Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

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cjonblanchard
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Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by cjonblanchard »

It was my understanding that eff. 2/1/18, QCDs from Vanguard accounts could only be withdrawn from a Federal Money Market (Settlement Account) Fund, but I must have misunderstood that, as it's still possible to withdraw from other accounts. At any rate, I've figuratively carved out an amount of my husband's MRD and put it aside to be distributed throughout the year, as dividends are distributed to the Federal M.M. Fund. I discovered yesterday that, in a way, Vanguard made the QCD distribution process easier, especially if you make only a few at a time. It can now be done totally independently, on-line, and electronically confirmed immediately. Thought I'd share how to easily do this in case it'll help some of my fellow Bogleheads:

- Within your Vanguard account, click on the "FORMS" tab at the top of the screen
- Look for the "Buy or Sell" heading and click "View all"
- Scroll down and look for "Take a Qualified Charitable Distribution from IRA" ... click on the "Complete Online" box
- Tick the box to the left of Federal Money Market (Settlement Fund) [or ??], enter check amount you want for a QCD, and click on "Continue"
- Under "2. Where's my money going?" select "Send me a check"... your address will appear with "TRAD IRA VFTC AS CUSTODIAN" on the 2nd line
- Tick the box to the left of "Qualified charitable distribution" ... a box explaining about QCDs will pop up ... read it and click on "Continue"
- Enter the name of the charity next to the "Charity name" area that popped up after you hit "Continue" above ... click on "Continue" again
- "Make a tax withholding choice" screen will pop up ... tick the bullet to the left of "Do not withhold"
- "Review and Submit" screen will appear ... review all the information and click on the Cancel, Back or Submit boxes, as you see fit ...
- Once "Submit" is selected, you're done and Vanguard will e-mail a confirmation shortly thereafter.

This may seem like a lot of steps, but once you get it down, it goes quickly and can be done without involving a Vanguard representative, which I like. Hope this helps ... Cheers!
oysterboy
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by oysterboy »

Thank you; that's very helpful. I'm beginning my RMDs this year and want to use the QCD process, but was dreading the hassle.
retire57
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by retire57 »

This is great information. Thank you!!!
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by RadAudit »

cjonblanchard wrote: Wed Mar 07, 2018 12:54 am Thought I'd share how to easily do this in case it'll help some of my fellow Bogleheads:
Thanks for the post. I, too, was dreading the hassle; but the tax law change sort of forced the situation. Found it rather easy once I took the leap.

The thing I'm looking forward to (in early Nov?) is calling VG to adjust the total RMD for the year so as not to over withdraw. I've used the automatic calculations in the past; but, so far, VG hasn't incorporated QCDs in to an auto reduction of the remaining RMD amount. Oh, well. Always something.
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RudyS
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by RudyS »

Another approach:
sport wrote: Thu Sep 15, 2016 9:53 am
pshonore wrote:
sport wrote:
RudyS wrote:One can write a check on the IRA's settlement fund. That is an IRA account. You send the check to the charity who (hopefully :wink: ) deposits it. That is a legit QCD. The nice thing is, you can look at the IRA and watch the check clear. Oh, these have to be for at least $250.
RudyS,
Do you have a citation for this? This is what IRA Publication 590B says:
"A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax deductible contributions."
It does not seem clear that me writing a check on the account is the same as a distribution "made directly by the trustee".
Evidently, Fido allows it. From their website: https://www.fidelity.com/insights/perso ... ty-in-2016
The money needs to be transferred directly from the IRA to the charity in order to be tax-free. If you withdraw it from the IRA first and then give it to the charity, you can deduct the gift as a charitable contribution (if you itemize), but the withdrawal will be included in your adjusted gross income.

Because the law is now permanent, IRA administrators are starting to simplify the process. Fidelity, for example, plans to introduce a new form in the next few weeks that makes it easy to transfer the money and make your wishes clear to the charity. You may also have the option of signing up for check-writing privileges from your IRA so that you can write the check directly from your account to the charity. That way, the charity will see who the contribution is from, and you can include specific directions as to which fund within the charity you'd like to support. Otherwise, the IRA administrator will cut a check and send it directly to the charity, but the charity won't necessarily be given clear information about whose account it is from or what the money is meant to support, says Jane Wilton, general counsel for the New York Community Trust.

And Fido will also send the check to you, for forwarding to the charity.
pshonore,
Thanks for this info. It is interesting that Fido allows it. However, the real question is whether or not the IRS allows it.
Indianrock
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Indianrock »

When doing this on Vanguard's site, do you provide an ABA routing number etc for the charity, or just an official mailing address for the charity?
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CABob
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by CABob »

Indianrock wrote: Sun Dec 02, 2018 3:05 pm When doing this on Vanguard's site, do you provide an ABA routing number etc for the charity, or just an official mailing address for the charity?
Neither one. The check will be made payable to the charity but will be mailed to you. You must then see that the charity gets it.

Edit: I just read the OP above and perhaps my information is not the latest information. Or perhaps there is a difference between the newer brokerage accounts and the older mutual fund only accounts. I will have to clarify in my mind for the future.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Indianrock »

Thanks. Nice forum here but odd there is no quick way to "Like" or "thank" a response, other than another response. :-)
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by fourwheelcycle »

I recently turned 70 1/2 and used Vanguard's online QCD check request facility to request checks for six different charities. I was surprised to find the checks in my mailbox only three days later!
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Indianrock »

Awesome
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by RadAudit »

cjonblanchard wrote: Wed Mar 07, 2018 12:54 am Within your Vanguard account, click on the "FORMS" tab at the top of the screen
- Look for the "Buy or Sell" heading and click "View all"
- Scroll down and look for "Take a Qualified Charitable Distribution from IRA" ... click on the "Complete Online" box
Thanks. I forgot how to do this from last year when I did it for the first time. Maybe I ought to give more money more often or maybe just write down the instructions. Thanks again.
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CABob
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by CABob »

RadAudit wrote: Thu Feb 28, 2019 3:47 pm
cjonblanchard wrote: Wed Mar 07, 2018 12:54 am Within your Vanguard account, click on the "FORMS" tab at the top of the screen
- Look for the "Buy or Sell" heading and click "View all"
- Scroll down and look for "Take a Qualified Charitable Distribution from IRA" ... click on the "Complete Online" box
Thanks. I forgot how to do this from last year when I did it for the first time. Maybe I ought to give more money more often or maybe just write down the instructions. Thanks again.
I just went through the process stopping just as I was about to commit to the QCD withdrawal and it appears that it works for me in my old fashioned mutual fund account. It does seem like a long and laborious process that should have been in the "Retirement contributions, withdrawals, and RMD" section at the bottom of the "Balances" page. Starting with the "Forms" link at the top of the page doesn't seem intuitive to me.
Bob
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Indianrock »

I had reasons to take my first RMD for 2018 this month ( turned 70 1/2 last November ). I'll take my RMD for 2019 in November, diverting some of it to a QCD. So when the author said this ( below ), I interpret it to mean that "my first distribution for 2019" is the one I'll take the 2019 QCD from.
( the one I just took for 2018 was just moved to a taxable mutual fund account, but declared as my minimum RMD for 2018 )

"One important caveat of using a QCD to satisfy an RMD obligation, though, is that an RMD is presumed to be satisfied by the first distribution that comes out of the IRA for the year."

https://www.kitces.com/blog/qualified-c ... uirements/
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by prd1982 »

Indianrock wrote: Thu Feb 28, 2019 4:45 pm ...
"One important caveat of using a QCD to satisfy an RMD obligation, though, is that an RMD is presumed to be satisfied by the first distribution that comes out of the IRA for the year."

I never understood this comment, although it keeps being mentioned. Assume I have a $30K RMD. If I take a standard $30K withdrawal, and then a $10K QCD, I end up taking $40K from my account but only pay taxes on $30K. If I take a $10K QCD, and then a $30K standard withdrawal, I end up taking $40K from my account but only pay taxes on $30K. So what is the difference? And if the standard + QCD equals $30K, the order doesn't matter either.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Indianrock »

They can be a bit confusing. At first I was thinking the QCD would reduce my other, non-IRA related income. Must have been smoking something that day. The QCD is just income-neutral -- doesn't add to or subtract from your other taxable income, and can't be used as an itemized deduction. But my concern today was that somehow my 2018 RMD taken last week would be considered "the first RMD for this year" and I would be prevented from taking the QCD from the actual 2019 RMD later this year.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by tomd37 »

A QCD from a traditional IRA does reduce your taxable income and the QCD cannot be used as an itemized deduction if you are itemizing on Schedule A.

When you take a QCD the full amount of the RMD is reported on the 1099-R and it is up to the taxpayer to report the distribution correctly on line 4 of the 1040. The full amount of the RMD is reported on line 4a and the line 4b amount reported is 4a minus the QCD. An if your marginal tax rate is 22% and you make a QCD of $10,000 you are saving $2,200 in taxes.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Indianrock »

Probably just semantics. If your taxable income, including a mandatory $10k RMD, would be $80,000 and you take half of the $10k RMD as a QCD, your taxable income ( $70k in other income plus $10k in RMD ) becomes $75k
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by tomd37 »

Yes, that is correct
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by sport »

prd1982 wrote: Thu Feb 28, 2019 5:29 pm
Indianrock wrote: Thu Feb 28, 2019 4:45 pm ...
"One important caveat of using a QCD to satisfy an RMD obligation, though, is that an RMD is presumed to be satisfied by the first distribution that comes out of the IRA for the year."

I never understood this comment, although it keeps being mentioned. Assume I have a $30K RMD. If I take a standard $30K withdrawal, and then a $10K QCD, I end up taking $40K from my account but only pay taxes on $30K. If I take a $10K QCD, and then a $30K standard withdrawal, I end up taking $40K from my account but only pay taxes on $30K. So what is the difference? And if the standard + QCD equals $30K, the order doesn't matter either.
The reason it is hard to understand is that it is incomplete. The rules are that the first distributions that come out of the IRA must be used to satisfy the RMD. However, some or all of those distributions can be used for QCDs, up to 100K per year. The RMD distributions cannot be used for a rollover, they must be distributed (withdrawn). Once the RMD is completed, then rollovers can be made with the remaining money in the IRA. Additional QCDs are also permitted, although those will not reduce the taxes on your RMD.

I make QCDs throughout the year. In November, I take the balance of the RMD and have the necessary income taxes withheld at that time.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by JMacDonald »

My quick way to do a QCD was to call Vanguard and give the information and received the check in the mail in about a week. Then I mailed the check to the charity. I have done this two years in a row. Quick and simple.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by tomd37 »

Joe - I basically do the same as you. I have nine annual contributions to charity via QCDs. I set up an appointment for my Flagship rep to call me. The day before the call I email him a list containing the name and amount for each recipient and the account from which the QCD is to be taken. On the call the rep confirms the info and makes an entry for each. He must go through certain language for each one. My rep likes the way we do it.

Three days later I receive all nine checks made payable to the charity with my name and address just below the charity name. I make a copy of each, and prepare a cover letter to the charity indicating an annual contribution in memory of our son. Been doing it this way for the past ten years when QCDs were available to us.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by drzzzzz »

Does anyone know if Vanguard reports the QCD total amount to you when issuing a 1099 or just includes it as part of the total distribution and it is your responsibility to then determine the amounts that you donated? Also, rather than calling Vanguard to make out a check to the charity, which they then mail to you to send to the charity, does anyone just write out a check on their IRA account directly to the charity for QCD purposes?
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by tomd37 »

Vanguard's annual 1099-R for a RMD reports the total RMD distribution; it is up to the taxpayer to report both the total distribution and the taxable portion of that distribution on Form 1040 and its Schedules. I cannot answer the question about check writing directly from an account to apply as a QCD from an RMD as I do not do it that way. Maybe someone else doing it that way with Vanguard will respond.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by sport »

I write Vanguard checks for QCDs. I have Prime MM fund in my IRA, and keep a limited amount in that fund. I can write checks on that fund for QCDs. Printed on Vanguard checks is the statement "NOT VALID FOR LESS THAN $250.00" So, if I want to make a QCD for less than that amount, I let Vanguard write the check. As tom37 explained, Vanguard does not show any information about QCDs on the 1099 form. Vanguard does not know, nor do they care, whether or not the charity is "qualified". It is up to you to make sure that the charity(s) are qualified, and to report the amount of your distribution that is taxable properly.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by CABob »

Many thanks to cjonblanchard for pointing out and describing the procedure for requesting a QCD check online. I have used it several times this year and find it fast and easy. The procedure is pretty straightforward except for the first step. Finding the “FORMS” link at the top and using it to start the process seems very counter intuitive to me. All of the remaining steps are alright.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by heartwood »

Thank you for listing the process. I tried 4 times and never got the "Tick the box to the left of "Qualified charitable distribution" " option. I tried a fifth time and I realized I was starting in my personal taxable account rather than my IRA. :oops:

Once I selected the IRA account and FMM all went as you described.

I never would have found the path without your map.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by its4inthemorning »

cjonblanchard,

Thank you for providing the QCD instructions in your 3/17/18 post. By following them, I just made six 2019 QCDs, all online without requiring telephone assistance in about 15 minutes!

QCDs are a great way to make donations once one can no longer itemize deductions.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Alan S. »

its4inthemorning wrote: Mon Oct 28, 2019 10:03 am cjonblanchard,

Thank you for providing the QCD instructions in your 3/17/18 post. By following them, I just made six 2019 QCDs, all online without requiring telephone assistance in about 15 minutes!

QCDs are a great way to make donations once one can no longer itemize deductions.
QCDs are preferable even when you CAN itemize, and even when your itemized deductions equal your std deduction before charities. A QCD:
1) Is not included in your AGI in the first place and that has several potential benefits
2) Increases your % basis for your TIRA which lowers the taxable portion of other IRA distributions.
3) Avoids the % of AGI limits on itemized charitable deductions if you have others that you do itemize.
4) Creates more AGI space before IRMAA surcharges and other AGI based thresholds are triggered .
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by kaneohe »

prd1982 wrote: Thu Feb 28, 2019 5:29 pm
Indianrock wrote: Thu Feb 28, 2019 4:45 pm ...
"One important caveat of using a QCD to satisfy an RMD obligation, though, is that an RMD is presumed to be satisfied by the first distribution that comes out of the IRA for the year."

I never understood this comment, although it keeps being mentioned. Assume I have a $30K RMD. If I take a standard $30K withdrawal, and then a $10K QCD, I end up taking $40K from my account but only pay taxes on $30K. If I take a $10K QCD, and then a $30K standard withdrawal, I end up taking $40K from my account but only pay taxes on $30K. So what is the difference? And if the standard + QCD equals $30K, the order doesn't matter either.
see ex 2 in the linked Kitces article above.......I think what he is pointing out is that if you take the QCD so that it is part of the RMD, then
you minimize withdrawals from the IRA. If you have a 10K RMD requirement, and do a 10K QCD, you have satisfied the RMD requirement
and owe no taxes on the IRA withdrawal. If you take your 10K RMD first, and then do a 10K QCD, you have withdrawn 20K from the IRA
(vs 10K) in the first example and you owe taxes on 10K RMD.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by ralph124cf »

Does anybody have similar step by step instructions for Schwab and Fidelity?

Thanks,

Ralph
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by kaneohe »

I don't have any do-it-yourself instructions for Schwab. I just give them a letter detailing each organization and the amount to be given.
One letter lists the N organizations and is given to a local office. A wk or so later, the checks arrive at my home address which is listed
in the letter of instructions. I also tell them not to withhold any taxes.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by bsteiner »

Does Vanguard have a minimum amount requirement for QCD checks?
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by tomd37 »

Bruce ? -Attempted to call VG right after your post, but they have already closed. Nothing on their website about minimum QCD amount. A call Monday to VG could confirm the info you need.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by CABob »

bsteiner wrote: Fri Aug 21, 2020 4:22 pm Does Vanguard have a minimum amount requirement for QCD checks?
I don't have a direct answer to the question but I have requested and received QCD checks as small as $30 earlier this year from Vanguard.
Bob
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by tomd37 »

CABob - That's good to know. I do ten QCDs routinely every year, but there are always a few smaller dollar value contributions that pop up later in the year which have been coming out of my personal checkbook and cannot be used as a reduction to federal taxable income as we cannot itemize. Since I don't take my full RMD until later in the year I could easily arrange to fund those smaller contributions as a QCD and save the tax on the amount. I will try to confirm the QCD amount limit, if any, with Vanguard next week via phone.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Eagle33 »

tomd37 wrote: Fri Aug 21, 2020 7:39 pm CABob - That's good to know. I do ten QCDs routinely every year, but there are always a few smaller dollar value contributions that pop up later in the year which have been coming out of my personal checkbook and cannot be used as a reduction to federal taxable income as we cannot itemize. Since I don't take my full RMD until later in the year I could easily arrange to fund those smaller contributions as a QCD and save the tax on the amount. I will try to confirm the QCD amount limit, if any, with Vanguard next week via phone.
Starting in 2020 there is a new $300 cash contribution to charities that is a income adjustment - above the AGI line deduction! Don't have to itemize.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by drzzzzz »

We used our Vanguard IRA last year for QCD distributions, but did it slightly differently than having Vanguard issue the check (which is likely Vanguard's preference). We have a checking account on the IRA account (which you can also do at Fidelity and Schwab) and write the checks out ourselves to the charity with the spouse whose account it is signing the check. The money is not distributed to us but goes directly to the charity from the IRA custodial account at Vanguard. The checks have been for as little as $18 so far. Kitces has an article about this approach ( https://www.kitces.com/blog/qualified-c ... uirements/) and the comments section discusses in more detail about writing checks on the IRA account to a charity. There is also this IRS advisory (https://www.irs.gov/pub/irs-drop/n-07-07.pdf) question 41 for more information. What we also do is keep copies of all the checks written to charities that we use for QCD purposes in-case we need to document to the IRS. In our case we only write checks to charities on the account and do all other distributions electronically to our Vanguard brokerage account to make book-keeping easier for us. We are however not accountants nor tax lawyers so use whatever approach you are most comfortable with.
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by sport »

drzzzzz wrote: Sat Aug 22, 2020 10:08 am We used our Vanguard IRA last year for QCD distributions, but did it slightly differently than having Vanguard issue the check (which is likely Vanguard's preference). We have a checking account on the IRA account (which you can also do at Fidelity and Schwab) and write the checks out ourselves to the charity with the spouse whose account it is signing the check. The money is not distributed to us but goes directly to the charity from the IRA custodial account at Vanguard. The checks have been for as little as $18 so far. Kitces has an article about this approach ( https://www.kitces.com/blog/qualified-c ... uirements/) and the comments section discusses in more detail about writing checks on the IRA account to a charity. There is also this IRS advisory (https://www.irs.gov/pub/irs-drop/n-07-07.pdf) question 41 for more information. What we also do is keep copies of all the checks written to charities that we use for QCD purposes in-case we need to document to the IRS. In our case we only write checks to charities on the account and do all other distributions electronically to our Vanguard brokerage account to make book-keeping easier for us. We are however not accountants nor tax lawyers so use whatever approach you are most comfortable with.
We do the same thing. We prefer to write the checks because when the check clears my account, we know it has been received. However, our Vanguard checks are imprinted "not valid for less than $250". Vanguard has told us that they will honor checks for less than that amount. However, we do not want to write checks that state they are not valid. This could cause problems at the charities. The last time I asked about this, I was told that the brokerage account checks do not have the imprint, but the mutual fund accounts do. This makes no sense. :annoyed
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Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by drzzzzz »

sport wrote: Sat Aug 22, 2020 10:23 am
drzzzzz wrote: Sat Aug 22, 2020 10:08 am We used our Vanguard IRA last year for QCD distributions, but did it slightly differently than having Vanguard issue the check (which is likely Vanguard's preference). We have a checking account on the IRA account (which you can also do at Fidelity and Schwab) and write the checks out ourselves to the charity with the spouse whose account it is signing the check. The money is not distributed to us but goes directly to the charity from the IRA custodial account at Vanguard. The checks have been for as little as $18 so far. Kitces has an article about this approach ( https://www.kitces.com/blog/qualified-c ... uirements/) and the comments section discusses in more detail about writing checks on the IRA account to a charity. There is also this IRS advisory (https://www.irs.gov/pub/irs-drop/n-07-07.pdf) question 41 for more information. What we also do is keep copies of all the checks written to charities that we use for QCD purposes in-case we need to document to the IRS. In our case we only write checks to charities on the account and do all other distributions electronically to our Vanguard brokerage account to make book-keeping easier for us. We are however not accountants nor tax lawyers so use whatever approach you are most comfortable with.
We do the same thing. We prefer to write the checks because when the check clears my account, we know it has been received. However, our Vanguard checks are imprinted "not valid for less than $250". Vanguard has told us that they will honor checks for less than that amount. However, we do not want to write checks that state they are not valid. This could cause problems at the charities. The last time I asked about this, I was told that the brokerage account checks do not have the imprint, but the mutual fund accounts do. This makes no sense. :annoyed
Our accounts say Vanguard brokerage account IRA on the checks and there is no minimum imprinted on the check. It is interesting that they do something differently for the brokerage and mutual fund accounts - you would think it would be easier to be consistent across the board. Our checks settle on the settlement account within the IRA whereas I am guessing your checks are written against a money market account.
Alan S.
Posts: 9926
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by Alan S. »

Keep in mind that the Secure Act has eliminated the age requirement to make TIRA contributions.

However, if you make any deductible TIRA contributions starting in the year you reach 70.5, a punitive anti abuse rule included in Secure results in a direct dollar for dollar offset of your QCD donation.

For example, if you make a 7000 deductible TIRA contribution this year whether a spousal contribution or not, and do a 10k QCD, then 7000 of that 10k donation is NOT a QCD and cannot be reported as such, and you end up with a 3k QCD. The offset also accumulates, so if you make 3 years of 7000 deductible contributions (21k) starting at 70.5, then 21k of your QCDs are not treated as QCDs once you start doing QCDs anytime thereafter.

While most people are not making deductible TIRA contributions and many do not have earned income to do so, if you do have the earned income and plan QCDs, remember to take this offset into consideration, and also note that the offset begins at 70.5 even though RMDs do not begin until 72.

If you are doing back door Roths at this age, you are not affected because you are not making a deductible TIRA contribution.
sport
Posts: 9568
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by sport »

drzzzzz wrote: Sat Aug 22, 2020 5:49 pm
sport wrote: Sat Aug 22, 2020 10:23 am
drzzzzz wrote: Sat Aug 22, 2020 10:08 am We used our Vanguard IRA last year for QCD distributions, but did it slightly differently than having Vanguard issue the check (which is likely Vanguard's preference). We have a checking account on the IRA account (which you can also do at Fidelity and Schwab) and write the checks out ourselves to the charity with the spouse whose account it is signing the check. The money is not distributed to us but goes directly to the charity from the IRA custodial account at Vanguard. The checks have been for as little as $18 so far. Kitces has an article about this approach ( https://www.kitces.com/blog/qualified-c ... uirements/) and the comments section discusses in more detail about writing checks on the IRA account to a charity. There is also this IRS advisory (https://www.irs.gov/pub/irs-drop/n-07-07.pdf) question 41 for more information. What we also do is keep copies of all the checks written to charities that we use for QCD purposes in-case we need to document to the IRS. In our case we only write checks to charities on the account and do all other distributions electronically to our Vanguard brokerage account to make book-keeping easier for us. We are however not accountants nor tax lawyers so use whatever approach you are most comfortable with.
We do the same thing. We prefer to write the checks because when the check clears my account, we know it has been received. However, our Vanguard checks are imprinted "not valid for less than $250". Vanguard has told us that they will honor checks for less than that amount. However, we do not want to write checks that state they are not valid. This could cause problems at the charities. The last time I asked about this, I was told that the brokerage account checks do not have the imprint, but the mutual fund accounts do. This makes no sense. :annoyed
Our accounts say Vanguard brokerage account IRA on the checks and there is no minimum imprinted on the check. It is interesting that they do something differently for the brokerage and mutual fund accounts - you would think it would be easier to be consistent across the board. Our checks settle on the settlement account within the IRA whereas I am guessing your checks are written against a money market account.
Yes, I have a MM fund in my IRA specifically for that purpose. This also lets me control exactly how much money is in that fund to limit the risk involved with writing checks.
tomd37
Posts: 3395
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Re: Quick, Efficient Way to Make a QCD from a Vanguard IRA when 70.5

Post by tomd37 »

Following up on my post this past Friday, I called Vanguard this morning and confirmed that there is no low dollar limit on QCDs done online. Also looked at a copy of the check for one of my 2020 QCDs and there is no low dollar limit printed on the check.
Tom D.
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