QCD first dollars out rule

Submitted by Ed Snyder on Tue, 2020-02-04 16:03

Clients RMD amount is $23,435. He’s withdrawing it plus more monthly. He’s withdrawing $3,369 per month to his bank account and $500 per month directly to a charity. He’ll withdraw his total RMD by June. I’m uncertain if there is any impact from the first dollars out rule on his ability to do the QCD for $6,000 of this for the year since it was donated monthly and he received the total RMD amount by June.



Submitted by Alan - IRA critic on Tue, 2020-02-04 17:02

  • You are right. Using this distribution pattern, his RMD will be complete by June yet he will only have made 3000 in QCDs by then. That means that the other 3000 of QCDs remaining would not offset taxes on the RMD. He would be left with about 20,435 as his taxable RMD. 
  • To avoid this, he needs to complete the 6000 of QCDs by June, or otherwise modify the distribution schedule to make sure that his entire intended QCD total is distributed before his RMD is completed. 
  • If he wants to hold off on the QCDs to make sure he can afford them, then he also needs to delay the other distributions to prevent him from the completing the RMD before the QCDs. The June date of course results from his distributing double his RMD this year including QCDs.
  • Fewer QCD checks also reduces the chance that one of them is misplaced by the charity.
  • If client is using an IRA custodian’s “RMD service”, that is risky when QCDs are involved. Too much risk in communication errors or custodian execution errors.

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