72t Account transfer to new custodian
L1: 72t Account transfer to new custodianClient is taking 72t payments from his IRA account and would like to transfer assets to another custodian.
He would like to keep12 months of income distributons in his current IRA so he doesn”t have to take distributions from the new account until 1 year later. In 1 year he would then start taking the same distribution from this new IRA account.
Can he do this …. maintain 2 IRAs while still keeping the same 72t distribution ?
2006-06-05 10:22, By: Bob, IP: [172.16.1.71]
L2: 72t Account transfer to new custodianYes, he can directly transfer part of the account to a new IRA custodian and account, and then his SEPP universe consists of both accounts. It is vital that the correct annual total be distributed from some combination of both accounts. The potential problem here is that there will be two 1099R forms, and the chance of both of them showing the “2” exception code is pretty slim. That means filing a 5329 to clain the SEPP exception on his tax return.
It appears that he wants to leave behind just enough to exactly satisfy the calendar year SEPP from the original account. However, if any interest or dividends are earned after the transfer, he will have to process a second transfer to the new account to get the original one closed out without over distributing if he plans the second year”s full distribution amount to be taken from the second account. This may not be worth the trouble vrs just first taking the full year”s SEPP from the first account, then fully transferring the account balance to the new custodian. If he wants to retain monthly payments, he could also just continue them after the transfer from the new custodian. There is plenty of flexibility here, the main things are to transfer the account directly, and be sure the correct annual amount is taken in combination.
2006-06-05 12:33, By: Alan S., IP: [220.127.116.11]
L2: 72t Account transfer to new custodian
Revenue ruling 2002-62 says, “e) Changes to account balance. Under all three methods, substantially equal periodic payments are calculated with respect to an account balance as of the first valuation date selected in paragraph (d) above. Thus, a modification to the series of payments will occur if, after such date, there is (i) any addition to the account balance other than gains or losses, (ii) any nontaxable transfer of a portion of the account balance to another retirement plan, or (iii) a rollover by the taxpayer of the amount received resulting in such amount not being taxable.” Section ii seems to me to say that partial transfers aren”t allowed.2006-06-07 16:09, By: KDM, IP: [18.104.22.168]
L2: 72t Account transfer to new custodian>>any non taxable transfer of a portion of the account balance to another retirement planKDM – you are missing one very important point – the transfer isn”t to another retirement plan, it is to an new account – still the same IRA as one individual may only have one IRA regardless of the number of accounts that are used for funding. That”s why all non–deductible contributions must be aggregated for determining the the pre/post tax portion of the withdrawal regardless of which account the withdrawal is made from.2006-06-07 16:21, By: Gfw, IP: [172.16.1.71]