Distributions to charitable trust?

[kwalified]

A profit sharing plan sponsor has appx 2.5 million in their personal accounts and the couple are in their mid-80's.  They will take a hit with estate/inheritance taxes if the funds were ever distributed.  They are wanting to establish a trust and make it the contingent beneficiary.  I am of the opinion this is permissible, but want to be aware of pitfalls, if any, such a designation would result in. Has anyone had experience naming a charitable trust as a beneficiary?

[Larry Starr]

Kwalified,

Are you an estate planning attorney?  Leaving retirement plan assets to a trust (any type of trust) is fraught with enormous complications and should have a very competent legal/tax advisor involved.  You can read about many of the issues in Nancy Choate's text (Life and Death Planning for Retirement Benefits). https://www.ataxplan.com/

Frankly, if you are not a competent estate planning or tax attorney knowledgeable about this issue, you should provide NO guidance since the odds are your guidance will be incorrect.  This is not simple stuff.  I know a lot about this stuff and have been involved with a few over the years but I bring in competent council if the client is really interested in talking about this subject.

Can they name a charitable trust as beneficiary? Absolutely. Pitfalls?  Too many to discuss here.

[jpod]

The premise of the OP is a little strange, at least to me.  Is their preference to leave money to charity or not?  If there preference would be to leave it to children or other individuals, isn't X% of something better than 100% of nothing? 

[david rigby]

Pardon me, the term "personal accounts" is ambiguous.  Does this mean the PS plan accounts of the husband and wife, or something else?  

Are RMDs being paid?

[kwalified]

Thanks for the replies. 

To add more clarity, no I am not an estate planning attorney and the plan sponsor has one.  I am familiar with Ms. Choate. Thanks for the link.

Jpod, I believe they are trying to determine what allocation will be made either to children and/or a trust. 

David, it does mean the accounts of the husband and wife. She has mild dementia and pretty much runs the day to day activities while he handles some of the affairs of the business.  RMD's have been ongoing.