Can a QCD ever be in-kind?
Suppose client has IRA annuity that is still within the surrender schedule. Client wants to do a Qualified Charitable Distribution using this annuity.
If the annuity is liquidated and a check cut to the charity, a surrender penalty will kick in, which the client wants to avoid. However, the client also does not want to wait until the surrender period is over to do the QCD.
Is there anything (Ruling, PLR, Proc.) that would allow the IRA custodian/annuity carrier, instead of sending a check, to transfer ownership of the annuity in-kind to the charity, and then 1099R the IRA Owner on the cash surrender value of the annuity that was transferred? If the carrier was willing to play ball, this would allow the QCD to take place without liquidating the annuity and triggering a surrender charge.
I had always assumed that QCDs had to be strictly cash, but I am not sure if I’ve ever seen anything that said in-kind transfers like that would be prohibited, either.
What am I missing, if anything?
Please and thank you!
Permalink Submitted by Alan - IRA critic on Fri, 2021-04-30 00:32
There is no apparent requirement for a QCD to be in cash, but I would be shocked if an insurance company would consider this type of transaction. In addition the donation would probably not qualify if the charity received an annuity that could not be cashed without a surrender charge to the charity. That would seem to violate the no “quid pro quo” contemporaneous receipt requirement. FWIW, would be amazed if an insurance company would consider such a distribution from an IRA annuity.