,000,000 per person under the extension enacted in July 2025.7Internal Revenue Service. What’s New — Estate and Gift Tax Most estates fall below it and owe no federal estate tax at all. For estates above the threshold, the charitable deduction cuts directly into the 40% rate, and the executor claims it on Schedule O of Form 706.8Internal Revenue Service. Instructions for Form 706
What the Charity Does After You Die
The charity has to claim the funds from the custodian. The steps are administrative but worth knowing.
If the owner was 73 or older and had not taken the year’s Required Minimum Distribution before death, that final RMD still has to come out. The beneficiary is usually responsible, and because the charity is tax-exempt, taking it creates no income tax bill.4Internal Revenue Service. Retirement Topics – Beneficiary
The charity provides the custodian with a distribution request on its letterhead, a copy of its IRS determination letter showing current 501(c)(3) status, and its EIN. Incomplete paperwork is the biggest cause of delay. Once the custodian verifies the documents, it releases the funds and issues a Form 1099-R showing the distribution with zero taxable amount.9Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025) Individual beneficiaries face a ten-year payout window, but a charity is generally expected to take the full amount promptly, and most transfers finish within a few months of the death certificate being submitted.
You Do Not Have to Wait Until Death
If you want the charity to benefit during your lifetime, a Qualified Charitable Distribution lets you send money directly from your IRA to a qualified charity and keep the amount out of your gross income. You must be at least 70½, and the money has to move trustee-to-charity; if it lands in your bank account first, the whole distribution becomes taxable.10Internal Revenue Service. Seniors Can Reduce Their Tax Burden by Donating to Charity Through Their IRA The 2026 annual limit is $111,000 per person.11Internal Revenue Service. IRS Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs
Once you are 73 and subject to RMDs, a QCD counts toward the year’s RMD without adding a dollar to taxable income. That is different from taking the distribution, paying tax on it, and then donating and claiming a deduction. Keeping the income off the return can lower Medicare premiums, reduce the taxable share of Social Security, and avoid the net investment income tax.
Not every charity qualifies. Donor-advised funds, private non-operating foundations, and Section 509(a)(3) supporting organizations are all excluded; the recipient has to be a public charity under Section 170(b)(1)(A).12Legal Information Institute (LII) at Cornell Law School. 26 U.S. Code 408(d)(8) – Qualified Charitable Distribution
If the goal is more complicated, for example providing income to a spouse or child during their lifetime while still benefiting a charity, a charitable remainder trust or charitable lead trust can be named as the IRA beneficiary instead. Trusts add filing obligations and drafting requirements, so they are worth the cost only when the plan calls for more than a straight gift. For a simple bequest to a charity, naming the organization directly on the beneficiary form gets the same tax result with none of the overhead.