Pro/con of Qualified Charitable Distributions by TIRA owner’s checks

Submitted by fairira on Wed, 2016-09-14 23:37

A Vanguard TIRA owner over 70-1/2 would like to make several dozen Qualified Charitable Distributions (QCD’s) from her TIRA. In 12/2015 her Letter of Instruction (LOI) to Vanguard sufficed and Vanguard issued checks payable to the organizations (but mailed to the TIRA owner) and in the amounts stated in the LOI of which only one check was as much as $500.

Vanguard in its concern about meeting “regulatory disclosure requirements” now wants completion of their IRA Distribution Form (which lists the necessary regulatory disclosures) to accompany the LOI.

Q. 1: If the TIRA owner wishes to instead simply write a check on her TIRA account to send to each organization, would these checks qualify as QCD’s?

Q. 2: If so, is there any risk of inadequate proof that the checks are QCD’s or other disadvantage to this method of making QCD’s? The TIRA owner would write and send the checks in early Jan. 2017 so that even if a charity took several months to process the check, it should still qualify as a 2017 QCD.

Thank you for your help.



Submitted by tomd37 on Thu, 2016-09-15 00:21

Not familiar with, nor can I find, any such IRA Distribution Form on the Vanguard site.  I would be interested in the responses to your post.  Seems to me IRA owner is asking a lot of Vanguard to make “several dozen” QCDs in such small amounts. I just made such QCDs for 2016, but they averaged in the low four-digits each and use a very simple written method with Vanguard which they have accepted without undue concern for about five years now.

Submitted by Alan - IRA critic on Thu, 2016-09-15 01:01

  • Sec 408(d)(8)(B) of the tax code requires that a QCD be transferred directly from the IRA trustee (custodian) to the charity and Notice 2007-7 clarifies that if this check is sent to the IRA owner for delivery to the charity the requirement is met. There is nothing to suggest that an IRA owner with check writing is allowed to issue the check
  • The trustee issue requirement otherwise also meets the criteria to otherwise be treated as a non reportable transfer other than the transfer is required to be reported on a 1099R. Now that QCDs are permanent, the IRS may consider more specific 1099R identification to weed out any potential tax fraud related to QCDs.
  • In summary, using check writing for a QCD will likely not be considered valid by the IRS even though they have issued no guidance I am aware of specifically mentioning check writing.

Submitted by tomd37 on Thu, 2016-09-15 15:58

Interesting discussion on a similar situation going on over at the Bogleheads.org forum in the Personal Finance Not Investing portion, but as I interpret it the two answers do not agree.  Personally I have more faith in the response given here.  Tom D.

Submitted by Alan - IRA critic on Thu, 2016-09-15 20:50

Yes, I see that Fidelity has taken the position more than once that IRA owner checks meet the QCD definition. This might come from their interpretion of Q 41 in Notice 2007-7, which refers only to the check payee being the charity without addressing the check issuer. However, cannot find evidence of other major custodians taking the position that an IRA owner check is considered by the IRS as a trustee check, and the tax code still directly states that the QCD must be transferred directly from the trustee to the charity. The Notice states only that the check can be sent to the IRA owner for delivery, not that the IRA owner is treated as the trustee if they have check writing. For a Fidelity IRA owner, I would investigate what specific guidance Fidelity might have received from the IRS allowing this before proceeding. Also, VG does not seem to be on board with the FIdelity interpretation.

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