L1: Busted 72t?I started my 72t distributions on 1/6/06. I was born 11/16/1949. I received a letter from my custodian in October that I have satisfied the requirements of 72t and that my systematic distributions will end 12/31/10. I just realized that I was short some cash for my 12/06 distribution and sold some stock that settles 12/07. My custodian’s distribution form states that any systematic distribution that is rejected for insufficient funds is considered a modification. Am I in trouble?2010-12-05 19:32, By: Dennis J, IP: [18.104.22.168]
L2: Busted 72t?Your first plan modification date is 1/6/2011 – the end of the 5 years. You need to make sure that you take at least 5 full annual distributions between 1/6/2006 and 1/6/2011 – none have to be made on the 6th of the month.
From your post it sounds like you were planning a monthly distribution on 12/06. If yes, merely take it some time some time before 12/31. Will that distribution complete 60 monthly payments?
2010-12-05 19:43, By: Gfw, IP: [22.214.171.124]
L3: Busted 72t?Yes, the 12/06 distribution will be the 60th of equal monthly payments.2010-12-05 20:27, By: DennisJ, IP: [126.96.36.199]
L4: Busted 72t?All you need to do is get the final monthly (60th) distribution out by 12/31 and then makeno changes/withdrawals until after 1/6/2011 and you should be in good shape.2010-12-05 23:47, By: Gfw, IP: [188.8.131.52]
L5: Busted 72t?I don’t understand the broker’s form with respect to insufficient funds. With a 72t plan, you meet requirements whether you receive cash or in kind distribution of shares. So why would there be insufficient funds in your account unless the entire account balance has been distributed? If the account is drained and you do not have other IRA accounts as part of the plan, there is NO modification of your plan. You just exhaust the account of whatever funds are there and the plan ends.2010-12-06 00:10, By: Alan S., IP: [184.108.40.206]
L6: Busted 72t?From the original post, it appears that while he sold the stock, the cash wasn’t available for distribution until 12/07 when the scheduled distribution was 12/06 – had the scheduled distribution been on 12/08 instead of 12/06 – after the stock settlement date – there would have been sufficient funds/cash.
2010-12-06 00:18, By: Gfw, IP: [220.127.116.11]
L7: Busted 72t?If the situation is as GFW describes it, then you may have misunderstood the computerized notice from the broker.
The notice should be, or should have been worded, merely that there was insufficient cash to make the cash distribution on the assigned date. The notice should go on to say that the distribution will be made when there is sufficient cash in the account. Further, it should alert you to the fact that if there is inadequate cash, then they cannot make a cash distribution, and your SEPP 72-T plan will be “busted”, and you will be subjectto the 10% penalty retroactively on all distributions from the beginning of the plan.
The notice should then offer you an alternative solution whereby you could make a “distribute in kind” of a combination of securities and cash which total your monthly payment. This is tricky because of the need to use the “fair market value” of the securities.
However, in your situation, you should have the cash from the sale in plenty of time to distribute the cash before 12/31. There is no requirement that every distribution must be made on the same date of every month.
Your broker should have discussed all of this with you when he received a copy of the notice that was sent to you.2010-12-06 01:55, By: dlzallestaxes, IP: [18.104.22.168]