Charities say gifts by deceased donors are getting held up at financial firms
Charities say gifts by deceased donors are getting held up at financial firms
When a donor designates a charity as the beneficiary of a retirement account, the arrangement is meant to be a simple way to leave a legacy while reducing estate taxes. The donated amount is removed from the taxable estate, and the assets pass to the nonprofit free of income tax that would otherwise be owed by heirs.
Complex Process for Nonprofits
In practice, many charities now report that the transfer can be delayed for months or even years because brokerages and banks impose additional requirements. Some institutions demand that a nonprofit open a new account with the firm before any IRA assets are released, and they often request detailed, sometimes sensitive, information about staff or board members, including Social Security numbers and home addresses. Experts say these demands can create a lengthy bureaucratic maze.
Rob Hilbert, president of the Iowa PBS Foundation, described a case in which his organization spent more than five years exchanging paperwork to obtain a $6,000 gift. Hilbert noted that while the amount was modest, the administrative burden is a common challenge. “These contributions are important, because a person has chosen to leave part of what they worked their entire life for to support our mission, and we want to honor that designation,” he said. “But we can’t do it if we don’t receive the funds.”
Invasive Requests and Lack of Transparency
Legal counsel told CNBC that IRA custodians are not obligated to notify charities or disclose the value of the bequest. In some instances, custodians have asked for personal data from nonprofit employees without first revealing how much the gift is worth. Jon Kraus, executive director of gift planning at the University of Denver, recounted a situation where his university waited two years to receive a donor’s investment account, which ultimately amounted to $2 million. The university initially resisted the financial institution’s demand to open a new account and to provide personal information about its chief financial officer, but eventually complied. “That $2 million at 4.5% would have spun off $90,000 a year that we could have been awarding in student scholarships,” Kraus said. “Instead it sat at the company in their assets under management.”
Push for Legislative Reform
Many nonprofit leaders who shared their stories asked to remain anonymous to protect donor privacy and avoid retaliation. In response to the growing frustration, several charities are lobbying for state legislation that would require financial firms to release bequests promptly and without forcing charities to set up new accounts. Six states have enacted such bills in the past two years, and California is poised to become the seventh with a donor‑intent bill awaiting Governor Gavin Newsom’s signature.
Growing Need for Change
Kraus played a role in securing reform in Colorado, which was signed into law in April. He warned that the issue is likely to expand as the projected “great wealth transfer” generates a surge of bequests and retirement‑account gifts. Advocates argue that clear, uniform rules are essential to ensure charities receive the funds intended for their missions without being sidetracked by administrative obstacles.
Source: CNBC · 2026-09-17