Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Updated August 3, 2026. Quick answer: if you intend to leave money to both charity and family, the traditional retirement account is almost always the right pocket for the charity. A charity receives it without income tax; a human heir does not. Directing the charitable share there and the family share elsewhere can leave the family better off without the charity receiving a penny less.
The asymmetry
Money in a traditional IRA or 401(k) has never been taxed. Whoever receives it pays income tax as it comes out — except a qualifying charity, which generally does not. So the same $100,000 (2026) is worth $100,000 to the charity and materially less to your child, with the gap depending on their bracket in the years they withdraw it.
Meanwhile assets outside retirement accounts generally receive a basis reset at death, so they reach a human heir with little or no built-in gain. Though not always in the direction people expect.
What that implies
Two pockets, two recipients, and the pairing is not symmetric:
- Retirement account to charity — no income tax to anyone.
- Taxable assets to family — basis reset, little embedded gain.
Reverse the pairing and the family pays income tax on the retirement money while the charity receives assets whose tax advantage is wasted on a tax-exempt recipient. The total given away is identical; only the family’s outcome changes.
Why the ten-year rule sharpens this
Most adult children who inherit a retirement account now have to empty it within about ten years rather than over a lifetime. That compresses the withdrawals into a decade that often coincides with their own peak earnings, pushing the money through higher brackets. The cost of leaving a retirement account to a child has gone up.
How to actually do it
- Use the beneficiary form, not the will. Retirement accounts pass by designation; a charitable clause in a will does not reach them.
- Name the charity precisely, with its legal name and tax identification number.
- Consider splitting by percentage across beneficiaries rather than naming a dollar amount, so it scales with the account.
- Check the custodian accepts a charitable beneficiary and whether it requires its own form. Some do.
- Keep the two plans consistent — the will and the beneficiary forms should describe the same intention.
While you are alive, there is a different route
Which asset goes where changes what everyone actually keeps.
If you are old enough, a qualified charitable distribution moves money from an IRA to a charity without it appearing in your income at all. Qualified charitable distributions.
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Honest gaps
Roth accounts change the analysis, because they generally reach a human heir tax-free and the asymmetry above largely disappears. Beneficiary rules have exceptions for spouses, minor children, disabled and chronically ill beneficiaries, and beneficiaries close in age to the owner. We have not restated the ten-year rule’s details here.
Related: charitable bequests.
General information drawn from the Internal Revenue Code, Treasury regulations and IRS publications, not legal or tax advice. Thresholds and dollar figures are adjusted regularly and several of the rules here turn on facts this page cannot see, so check the current year before you act on a number.