Charities named in donors' IRAs say some financial firms take months or years to release the money
Firms often cite anti-money-laundering rules when they ask a charity to open an account and hand over its leaders' personal details, CNBC reported. A 2024 federal ruling says those rules do not require a new account, and several states now set deadlines for paying charities.
Charities named as beneficiaries of donors' individual retirement accounts and other accounts that pass outside probate say some banks and brokerages take months or years to release the money, CNBC reported on Sept. 17. Some firms insist that the charity first open an account and supply personal information about its employees or board members, nonprofit leaders and lawyers said.
Johni Hays, a lawyer who advises nonprofits on such gifts as a volunteer, said she has seen firms ask for photos of employees' driver's licenses, their personal asset information and consent to credit checks. Other firms are easier to work with, the charity leaders and lawyers said, so procedures vary by firm.
Valley Humane Society, an animal welfare group in Pleasanton, Calif., spent two and a half years collecting a $70,000 IRA gift, its chief executive, Melanie Sadek, told CNBC. It learned of the gift only from the donor's sister. Its paperwork was turned down for two years, though she supplied her own Social Security number and personal details of two board members, because the bank required all nine beneficiaries to file within the same 90 days.
What federal rules say
Firms often cite anti-money-laundering and customer identification rules, five lawyers told CNBC. In a March 2024 ruling for a foundation whose broker required a new IRA, the Treasury's Financial Crimes Enforcement Network said that under the Bank Secrecy Act, a broker-dealer that opens an account for a charity must collect its name, address and employer identification number, and identifying information, including a Social Security number, for one person who controls or manages it.
“We express no view on the rationale and note only that the BSA and its implementing regulations do not require institutions to open new accounts, as a risk-based internal control or otherwise.”
States set deadlines
Iowa passed the first such law in 2024. A charity presents an affidavit with its IRS determination letter, proof of the death and a Form W-9, among other documents, and the firm may not ask its employees or board members for Social Security or driver's license numbers or personal financial information. If the firm refuses to deliver within 30 days, the charity may sue, and a court that finds the firm acted unreasonably may add a penalty of $500 to $10,000.
Colorado's law, signed April 17 and in force since Aug. 12, gives firms 60 days after a charity's affidavit, or 120 days when federal law requires more steps, and bars them from requiring an account or employees' personal information. CNBC counted six state laws. Gov. Gavin Newsom of California signed another on Sept. 27, and advocates in Missouri and Florida are working on similar measures, CNBC reported.
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