Qualified Charitable Distributions & Spousal Beneficiaries: Today’s Slott Report Mailbag

By Andy Ives, CFP®, AIF®
IRA Analyst
Follow Us on Twitter: @theslottreport

Question:

I have a 401(k) that I’d like to use a portion for a QCD. I understand that QCD’s have to be from an IRA. Can I move a portion to an IRA for the QCD? How will this affect my RMD from my 401(k)? Federal tax implications? Thank you!

Answer:

You are correct that QCDs can only be done from an IRA, so you would have to roll over money from your 401(k) to an IRA to do a QCD. However, based on the “first-dollars-out rule,” the first distribution from your 401(k) will count toward the 401(k) RMD. Since these first dollars out are considered RMD dollars, they cannot be rolled over. Only after the plan RMD has been satisfied could you then roll additional 401(k) dollars to an IRA for a subsequent QCD. The plan RMD will be included in your income, while the QCD will not.

Question:

Dear Mr. Slott,

Before I was married, I opened several brokerage accounts and a Roth IRA in my name alone.  After marriage, I named my wife the beneficiary for these accounts.  I am wondering if we would be better off if I made her a co-owner.  What do you suggest?

Yours truly,

Mitchell

Answer:

Mitchell,

Regarding the non-IRA brokerage accounts, we suggest you speak to a financial advisor to discuss the pros and cons of making those joint account. As for the Roth IRA, that can only be held by one owner. You can name your wife as the beneficiary of the Roth IRA (as you did), but the account itself cannot be held jointly.