Key takeaways:
Situation: A successful business owner with a sizable IRA wanted to leave a meaningful legacy to his community and reduce his heirs’ tax burden.
Solution: He named a donor-advised fund as the beneficiary of his IRA instead of his son.
Impact: His legacy supports local charities annually, while his son remains engaged in giving without triggering income or estate tax on the IRA.
Situation
Larry Kirk, a 62-year-old business owner with a golden touch, had built a successful career and accumulated a large IRA through a rollover of his retirement account. As he looked ahead, he knew he wanted to give back to his community—but he also wanted to do it in a way that didn’t saddle his son, Neil, with unnecessary tax burdens.
In conversation with his estate attorney, Larry learned that passing his IRA directly to Neil could trigger both estate tax and “income in respect of a decedent” (IRD) tax—resulting in a significant loss of value. With other, more tax-efficient assets available for Neil, Larry started looking for a smarter option for his IRA.
Solution
Larry chose to name a donor-advised fund—the Kirk Family Fund at Renaissance Charitable Foundation—as the beneficiary of his IRA. Because the DAF is a tax-exempt public charity, the IRA passed to it without incurring either estate or IRD tax.
Larry took it a step further and structured the fund to make automatic annual grants of 2% of its value to his favorite local charities. Additionally, he empowered Neil to recommend grants of up to another 2% each year to causes he cares about, keeping him actively involved in the family’s charitable legacy.
Impact
By naming a DAF as his IRA’s beneficiary, Larry avoided a significant tax drag and redirected those dollars into meaningful, ongoing community impact. His plan ensured that local nonprofits receive continued support—and that Neil has a role in the family’s charitable giving for years to come.
The strategy preserved more wealth for charitable purposes, avoided taxation that would’ve reduced the gift’s value, and deepened multigenerational engagement in philanthropy. It’s a win for the family, a win for the community, and a prime example of how a DAF can transform an IRA into a legacy.
Have clients with valuable or appreciated assets they want to give? Let’s talk about how a DAF can turn those assets into maximum-impact philanthropy at [email protected].
