Fidelity and Schwab have differing approaches to a QCD from an RMD. Why?
February 8, 2024 7:16 AM   Subscribe

Fidelity will send a Qualified Charitable Donation (QCD) to your preferred charity before sending the balance of the Required Minimum Distribution (RMD) to you. This permits a tax benefit, even if you do not itemize on your Federal return. On the other hand, Schwab will not do this, which is a disservice to their clients. Obviously, both of them can do it. What explains their differing interpretations of the same laws and regulations?
posted by John Borrowman to Work & Money (5 answers total)
I'm very confused by this. Schwab allows for QCDs at any time. Similarly, you can request your RMD at any time. QCDs are tax deductible whenever you make them, provided they are made to a qualified charity.

Perhaps others understand this question entirely. That said, I think it's worth clarifying.
posted by saeculorum at 7:36 AM on February 8

Short version: Schwab lets you do this; contact them to figure out the best way.

Schwab encourages clients to minimize taxes by directing RMD to charities: Reducing RMDs With QCDs. On their RMD request form, there's a note "If you would like to make a charitable donation, enter the name of the charity as payee and select 'Mail to my home address.' This will ensure you are able to obtain a receipt from the charity for your tax records. Talk to your tax advisor to see if your distribution is eligible for a qualified charitable distribution (QCD)." There's also an option to pay to a third party, but there's a note: "If this distribution is paid directly to a third party, you acknowledge and agree that you, as the account holder, are solely responsible for any adverse tax consequences." So maybe they think the best way to follow tax law is for you to forward the check to the charity rather than Schwab sending it directly to the charity. But if you have an account with them, just call them and they'll tell you how to do it.
posted by Mr.Know-it-some at 7:46 AM on February 8

Response by poster: Thank you both. Clarification: This refers to an RMD from a Solo401K, not from an IRA. Again, however, Fidelity was willing to make the QCD from the RMD prior to distribution to the investor. Schwab was not will to make the QCD prior to distribution.
posted by John Borrowman at 8:22 AM on February 8

Response by poster: Sorry for thread-sitting. The answer appears to be that a QCD is not allowed from a Solo401K. Fidelity must have some kind of workaround that enables them to convert the funds to an IRA and then make the QCD.
posted by John Borrowman at 8:27 AM on February 8

You are able to rollover your Solo 401(k) into an IRA. Since you are talking about RMDs, presumably you are way over the 59.5 year mark that allows for non-taxed distributions from an IRA. I suggest doing this, if only because IRAs are usually cheaper in fees than Solo 401(k)s. On top of that, you'll probably have better fund choices in the plan.
posted by saeculorum at 8:36 AM on February 8

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