QCD: Personal Information Given to Charity

Submitted by Harold Leslie on Fri, 2016-12-09 18:34

I’ve had problems with the way Fidelity handled QCDs in the past but not to the extent to what occurred this year. I won’t go into the messy details because this year’s QCD process with Fidelity Investments was a fiasco. The information that Fidelity sent with the QCD check included my account number, the name of the mutual fund which funded the QCD, the number of shares sold, & the share price. I’m not asking for legal advice but what recourse do I have for such a blatant revelation of my private information? I’m considering writing a complaint letter to someone in management at the Tampa office, which is where my Fidelity contact is located, with a copy to Abigail Johnson, since she should know how incompetent her back office people are, but I don’t know how much good that would do so I’m hoping that someone has a suggestion that might be more helpful.

By the way, one suggestion that someone at Fidelity made is to set up a check writing option with the IRA so that I could write my own QCD check. However, I pointed out that IRS Publication 590 states that the distribution must come directly from the IRA’s trustee to the charity, so that’s not a viable option.

Thanks for any help that you can provide,

Harold



Submitted by Alan - IRA critic on Fri, 2016-12-09 20:34

  • There have been similar issues with Vanguard, so this processing format needs to be revised for QCDs. Perhaps now that they are permanent the custodians will be able to process them more discretely.
  • Note that the IRS has OKed the check writing method of executing a QCD, but probably advised only the IRA custodians. The IRS considers “coming directly from the trustee” to include IRA owner check writing. But there could also be issues with check writing including when the custodian records the distribution from the cancelled check. There could be delays and the current year 1099R would not include the distribution screwing up the RMD taxation in the year the check was written. I think the custodians need to change their procedures and not encourage check writing which could cause considerable problems.


Submitted by Harold Leslie on Fri, 2016-12-09 22:18

Thanks, Alan.  Wasn’t aware that the IRS would accept that I could write the QCD check from my IRA; however, I’d be concerned for the reasons that you cited.  It seems to me that there should be some recourse for sending my personal information to the charity, though.Harold



Submitted by Ben Meyer on Sun, 2016-12-11 16:35

You could avoid having the institution disclosing the name of the fund and the number of shares by first selling the shares and putting the proceeds into the cash account of your plan.  Then, in a separate transaction, distribute the resulting cash to the charity via a QCD.  Then the charity would only see that the funds came from your cash account.  The value of the donation would be the same under both procedures.  You could also establish a separate IRA account to hold only the cash to be donated via a QCD.  This way, disclosure of the account number would be irrelevant.  I trust that your SSN was not disclosed, which would be a greater impropriety.  I understand that following a procedure such as the above would involve a little more work, but it sounds easier than convincing a large corporation to establish a new processing system for QCDs.  



Submitted by Ben Meyer on Sun, 2016-12-11 16:53

Would it be legal under IRC and IRS rules to have the IRA custodian mail the check to the IRA participant, but to have the check payable to the charity?  Legally speaking, the IRA participant would not be able to cash the check, and would not have received the funds.  But he would be able to blank out any of his private data or detach the stub before presenting the check to the charity.  He would also be able to attach a nice letter to accompany the check.  Many of the large IRA institutions might not agree to mail the check to the participant, but some might, assuming it is within the IRS rules. 



Submitted by Alan - IRA critic on Sun, 2016-12-11 18:51

Yes, that is permissable. Here is a copy of QA 41 from 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).  



Submitted by Harold Leslie on Tue, 2016-12-13 17:32

Thanks for all of your useful comments.  I’ll give some thought to how to try to handle this next year so that it, perhaps, will work out better but I’m alnost afraid to do QCDs after what happened this year & for other years in the past. I tried in the past to have Fidelity mail me the check so that I could personally deliver it to the charity.  That way, I could see the check & make sure that it was prepared properly. What happened was that the check was made payable to the charity but instead of the charity’s address, the check had my address so that didn’t work out too well.  Fidelity claimed that this was the only way that it could be done.Take care,Harold



Submitted by Alan - IRA critic on Tue, 2016-12-13 18:47

Harold, this time of year there is another concern of beating the clock. If the custodian mails you the check to be forwarded to the charity, the technical deadline for it to count as a QCD for the current year is 12/31, by which the check must be in your mailbox to the charity. The fact that the charity dates their receipt in the following year is not a problem, but the mailing date that applies is not when the custodian mails you the check, but when you mail it forward. The 1099R will be based on the custodian distribution, but that date is up to a week sooner than you would mail the check. Now that the QCD has been made permanent, it is best to take care of it in early December at the latest.



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