No stretch IRA? Enter the charitable remainder trust

by Eric Metzger, Wealth Planner, 5/3 Private Bank

In late 2019, Congress enacted the Setting Every Community Up for Retirement Enhancement (“SECURE”) Act, which had the effect of eliminating the popular “stretch” feature of qualified plans and Individual Retirement Accounts (IRAs).  

Before the SECURE Act, a non-spouse beneficiary of an IRA could “stretch” the required payments from the IRA over his or her remaining life expectancy. These required payments, known as required minimum distributions (RMDs), were paid out annually to the non-spouse beneficiary and taxable to the beneficiary as ordinary income at the beneficiary’s marginal income tax rate in the year of distribution. 

The ability to “stretch” these RMDs over the beneficiary’s lifetime had a three-fold effect:

  1. It allowed the beneficiary to spread the income tax liability over his or her remaining life expectancy.
  2. It allowed the inherited IRA assets to continue to grow tax-free within the account. 
  3. It created a lifelong income stream for the beneficiary.  

What’s changed for beneficiaries

As of January 1, 2020, a non-spouse beneficiary inheriting an IRA is required to distribute the entire balance within 10 years of the IRA owner’s death. There are a few notable exceptions to this rule, such as a disabled beneficiary or a minor beneficiary. However, most non-spouse beneficiaries will now need to withdraw the entire IRA balance over the 10-year period, reducing the benefit of tax-free growth and accelerating the income tax liability on distributions from the account.  

How a charitable remainder trust can help

While beneficiaries can adapt to these new rules in numerous ways, using a charitable remainder trust (CRT) is an increasingly popular strategy to recreate the IRA “stretch.” A CRT is a “split-interest” trust. That means the grantor of the trust names at least one “non-charitable” beneficiary and at least one charitable beneficiary.  During the term of the CRT, the non-charitable beneficiary receives a percentage of the assets of the trust, paid at least annually. The non-charitable beneficiary will be responsible for income taxes on each distribution. Upon the termination of the CRT, the named charitable beneficiary receives the remaining balance of the trust. 

No income taxes owed on IRA-to-CRT distributions

One of the key features of the CRT is that the trust itself is tax-exempt. By naming a CRT as the beneficiary of the IRA, no income tax will be owed on distributions from the IRA to the CRT. As a result, the entire amount of the IRA can be migrated to the CRT upon the account owner’s death with no income tax ramifications. In addition, the funds can be invested over the term of the CRT for the benefit of the non-charitable beneficiaries.  

As an example, assume that Elizabeth, a widow, dies with an IRA worth $1,500,000. She is survived by one daughter, Cathy, who has a remaining life expectancy of 28 years.  The simplified illustrations below provide an overview of the 10-year payout mandated by the SECURE Act, versus a CRT strategy for Elizabeth’s IRA.  

10-Year Distribution mandated by the SECURE Act

Growth Rate            5.000%
Income Rate            2.000%
Income Tax rate    30.000%

Year Beginning IRA Amount Net Received
1 $1,500,000.00 $179,026.00
2 $1,350,000.00 $171,623.40
3 $1,200,000.00 $164,220.80
4 $1,050,000.00 $156,818.20
5 $900,000.00 $149,415.60
6 $750,000.00 $142,013.00
7 $600,000.00 $134,610.40
8 $450,000.00 $127,207.80
9 $300,000.00 $119,805.20
10 $150,000.00 $112.402.60
Summary:   $1,457,143.02

Lifetime Charitable Remainder Trust (CRT) Strategy

Term of CRT                    28 Years                                    Growth Rate    5.000%
Paragraph 7520 Rate       0.006%                                    Income Rate    2.000%
Income Tax Rate             30.000%                                    Payout Rate    10.493%

Year Beginning IRA Amount  Net Received
1 $1,658,033.50 $121,784.22
2 $1,600,948.99 $117,591.30
3 $1,545,829.85 $113,542.75
4 $1,492,608.41 $109,633.58
5 $1,441,219.33 $105,859.00
6 $1,391,599.52 $102,214.38
7 $1,343,688.08   $98,695.23
8 $1,297,426.18   $95,297.25
9 $1,252,757.04   $92,016.26
10 $1,209,625.81   $88,848.23
11 $1,167,979.55   $85,789.27
12 $1,127,767.14   $82,835.62
13 $1,088,939.19   $79,983.67
14 $1,051,448.06   $77,229.91
15 $1,015,247.70   $74,570.96
16    $980,293.70   $72,003.55
17    $946,543.12   $69,524.54
18    $913,954.55   $67,130.88
19    $882,487.97   $64,819.62
20    $852,104.75   $62,587.95
21    $822,767.60   $60,433.10
22    $794,440.50   $58,352.45
23    $767,088.67   $56,343.43
24    $740,678.54   $54,403.58
25    $715,177.69   $52,530.52
26    $690,554.80   $50,721.94
27    $666,779.66   $48,975.63
28    $643,823.07   $47,289.45
Summary:   $2,211,008.26

The following is seen in the above CRT chart:

  1. CRT distributions (Net Received) create an income stream for Cathy’s life. 
  2. The remaining balance of the CRT at Cathy’s death provides for a legacy gift of over $600,000 to the charity of Elizabeth’s choice.

In addition, the CRT Strategy reduces Cathy’s income tax liability year over year compared to the 10 Year Distribution.

Naming a CRT as a beneficiary of an IRA can be an attractive strategy for charitably inclined individuals, who desire to provide an income stream for the life of a non-spouse beneficiary. While this strategy may not be a fit for everyone, it does provide a tool to be evaluated, in light of the SECURE Act, as a way to accomplish legacy objectives.


Eric Metzger is a Wealth Planner at 5/3 Private Bank in the Cincinnati & Kentucky markets.  Before joining 5/3, he was an attorney in private practice at the Bingham Greenebaum Doll law firm, n/k/a Dentons Bingham Greenebaum.  Eric works closely with high-net worth individuals, business owners, corporate executives, and multi-generational wealthy families on a broad range of personal, charitable, business, and succession planning matters.

Fifth Third Private Bank is a Goering Center Diamond Sponsor, and the Goering Center is sharing this content as part of its monthly newsletter, which features member and sponsor articles.

About the Goering Center for Family & Private Business
Established in 1989, the Goering Center serves more than 400 member companies, making it North America’s largest university-based educational non-profit center for family and private businesses. The Center’s mission is to nurture and educate family and private businesses to drive a vibrant economy. Affiliation with the Carl H. Lindner College of Business at the University of Cincinnati provides access to a vast resource of business programing and expertise. Goering Center members receive real-world insights that enlighten, strengthen and prolong family and private business success. For more information on the Center, participation and membership visit

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