At the start of 2020, the Secure Act took effect and left many people wondering about retirement plans and estate plans. In a scramble to help clients update plans and offer new protections, many financial advisors began to advise the use of a charitable beneficiary as a workaround. 

CNBC explains that until 2020, wealthy Americans could pass on hefty IRA accounts to non-spouse beneficiaries. These heirs could then withdraw money from the account based on calculations that came from their own life expectancy rates. They could do so by December 31st of the year the person died. 

Why planners recommend charitable benefits 

More specifically, finance gurus and tax professionals recommend a charitable remainder trust. This might allow the original owner of the IRA to leave the asset to a trust that names a beneficiary who receives income from the account for life or a predetermined period before the rest of the money goes to a named charitable organization. 

The pros and cons of using this route 

Forbes points out that while there are many benefits and this might work, people should remember that there are downsides. Unlike simply naming a human beneficiary of an IRA account, creating a charitable remainder trust requires fees that can climb up to $2,000. It also requires the completion of special forms, including a special tax return. The beneficiary might also have similar, special reporting requirements upon inheriting the account. 

For this and other reasons, many people in the foreseeable future might move away from using IRAs as a good estate planning vehicle. The good news is that existing trusts remain untouched. The law affects people who inherit property related to deaths that took place at the start of 2020 and onward.