New Rules Ease IRA Bequests to Charity

BY ELIZABETH SCHWINN

Recent changes to the rules governing individual retirement accounts make it easier for donors to divide their I.R.A. assets between heirs and charity, according to Christopher Hoyt, a law professor at the University of Missouri at Kansas City.

In the past, I.R.A. distributions had to be based on the combined life expectancies of the account’s owner and a beneficiary. The younger the beneficiary, the less money the owner was obligated to collect from the I.R.A. each year. But if a charity was the beneficiary, the payout was based solely on the life of the owner. That meant that assets in the account had to be distributed to the owner more quickly, in many cases leaving less for charity at the account owner’s death.

The new rules base the required payout on the combined life expectancy of the I.R.A. owner and a hypothetical beneficiary who is assumed to be 10 years younger than the owner. Thus, Mr. Hoyt says, the rules put charities on an equal footing with heirs, making it more likely that I.R.A. owners will make donations.

The regulations are optional for payments made from I.R.A.’s in 2001. Pending issuance of final regulations by the Internal Revenue Service, they will become effective for all payouts in 2002.

The I.R.S. has set a public hearing on the rules for 10 a.m. on June 1 at Internal Revenue Building, seventh-floor auditorium, 1111 Constitution Avenue, N.W., Washington. Comments must be received by the government by April 19, and requests to speak at the hearing are due by May 11. They can be mailed to Internal Revenue Service, CC:M&SP:RU (REG-130477-00; REG 130481-00), Room 5226, POB 7604, Ben Franklin Station, Washington, D.C. 20044.

Comments may be sent and the full text of the regulations (REG-130477-00; REG 130481-00) may be obtained electronically from the revenue service’s Web site at http://www.irs.gov/ tax_regs/ regslist.html, under the heading “Required Distributions from Retirement Plans.”