RMD's, Charity and your age?

[Richcpaman]

Interesting question this week:

If your parent passed away while receiving RMD's, and then you as the beneficiary are to receive the RMD's going forward, can your transfer direct to a charity amounts from your RMD?

Rich

 

[jklcpa]

QCDs can be made from inherited IRAs, but the owner must still meet the age requirement for QCDs, meaning that this new owner must be 70 1/2 or older.

[jklcpa]

Rich, if you need the cites, look to IRC 408(d)(8)(B) and (B)(ii) that was added by the PPA 2006. Then there was some clarification in the Q8A of IRB 2007-7 at sec IX Q-36 that states that distribs from any type of IRA including Roths are allowed (obviously needs to meet the other requirements of the IRC), but specifically excludes ongoing SEPs and ongoing SIMPLEs.

ETA - Q-37 deals with the age limit. 

[Richcpaman]

Thank you, Judy!  You should be the Tax Star!

Rich

 

[Roberts]

I wonder what the thought process is that QCDs should be linked to the 70 1/2 age rule. Why can't a 65 year old make a direct distribution?

[jklcpa]

1 hour ago, Roberts said:

I wonder what the thought process is that QCDs should be linked to the 70 1/2 age rule. Why can't a 65 year old make a direct distribution?

Probably so those taking early withdrawals couldn't avoid the penalty using this. I don't remember the year that the other early w/d exceptions came about, but one that was already in the law at that time was the 5+ yrs of equal distributions.  When this was first enacted, it was a temporary provision for only 2 years, and so it is possible that the framers didn't include the 5-yr equal distrb rule for those under 70.5 because at its original issuance its temporary nature didn't at least cover those same 5 years. 

 

[Roberts]

70 1/2 is the RMD age. Anyone can take distributions at 65 without penalty.

Has nothing to do with early distributions and avoiding penalties.

[jklcpa]

I did get that totally wrong, and when that happens, it's usually pretty awful.  It wasn't even a post from the middle of the night that I can use as an excuse.  

[Catherine]

@jklcpa don't we ALL do that from time to time?  Mis-read, mis-understand, conflate with a similar-but-different situation we've seen before, and then post in accordance with what we think we understand?

'Salright.  We all still love you.

[Margaret CPA in OH]

Not to mention overloaded brains long 'bout now... It's a village here and we look out for each other, no worries!

[Hahn1040]

the reasoning is that when faced with an RMD, the t/p can designate the charitable donation rather than taking the taxable distribution. 

for the 65 year old, the distribution is not required. That person can just leave it i the retirement account and not have a taxable event.

[Roberts]

23 hours ago, Hahn1040 said:

the reasoning is that when faced with an RMD, the t/p can designate the charitable donation rather than taking the taxable distribution. 

for the 65 year old, the distribution is not required. That person can just leave it i the retirement account and not have a taxable event.

Do you have a reference to this or is it a guess?  They can still withdraw it and make a charitable contribution. The QCD allows them to lower their AGI which has obvious advantages but why is that benefit linked to the RMD age and not the age of penalty free distributions? Many middle class families in retirement aren't itemizing.