Split custodians and withdrawls

L1: Split custodians and withdrawlsBeen waiting to get to 54 1/2 to start 72T. Bought/read the book. Talked with a bunch of folks. Now has arrived. Planned to take money from 401K to a couple of traditional IRA”s with 2 different custodians. Want to take all draws based on total funds from a singlecustodian. Seems that they are not wanting to pay out more than the calculated draw for just their portion of the total. Howbest do I convince them that this all right? What documents/proof can I show them, beyond my “plan”?2006-07-26 08:27, By: Bob, IP: [4.254.148.91]
L2: Split custodians and withdrawlsHello Bob:
I am not 100% certain what the question is; but, I am guessing that you want to open two IRAs; design a plan based on the value of both IRAs and then take the required withdrawals from just one of the IRAs.
If so, simply design your plan and document it as the book indicates that you should do. If you are so inclined, you can send the plan documentation to the IRA custodian from which you will be making withdrawals; presumeably in an attempt to get them to issue you a 1099R with a reason code of 2. Don”t be surprised if they decline to do so. Remember that in these situations, the trustee is not looking out for your interests; they are looking out for their own. Presuming they decline, simply complete form 5329 and attach it to your tax return.
TheBadger
wjstecker@wispertel.net

2006-07-26 08:48, By: TheBadger, IP: [66.109.211.254]

L2: Split custodians and withdrawlsI have talked with several of the custodians that I use about this concept, and they all have the same answer as to howtheyreadRev. Rulling 2002-62. Their interpretation is that a 72(t) can only come from “one account” so they are not willing to issue “Code 2″ if they are distributing more money each year than the amount calculated based on the assets they hold. You really can”t fault them when you look at the situation from their prospective. By issuing the “Code 2” on the 1099R, they are, in effect, certifying that your SEPP Plan is “in compliance” with all of the rules. But they can”t know this with certainty. If you have another IRA at another custodian, how does the distributing custodian know that you aren”t doing something with the other IRA that would “bust” the plan?
I agree with TheBadger that you should send your plan documents to both IRA custodians, and then get ready to file Form 5329 each year to explain the exception. While your plan is sound from a 72(t) perspective as it relates to the IRS, it is “strange” as it relates to how custodians have to operate. When you do “strange” things, you have to be ready to handle the nuiances of operating in a “strange environment.”
Good luck.
Jim2006-07-26 10:04, By: Jim, IP: [70.184.1.35]

L2: Split custodians and withdrawlsObviously, given the above explanations, perhaps you should re visit the need for using this strategy. Typically, something about the structure of the investments themselves leads to this decision, but the added risks and IRA custodian administrative requirements suggests that the benefits of this strategy should be pretty good in order to justify the added documentation requirements. Perhaps a restructure of retirement assets before starting the SEPP could be a solution. Also, don”t start the SEPP until you are sure that all 401k assets and lagging dividends are transferred because late incoming transfer of funds can muddy the waters.2006-07-26 17:37, By: Alan S., IP: [24.116.165.157]