I know nothing more than is in the draft 2025 Instructions for Form 1099-R and 5498:
https://www.irs.gov/pub/irs-dft/i1099r--dft.pdf
I find it difficult to believe that an IRA custodian would accommodate reporting the distribution with code Y if the custodian is not requested to transfer the funds. As you said, "The custodian cannot be expected to determine whether a payee is a qualified charity."
The IRS will probably have to issue some guidance on how to report legitimate QCDs that are reported with code 7 instead of code Y and how to report distributions that are reported with code Y but don't actually qualify as QCDs. (TurboTax is going to have to present the option to report some or all of a code-Y distribution as not being a QCD.) Given that updates to Pub 590-B have not recently been published before the end of the year for which the update is made, it might be prudent to request that the IRA custodian make the transfer rather than using check writing, at least until guidance is provided.
