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QCD Complications, Inherited IRAs Overseas and More

By Beverly DeVeny
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This week's Slott Report Mailbag looks into complications with QCDs, inherited IRAs overseas, and annuity distributions. As always, we recommend you work with a competent, educated financial advisor to keep your retirement nest egg safe and secure. You can find one in your area here.

Question:

Client turns 70 ½ on Dec 23, 2016. They took a Qualified Charitable Distribution (QCD) out in October 2016 – direct to their church.  Will this create a problem for them? Thanks.

Answer: 

Yes, this is a problem. A QCD can only be done once the IRA owner or beneficiary attains age 70 ½. Your client is not eligible to do a QCD until December 24, 2016. They also do not have the option of putting the funds back in the IRA and waiting until December 24th. The amount of the RMD is not eligible for rollover.

 

Question:

Daughter Inherited an IRA in 2010 and she lives overseas (NZ). Schwab now demands that this account be transferred or liquidated as they no longer service overseas residents even though they are US citizens with SS #. I have been unable to locate any firm to be a custodian for this IRA account due to new regulations. Any ideas or experience with this issue? Thanks! - Jerry

Answer: 

We are beginning to see more problems in this area as our economy and lives become more global. If the client has existing accounts at another financial institution, she should check with them to see if they would also hold her inherited IRA. Another option would be to check with U.S. institutions that have international operations, especially if they have an office in NZ.  

 

Question:

Ed - Great presentation at our 1st global conference on Wednesday. I had a question regarding RMD’s that I didn’t get a chance to ask you last week.

In calculating the annual RMD, you must aggregate all IRA’s. My question relates to taking distributions out of an IRA annuity (not income withdrawal). Once you start the annual IRA annuity distributions, I get conflicting opinions on whether or not the annuity distributions are still part of your IRA aggregation, or are they stand alone distributions and no linger part of the annual IRA aggregation? Thanks for your help

Answer: 

IRS guidance says that the RMD should be calculated for each IRA separately, then RMDs can be combined and taken from any one or group of IRAs as long as the total RMD amount is taken each year.

You are getting conflicting information regarding annuities because the IRS has never clarified this issue. The tax code says that if an annuity is annuitized for more than 10 years or over life expectancy, which is an irrevocable election, then the distributions from that annuity are the RMD for that annuity. No part of that distribution can be used to satisfy any other RMDs for the IRA owner. Many annuity companies and retirement experts apply that reasoning to any annuity that has been annuitized, even if the annuity period is less than 10 years or life expectancy. 

 

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