In the US, charities complain of delays in inherited donations — CNBC — CNBC Top News
In the United States, charities and lawyers say they are experiencing delays in receiving funds bequeathed to them by owners of individual retirement accounts, or IRAs. As CNBC reports, banks and brokerage firms sometimes require nonprofit organizations to open a new account with them and provide detailed, and in some cases confidential, information about employees or board members.
According to the outlet's sources, financial institutions may request Social Security numbers, home addresses, photos of driver's licenses, information on personal assets, or consent to a credit-history check in order to pay out such donations. At the same time, IRA custodians, lawyers say, are generally not required to notify charities that they are beneficiaries of funds or disclose the amount due to them.
Delays lasting years
Iowa PBS Foundation President Rob Gilbert said his organization exchanged documents for more than five years to receive a donation that ultimately amounted to $6,000. John Kraus, executive director of gift planning at the University of Denver, described another case: the university spent two years seeking the transfer of an investment account worth $2 million.
According to Kraus's estimate, if those $2 million had generated 4.5% annually, the university could have allocated $90,000 each year to student scholarships. Instead, the funds remained among the assets managed by the financial company.
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Valley Humane Society CEO Melanie Sadek said her organization spent two and a half years obtaining a $70,000 donation from an IRA. According to her, the bank required all nine account beneficiaries to submit documents within the same 90-day period.
State rules and FinCEN's position
Representatives of the charitable sector are seeking state laws that would require financial institutions to transfer assets in a timely manner and not force organizations to open new accounts. Over the past two years, six states have passed such laws, while in California a corresponding bill is under consideration by Governor Gavin Newsom.
In Colorado, asset custodians must transfer assets within 60 days after receiving from a charity a sworn statement of entitlement to the funds. According to lawyer Joni Hays, all enacted state laws except Iowa's also prohibit requiring charities to open an account.
Financial companies often explain such procedures by anti-money-laundering, customer-identification, and fraud-prevention rules. In a 2024 decision, FinCEN stated that banking secrecy legislation does not require broker-dealers to force charities to open new accounts in order to receive inherited IRA funds. Schwab told CNBC that its policy is intended to ensure clients' wishes are carried out while complying with legal and tax requirements and anti-fraud measures; Fidelity declined to comment.
