72t ira transfer to another brokerage
L1: 72t ira transfer to another brokerageHave received two different responses from two of the largest discount brokers. When one has a managed ira rollover that is taking 72t distributions; is it possible to transfer account to another brokerage without tax penalties? One brokerage said yes you can transfer…then start up a 72t with them in the same amount. The other brokerage said no….that it would be considered a modification and make you subject to tax liabilities. No longer satisfied that the managed portfolio is being managed with my best interests. What can one do?
2010-10-21 17:31, By: lori, IP: [126.96.36.199]
L2: 72t ira transfer to another brokerageI will break this down into two situations:
1) If the managed IRA is the ONLY IRA account comprising the 72t plan, there is no problem whatsoever in transferring it to another custodian. This is a full transfer of your 72t plan assets.
2) If the managed IRA is NOT the only IRA account comprising the 72t plan, then you are dealing with a PARTIAL transfer and there is very small risk that the IRS would bust the plan because of the partial transfer. They have done this a couple times and even though the IRS has never rationally explained those rulings, there is a small risk that this could be the 3rd such case. Very small risk, less than a fraction of a percent, but a risk you should be aware of.
While an IRA custodian is not required by the tax code to provide a direct transfer option and can issue a check to the IRA owner for an indirect rollover, the vast majority of custodians and all of them in the brokerage industry offer direct transfers and this is the way to move funds, particularly those part of a 72t plan.2010-10-21 20:47, By: Alan S., IP: [188.8.131.52]
L3: 72t ira transfer to another brokerage
Thank you Alan! A+++2010-10-21 20:58, By: lori, IP: [184.108.40.206]
L4: 72t ira transfer to another brokerageAlan:
I thought that the “partial transfer” issue related to moving less than 100% of ONE account. I never thought or realized that it was moving less than 100% of ALL accounts. Are you sure ?2010-10-21 21:06, By: dlzallestaxes, IP: [220.127.116.11]
L5: 72t ira transfer to another brokerageDlz…
I believe that for purposes of a SEPP plan, a partial transfer would be when less than 100% of the SEPP assets are transferred. That’s why we encourage SEPP plans to be set up under a brokerage/custodial arrangement where investments can be moved without actually moving part of the account.
If only one IRA makes up the plan, then transferring less than 100% would be a partial transfer. If there are multiple IRA accounts, then transferring less than 100% of the total of all accounts would be a partial transfer.2010-10-21 21:29, By: Gfw, IP: [18.104.22.168]