Earned income can also come from lawn mowing, dog walking, baby-sitting or other jobs that a teen performs for people outside of their fam ily, but it requires a little record-keeping. But if a teenager has a job at, say, Publix or Starbucks, a parent or grandparent could make a contribution to a custodial Roth IRA that doesnвЂ™t exceed the childвЂ™s earned income for the year. An allowance doesnвЂ™t count as earned income. The main thing is that the child or grandchild must have an earned income in order for contributions to be made to the account. But there are a few things to keep in mind. вЂњItвЂ™s really smart for nonprofits to approach their prospective or current donors and remind them, вЂHey, how about your RMD? Did you know that you can make contributions out of your IRA that wonвЂ™t have any tax implications to you?вЂ™ ItвЂ™s really a win-win for donors as well as charities.вЂќДЄnother end-of-year option to consider? Setting up a custodial Roth IRA as a holiday gift for a child or grandchild. вЂњI would try to guide people who work in the nonprofit sector, when going after significant gifts, to not think about just whatвЂ™s in current checkbook,вЂќ she says. Rogers advises nonprofits to seize these kinds of opportunities. вЂњIf IRA ownersвЂ™ tax rates are high, it may make better sense for them to take that RMD and have it go straight from their investment account to a qualified charity so they donвЂ™t take on any tax burden.вЂќ вЂњWhen you take the required minimum distribution, youвЂ™re taxed at your current income level,вЂќ says Rogers.

But up to $100,000 from an RMD can be gifted to a qualified charity each year, and the account holder wonвЂ™t have to pay taxes on that money. Account holders must take these funds by Dec. Starting at age 72, investors must take a required minimum distribution every year from traditional IRA accounts and other retirement savings accounts. ThereвЂ™s also another option for charitable giving through an IRA. вЂњA charity recognized by the IRS as being tax-exempt doesnвЂ™t care in what form they receive an inheritance they never have to pay taxes on the money.вЂќ вЂњWhat has done is give individuals an opportunity to select a charity to be the beneficiary,вЂќ says Figurelli. (There are some other options, such as setting up a trust, that a financial adviser or estate planning attorney could discuss with clients.)ДЄ nonprofit beneficiary, on the other hand, would not have to worry about paying any taxes. вЂњTraditional IRAs, subject to exceptions, are going to be fully taxed to non-charity heirs,вЂќ says Jennifer Figurelli, co-founder and managing director of Andrew Hill Investment Advisors in Naples. Heirs are also subject to taxation on the inherited IRA funds, which will now happen in a more concentrated time period. вЂњItвЂ™s really important that people know the rules around their retirement account.вЂќ вЂњThere are stiff penalties if you donвЂ™t do it properly within a certain timeframe,вЂќ says Rogers. Now, most beneficiaries who are not the surviving spouse must withdraw the assets from the inherited IRA within 10 years of the account holderвЂ™s death. The passage of the SECURE Act of 2019 eliminated the ability for beneficiaries to stretch out their distributions over their lifetime. When leaving an IRA to heirs, there are a few things to consider.

This means they would receive the benefits of the IRA after the account holder dies. вЂњIf youвЂ™re not going to need the money from the IRA, there are other things you can do with it.вЂќ One option is to designate heirs or a nonprofit organization as the beneficiary of the IRA. вЂњWhen people of wealth accumulate a lot of assets, the IRA is a tool they can use in many different ways,вЂќ says Carolyn Rogers, senior vice president and wealth services adviser at The Sanibel Captiva Trust Company. If youвЂ™re lucky enough to be in a position such that youвЂ™re financially prepared for retirement, you might have the capacity to make some provisions for your heirs or your favorite charity through your individual retirement account.

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