Inherited IRA and QCD
After much discussion in our office on this topic, we need help. Our questions is if a non-spouse inherits an IRA can they QCD from the inherited IRA if they are 70.5?
According to my Vanguard advisor, Vanguard will not support a QCD from an Inherited IRA. Can you point me to an IRS publication that specifically says this is allowed? Vanguard will not simply take Ed Slott’s word!
- This is specifically addressed in IRS Notice 2007-7 Q&A-37: https://www.irs.gov/pub/irs-drop/n-07-07.pdf
- Note that it’s not up to Vanguard to determine if the distribution qualifies as a QCD. As far as Vanguard is concerned, it’s just a regular distribution, albeit paid from the IRA directly to the charity. The only reason that Vanguard would have not to pay the distribution to a charity is if they simply do not permit distributions from the inherited IRA to be paid to a third party, which would be a Vanguard policy, not a statutory or regulatory limitation. (Why they would permit payments to a third party from an owned IRA but not from an inherited IRA would be a mystery only Vanguard could answer. Perhaps your Vanguard advisor is simply misinformed).
- If Vanguard continues to be problematic, trustee-to-trustee transfer the inherited IRA to a more accommodating custodian. (An inherited IRA is not permitted to be moved by distribution and rollover.)
Permalink Submitted by Alan - IRA critic on Wed, 2021-07-21 18:29
Yes, a QCD can be done from an inherited IRA once the beneficiary reaches 70.5. If the beneficiary is under the 10 year rule, any distribution before year 10 is not an RMD, so a QCD would not reduce taxes before the 10th year, but it would reduce the amount remaining in the inherited IRA in year 10 when the account must be cashed out.