QCDs from Vanguard

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friar1610
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QCDs from Vanguard

Post by friar1610 » Mon Aug 28, 2017 4:42 pm

I've never used the QCD process to make a charitable donation from my IRA before but am considering doing it this year. I spoke to a VG rep earlier today. He either confused me or I am a bit dense so just looking for confirmation on how this works from BHs who may have done this before.

I already have things set up with VG to get two annual distributions from my Rollover IRA. VG calculated the amount of the RMD and I opted for the semi-annual payments and the amount to withhold for taxes. Let's say the total RMD is $10,000 for the year. Each semi-annual distribution is $5,000 and from that I have taxes deducted such that I actually net $3,500 per distribution. I've already received the first semi-annual distribution. From the distribution due in December I want to make a QCD of $4,000. (I understand that I have to have the check made out to the charity and all those procedural things.) So, I should be due a $1,000 distribution in December (less taxes) to satisfy the RMD for the year.

The VG rep says that I am already on track in their system to receive $3,500 in December ($5,000 less taxes). If I initiate the the QCD now and take no further action, the QCD will be taken from money over and above my RMD for the year since VG is poised, per what I have set up (but based on their calculations), to pay me $5,000 ($3,500 after taxes) in December. To ensure the QCD comes from that planned December distribution, I would have to go into "the system" and change the December distribution amount from $5,000 ($3,500 after taxes) to $1,000 and then indicate how much of that I want to have taken out in taxes. It just seems to me that "the system" should be able to figure this all out without that last intervention on my part. But I've never done this before so maybe I don't know what I'm talking about.

Can anyone clarify this for me? Thank you.
Friar1610

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CABob
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Re: QCDs from Vanguard

Post by CABob » Mon Aug 28, 2017 4:55 pm

Based on my experience the information you have received is correct. If you take a QCD withdrawal you should have Vanguard recalculate the balance of the RMD. Then you can reschedule the final RMD changing if necessary your tax withholding etc. From one of your account view pages go to the link at the bottom for contributions , distributions, and RMDs. From there go to the RMD tab at the top of the page.
Bob

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Steelersfan
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Re: QCDs from Vanguard

Post by Steelersfan » Mon Aug 28, 2017 5:05 pm

I suspect "the system" doesn't know if you want to take the QCD in addition to your regular RMD or as a distribution to partially meet your required RMD. You know it's the later, it doesn't.

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Re: QCDs from Vanguard

Post by friar1610 » Mon Aug 28, 2017 5:25 pm

CABob wrote:
Mon Aug 28, 2017 4:55 pm
Based on my experience the information you have received is correct. If you take a QCD withdrawal you should have Vanguard recalculate the balance of the RMD. Then you can reschedule the final RMD changing if necessary your tax withholding etc. From one of your account view pages go to the link at the bottom for contributions , distributions, and RMDs. From there go to the RMD tab at the top of the page.
Thank you.
Friar1610

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friar1610
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Re: QCDs from Vanguard

Post by friar1610 » Mon Aug 28, 2017 5:25 pm

Steelersfan wrote:
Mon Aug 28, 2017 5:05 pm
I suspect "the system" doesn't know if you want to take the QCD in addition to your regular RMD or as a distribution to partially meet your required RMD. You know it's the later, it doesn't.
Point taken - thanks.
Friar1610

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GerryL
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Re: QCDs from Vanguard

Post by GerryL » Mon Aug 28, 2017 6:07 pm

From what I can figure, QCDs don't really work well with automatic distributions, especially when the QCD amount/percentage from year to year may be variable. For this reason, I am not planning to take advantage of Vanguard's automatic distribution feature. (Two years from now I expect to be executing my first RMD/QCD.)

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Re: QCDs from Vanguard

Post by RudyS » Mon Aug 28, 2017 6:41 pm

GerryL wrote:
Mon Aug 28, 2017 6:07 pm
From what I can figure, QCDs don't really work well with automatic distributions, especially when the QCD amount/percentage from year to year may be variable. For this reason, I am not planning to take advantage of Vanguard's automatic distribution feature. (Two years from now I expect to be executing my first RMD/QCD.)
+1

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Re: QCDs from Vanguard

Post by clydewolf » Mon Aug 28, 2017 6:57 pm

I do not like the automatic RMD. I always take my QCDs/RMDs early in the year. That way the RMD will not be forgotten.
QCDs can be as much as $100,000 per year.

sport
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Re: QCDs from Vanguard

Post by sport » Mon Aug 28, 2017 7:40 pm

I don't use the automatic RMD service either. I let Vanguard calculate the RMD for me, and I check to make sure it is correct. Once I have finished my QCDs, which usually occurs in the fall, I take the balance of my RMD and tell them how much to withhold for taxes.

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celia
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Re: QCDs from Vanguard

Post by celia » Mon Aug 28, 2017 8:01 pm

friar1610 wrote:
Mon Aug 28, 2017 4:42 pm
The VG rep says that I am already on track in their system to receive $3,500 in December ($5,000 less taxes). If I initiate the the QCD now and take no further action, the QCD will be taken from money over and above my RMD for the year since VG is poised, per what I have set up (but based on their calculations), to pay me $5,000 ($3,500 after taxes) in December.
I know what you mean, but you need to be aware of using correct terminology, especially when talking to Vanguard and the IRS. (Vanguard might accidentally do what you request instead of what you meant. :happy )

By definition, the RMD is satisfied by the first dollars coming out of the account each year. So, in this case, the RMD is satisfied by the past $5,000 that was withdrawn, the upcoming $4,000 QCD that is planned, and the first $1,000 withdrawn in December.

Also by definition, the QCD is the withdrawal that is sent to charity. It can be FROM the RMD (first withdrawal/s), AFTER the RMD has been satisfied, or partly from BOTH of them.


Looking back at the quote, I think you meant to say:
The VG rep says that I am already on track in their system to receive $3,500 in December ($5,000 less taxes). If I initiate the the QCD now and take no further action, the QCD will satisfy most of my remaining RMD for the year since VG is poised but, per what I have set up (but based on their calculations), to pay me $5,000 ($3,500 after taxes) in December, I will then have withdrawn more than I want unless I change something.

If you don't change anything, this quote:
friar1610 wrote:
Mon Aug 28, 2017 4:42 pm
The VG rep says that I am already on track in their system to receive $3,500 in December ($5,000 less taxes). If I initiate the the QCD now and take no further action, the QCD will be taken from money over and above my RMD for the year since VG is poised, per what I have set up (but based on their calculations), to pay me $5,000 ($3,500 after taxes) in December.
will mean that your RMD and QCD were satisfied in the first $10,000 withdrawn, then you took out an extra $4,000 (including the taxes).

I think the terminology is what was confusing you.

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Steelersfan
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Re: QCDs from Vanguard

Post by Steelersfan » Mon Aug 28, 2017 8:14 pm

Thanks to the folks who made recommendations how to combine RMD's and QCD's. I start both next year and this thread has been useful to determine how to do them in combo. I would likely have ended up like the OP without his post.

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WoodSpinner
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Re: QCDs from Vanguard

Post by WoodSpinner » Mon Aug 28, 2017 8:36 pm

friar1610 wrote:
Mon Aug 28, 2017 5:25 pm
Steelersfan wrote:
Mon Aug 28, 2017 5:05 pm
I suspect "the system" doesn't know if you want to take the QCD in addition to your regular RMD or as a distribution to partially meet your required RMD. You know it's the later, it doesn't.
Point taken - thanks.
Note ...

I believe ou must take your RMDs BEFORE any QCDs

Suggest you stop the auto RMD and take the last portion you want ($1000) before you put in for the QCD request.

8-)

sport
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Re: QCDs from Vanguard

Post by sport » Mon Aug 28, 2017 8:59 pm

WoodSpinner wrote:
Mon Aug 28, 2017 8:36 pm
friar1610 wrote:
Mon Aug 28, 2017 5:25 pm
Steelersfan wrote:
Mon Aug 28, 2017 5:05 pm
I suspect "the system" doesn't know if you want to take the QCD in addition to your regular RMD or as a distribution to partially meet your required RMD. You know it's the later, it doesn't.
Point taken - thanks.
Note ...

I believe ou must take your RMDs BEFORE any QCDs

Suggest you stop the auto RMD and take the last portion you want ($1000) before you put in for the QCD request.

8-)
This is not correct. The first money withdrawn counts towards your RMD. This money can be QCDs or normal withdrawals in any combination. The QCDs are part of your RMD if you take them before completing the RMD. After you complete the RMD, you can still make QCDs, but those will not count towards your RMD.

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BL
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Re: QCDs from Vanguard

Post by BL » Mon Aug 28, 2017 11:23 pm

I do only QCDs and no regular RMDs. So there are no RMD taxes to be paid. Vanguard calculates RMDs and shows that amount on the website. I call V and give complete names of charities and church and amounts I want to donate. They send them to me and I copy before sending it on to the charity. The first year I did this, they gave me a quiz about vehicles we had owned (colors, models, etc.) which they probably obtained from motor vehicle department.

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celia
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Re: QCDs from Vanguard

Post by celia » Tue Aug 29, 2017 3:53 am

From the perspective of the IRS, they don't care if this is done in the beginning, middle, or end of the year. The custodians report how much the RMD is to the IRS and the IRS just cares that that much was removed from the traditional IRA. The IRS also doesn't care when you made the QCD. It could have been from the very first withdrawal, the last withdrawal satisfying the RMD, or even later. They don't care what day anything was done, EXCEPT that the custodian can't mark donations as QCDs unless you were over 70.5 on that date. There is only one year where you have to worry about the exact date in the year being after your half-birthday. I'm confident that if you request a QCD when you are 70.3, Vanguard will alert you that the withdrawal can be done, but it won't be counted as a QCD.

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WoodSpinner
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Re: QCDs from Vanguard

Post by WoodSpinner » Tue Aug 29, 2017 7:26 am

sport wrote:
Mon Aug 28, 2017 8:59 pm
WoodSpinner wrote:
Mon Aug 28, 2017 8:36 pm
friar1610 wrote:
Mon Aug 28, 2017 5:25 pm
Steelersfan wrote:
Mon Aug 28, 2017 5:05 pm
I suspect "the system" doesn't know if you want to take the QCD in addition to your regular RMD or as a distribution to partially meet your required RMD. You know it's the later, it doesn't.
Point taken - thanks.
Note ...

I believe ou must take your RMDs BEFORE any QCDs

Suggest you stop the auto RMD and take the last portion you want ($1000) before you put in for the QCD request.

8-)
This is not correct. The first money withdrawn counts towards your RMD. This money can be QCDs or normal withdrawals in any combination. The QCDs are part of your RMD if you take them before completing the RMD. After you complete the RMD, you can still make QCDs, but those will not count towards your RMD.
Sigh, I learn something new every day! Not quite sure where I picked up that tidbit of incorrect information....

Thanks for setting me straight.

:beer

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Puck
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Re: QCDs from Vanguard

Post by Puck » Tue Aug 29, 2017 8:42 am

WoodSpinner wrote:
Tue Aug 29, 2017 7:26 am
sport wrote:
Mon Aug 28, 2017 8:59 pm
WoodSpinner wrote:
Mon Aug 28, 2017 8:36 pm
friar1610 wrote:
Mon Aug 28, 2017 5:25 pm
Steelersfan wrote:
Mon Aug 28, 2017 5:05 pm
I suspect "the system" doesn't know if you want to take the QCD in addition to your regular RMD or as a distribution to partially meet your required RMD. You know it's the later, it doesn't.
Point taken - thanks.
Note ...

I believe ou must take your RMDs BEFORE any QCDs

Suggest you stop the auto RMD and take the last portion you want ($1000) before you put in for the QCD request.

8-)
This is not correct. The first money withdrawn counts towards your RMD. This money can be QCDs or normal withdrawals in any combination. The QCDs are part of your RMD if you take them before completing the RMD. After you complete the RMD, you can still make QCDs, but those will not count towards your RMD.
Sigh, I learn something new every day! Not quite sure where I picked up that tidbit of incorrect information....

Thanks for setting me straight.

:beer

WoodSpinner

Replace 'QCDs' with 'Roth Conversions' and you're spot on.

Puck

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Re: QCDs from Vanguard

Post by tomd37 » Tue Aug 29, 2017 9:30 am

Good point Puck! That fact is often overlooked.
Tom D.

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Re: QCDs from Vanguard

Post by sport » Tue Aug 29, 2017 9:53 am

celia wrote:
Tue Aug 29, 2017 3:53 am
They don't care what day anything was done, EXCEPT that the custodian can't mark donations as QCDs unless you were over 70.5 on that date.
celia,
Everything you wrote is correct, except for this statement. Vanguard does not mark donations as QCDs. They are treated by Vanguard as ordinary withdrawals. In fact, when I have a QCD check sent to me, Vanguard includes a flyer that tells me I could get my money faster by linking my bank account to my Vanguard account. The year-end 1099 statement also does not mention QCDs. Perhaps other custodians do things differently.

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HueyLD
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Re: QCDs from Vanguard

Post by HueyLD » Tue Aug 29, 2017 10:28 am

sport wrote:
Tue Aug 29, 2017 9:53 am
Vanguard does not mark donations as QCDs. They are treated by Vanguard as ordinary withdrawals. In fact, when I have a QCD check sent to me, Vanguard includes a flyer that tells me I could get my money faster by linking my bank account to my Vanguard account. The year-end 1099 statement also does not mention QCDs. Perhaps other custodians do things differently.

I have seen QCDs from several brokerages that show a code 7 - Normal Distribution.

It is up to you to tell the IRS that the withdrawal is a QCD and any good tax software should allow you to so indicate.

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Re: QCDs from Vanguard

Post by pshonore » Tue Aug 29, 2017 11:05 am

HueyLD wrote:
Tue Aug 29, 2017 10:28 am
sport wrote:
Tue Aug 29, 2017 9:53 am
Vanguard does not mark donations as QCDs. They are treated by Vanguard as ordinary withdrawals. In fact, when I have a QCD check sent to me, Vanguard includes a flyer that tells me I could get my money faster by linking my bank account to my Vanguard account. The year-end 1099 statement also does not mention QCDs. Perhaps other custodians do things differently.

I have seen QCDs from several brokerages that show a code 7 - Normal Distribution.

It is up to you to tell the IRS that the withdrawal is a QCD and any good tax software should allow you to so indicate.
Absolutely correct and if you don't tell the software, it will be taxed.

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Re: QCDs from Vanguard

Post by Sheepdog » Tue Aug 29, 2017 11:22 am

HueyLD wrote:
Tue Aug 29, 2017 10:28 am
sport wrote:
Tue Aug 29, 2017 9:53 am
Vanguard does not mark donations as QCDs. They are treated by Vanguard as ordinary withdrawals. In fact, when I have a QCD check sent to me, Vanguard includes a flyer that tells me I could get my money faster by linking my bank account to my Vanguard account. The year-end 1099 statement also does not mention QCDs. Perhaps other custodians do things differently.

I have seen QCDs from several brokerages that show a code 7 - Normal Distribution.

It is up to you to tell the IRS that the withdrawal is a QCD and any good tax software should allow you to so indicate.
You should have QCD documentation, though, in case you are audited
People should not say everything they think. They should think about everything they say.

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HueyLD
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Re: QCDs from Vanguard

Post by HueyLD » Tue Aug 29, 2017 11:32 am

Sheepdog wrote:
Tue Aug 29, 2017 11:22 am
You should have QCD documentation, though, in case you are audited
Yes, absolutely.

Such documentation typically is a letter of acknowledgement from the charity.

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celia
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Re: QCDs from Vanguard

Post by celia » Tue Aug 29, 2017 11:37 am

sport wrote:
Tue Aug 29, 2017 9:53 am
celia wrote:
Tue Aug 29, 2017 3:53 am
They don't care what day anything was done, EXCEPT that the custodian can't mark donations as QCDs unless you were over 70.5 on that date.
celia,
Everything you wrote is correct, except for this statement. Vanguard does not mark donations as QCDs. They are treated by Vanguard as ordinary withdrawals.
Obviously, I haven't done QCDs yet. :happy So how does the IRS know you were 70.5 on the day you withdrew? Are you on your honor? After all, it is for one year only that the day matters, so maybe it is not worth building in checks to test for this.

Or will the custodian refuse to make out check(s) for you if you're not 70.5?

Edit to add: Ohhh, it just occurred to me. If you were to get audited on this point, the copy of the check you should have made will show the day the check was made out! :oops: So those of us who will give away $100,000 a year, had better make copies of those check(s)!

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Re: QCDs from Vanguard

Post by Alan S. » Tue Aug 29, 2017 10:31 pm

If there are any abuses regarding QCD reporting, the simple solution would be for the IRS to assign a unique Box 7 distribution code for QCDs. It is logical that there was no such code while QCDs expired every other year, but once they were made permanent it would have been logical to assign a code.

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Re: QCDs from Vanguard

Post by CABob » Tue Aug 29, 2017 11:21 pm

Alan S. wrote:
Tue Aug 29, 2017 10:31 pm
If there are any abuses regarding QCD reporting, the simple solution would be for the IRS to assign a unique Box 7 distribution code for QCDs. It is logical that there was no such code while QCDs expired every other year, but once they were made permanent it would have been logical to assign a code.
There you go expecting the revenooers to be logical. :annoyed
I'm not sure how much abuse is involved. I would expect that there are tax payers who forget they can deduct the QCD from the gross RMD amount. I agree that a Box 7 code would be helpful allowing tax prep software to pick up the information appropriately.
Bob

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Re: QCDs from Vanguard

Post by sport » Tue Aug 29, 2017 11:33 pm

Alan S. wrote:
Tue Aug 29, 2017 10:31 pm
If there are any abuses regarding QCD reporting, the simple solution would be for the IRS to assign a unique Box 7 distribution code for QCDs. It is logical that there was no such code while QCDs expired every other year, but once they were made permanent it would have been logical to assign a code.
Even if the IRS made this change, it would still be the responsibility of the individual to be sure the charity is qualified and that the proper letter of receipt was obtained.

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celia
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Re: QCDs from Vanguard

Post by celia » Wed Aug 30, 2017 1:48 am

Question: What happens to reporting the QCD on one's return if the charity did not receive the payment? ie, the check was not cashed so the money was not withdrawn from the account? Or is it withdrawn when the check was created and put into some kind of charity account until the check clears? Has anyone here had this happen to their QCD?

Is the following year's RMD calculated as if the QCD check had been cashed/withdrawn?

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Re: QCDs from Vanguard

Post by sport » Wed Aug 30, 2017 9:34 am

celia wrote:
Wed Aug 30, 2017 1:48 am
Question: What happens to reporting the QCD on one's return if the charity did not receive the payment? ie, the check was not cashed so the money was not withdrawn from the account? Or is it withdrawn when the check was created and put into some kind of charity account until the check clears? Has anyone here had this happen to their QCD?

Is the following year's RMD calculated as if the QCD check had been cashed/withdrawn?
Vanguard withdraws the money from your account when they cut the check. The money must go into the bank account on which the check is written. I sent one check that the charity had no record of receiving it. I called them to ask. I asked Vanguard to stop payment on that check and write another.

Minot
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Re: QCDs from Vanguard

Post by Minot » Wed Aug 30, 2017 1:45 pm

FYI--you can write your own QCD checks on your Vanguard or Fidelity IRA account. If you do it this way, VG or Fido won't withdraw the amount from your account until after the check has been cashed.

I also find it a lot simpler to write my own checks, rather than calling VG to do it. YMMV

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Re: QCDs from Vanguard

Post by tomd37 » Wed Aug 30, 2017 1:57 pm

Minot - In the Vanguard system can you set up check writing authority from a specific traditional IRA account (e.g. Total Stock Market Index fund) or must the check writing authority be set up on a money market account and have a dollar amount transfer made to that account before desiring to write QCD checks directly to the qualified charity? If the latter, would one have to maintain at least a minimum amount the that MM account at all times?

I have not had any problems contacting VG to have QCD checks issued to various charities in the past eight years (when QCDs were authorized), but your method seems even easier.
Tom D.

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Re: QCDs from Vanguard

Post by Alan S. » Wed Aug 30, 2017 2:08 pm

Minot wrote:
Wed Aug 30, 2017 1:45 pm
FYI--you can write your own QCD checks on your Vanguard or Fidelity IRA account. If you do it this way, VG or Fido won't withdraw the amount from your account until after the check has been cashed.

I also find it a lot simpler to write my own checks, rather than calling VG to do it. YMMV
While IRA owner check writing is valid for QCD execution, if the custodian will not process an account distribution until the check is returned and the charity misplaces that check near year end, the 1099R will not reflect that distribution and you will have an RMD shortfall and need to file a 5329 to request a penalty waiver. You will also have a higher year end balance which increases the next year's RMD.

Therefore, if you want to use check writing, would suggest that 10/31 be your 12/31 and you monitor your IRA account for the distribution.

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CABob
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Re: QCDs from Vanguard

Post by CABob » Wed Aug 30, 2017 2:41 pm

Minot wrote:
Wed Aug 30, 2017 1:45 pm
FYI--you can write your own QCD checks on your Vanguard or Fidelity IRA account. If you do it this way, VG or Fido won't withdraw the amount from your account until after the check has been cashed.

I also find it a lot simpler to write my own checks, rather than calling VG to do it. YMMV
I don't know the details regarding Fido but have looked into it at Vanguard. As I understand it, in order to make it work you have to have a fund in your IRA that allows check writing. This would be a money market fund or certain bond funds. I don't think a stock fund or a balanced fund would allow check writing. This approach has an appeal to me so I may investigate further for next year or possibly even this year although I have already gotten some QCD checks this year and am not sure I want to have both ways in play.
I think that checks from a mutual fund have a minimum of some amount, perhaps $500. If that is the case I'm not sure I am interested since some of my QCD are for a smaller amount. Can someone confirm my understanding regarding a minimum amount for check writing?
Bob

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HueyLD
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Re: QCDs from Vanguard

Post by HueyLD » Wed Aug 30, 2017 3:04 pm

My minimum is $250.

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Re: QCDs from Vanguard

Post by dcb » Wed Aug 30, 2017 3:34 pm

I found out the hard way that you need the funds in your IRA brokerage 'settlement account' when writing a check on your IRA. This is true whether it is a QCD distribution or otherwise.

As to writing a Vanguard IRA check for a QCD I have yet to find a definitive statement from the IRS, Vanguard, or another reliable source allowing a QCD checks to be written directly by the owner of the IRA. If anyone can cite a source I would surely appreciate it. It would simplify making a number of somewhat smaller QCD's (Vanguard does require a minimum of a $250 check) throughout the year.

dcb

pshonore
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Re: QCDs from Vanguard

Post by pshonore » Wed Aug 30, 2017 3:47 pm

Here's what Fido says:
If you have checkwriting established on your IRA, you can write a check directly to the qualified charity.
Note: The charity must cash the check by December 31 in order to meet your required minimum distribution (RMD) and the QCD deadline for that year.

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Re: QCDs from Vanguard

Post by Alan S. » Wed Aug 30, 2017 3:53 pm

dcb wrote:
Wed Aug 30, 2017 3:34 pm
I found out the hard way that you need the funds in your IRA brokerage 'settlement account' when writing a check on your IRA. This is true whether it is a QCD distribution or otherwise.

As to writing a Vanguard IRA check for a QCD I have yet to find a definitive statement from the IRS, Vanguard, or another reliable source allowing a QCD checks to be written directly by the owner of the IRA. If anyone can cite a source I would surely appreciate it. It would simplify making a number of somewhat smaller QCD's (Vanguard does require a minimum of a $250 check) throughout the year.

dcb
The following is Q 41 from IRS Notice 2007-7:
Q-41. Is a check from an IRA made payable to a charitable organization described in § 408(d)(8) and delivered by the IRA owner to the charitable organization a direct payment to such organization?

A-41. Yes. If a check from an IRA is made payable to a charitable organization described in § 408(d)(8) and delivered by the IRA owner to the charitable organization, the payment to the charitable organization will be considered a direct payment by the IRA trustee to the charitable organization for purposes of § 408(d)(8)(B)(i).
Note that "a check from an IRA" is not limited by who signs the check. To have IRA checks the custodian has obviously authorized the IRA owner to use those checks. This QA also clarifies that the IRA custodian can mail the check that they write to the IRA owner for delivery to the charity. While it would be nice if "check writing by the IRA owner" was specifically cited in the QA, most experts interpret this QA as IRS approval of check writing for QCDs, and most custodians do as well.

Note my earlier post regarding risks if the custodian does not include the check in their 1099R because they do not process a distribution until the cancelled check is returned. Charities can misplace checks regardless of who writes them, but for custodian written checks the distribution is processed when the custodian writes them rather than after they are returned which can be much later than when they were written.

dcb
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Location: Southwest Michigan

Re: QCDs from Vanguard

Post by dcb » Wed Aug 30, 2017 4:15 pm

Alan S. wrote:
Wed Aug 30, 2017 3:53 pm
dcb wrote:
Wed Aug 30, 2017 3:34 pm
I found out the hard way that you need the funds in your IRA brokerage 'settlement account' when writing a check on your IRA. This is true whether it is a QCD distribution or otherwise.

As to writing a Vanguard IRA check for a QCD I have yet to find a definitive statement from the IRS, Vanguard, or another reliable source allowing a QCD checks to be written directly by the owner of the IRA. If anyone can cite a source I would surely appreciate it. It would simplify making a number of somewhat smaller QCD's (Vanguard does require a minimum of a $250 check) throughout the year.

dcb
The following is Q 41 from IRS Notice 2007-7:
Q-41. Is a check from an IRA made payable to a charitable organization described in § 408(d)(8) and delivered by the IRA owner to the charitable organization a direct payment to such organization?

A-41. Yes. If a check from an IRA is made payable to a charitable organization described in § 408(d)(8) and delivered by the IRA owner to the charitable organization, the payment to the charitable organization will be considered a direct payment by the IRA trustee to the charitable organization for purposes of § 408(d)(8)(B)(i).
Note that "a check from an IRA" is not limited by who signs the check. To have IRA checks the custodian has obviously authorized the IRA owner to use those checks. This QA also clarifies that the IRA custodian can mail the check that they write to the IRA owner for delivery to the charity. While it would be nice if "check writing by the IRA owner" was specifically cited in the QA, most experts interpret this QA as IRS approval of check writing for QCDs, and most custodians do as well.

Note my earlier post regarding risks if the custodian does not include the check in their 1099R because they do not process a distribution until the cancelled check is returned. Charities can misplace checks regardless of who writes them, but for custodian written checks the distribution is processed when the custodian writes them rather than after they are returned which can be much later than when they were written.
Thanks Alan. That's definitive enough for me.

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celia
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Re: QCDs from Vanguard

Post by celia » Wed Aug 30, 2017 9:43 pm

And YOU can misplace the check before giving it to the charity. This could be more likely if you request several checks at the same time but spread out the distribution of them.

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