Change of custodian last year of SEPP
L1: Change of custodian last year of SEPPHello! With the help of this forum 5 years ago, I opened a SEPP. Well, I took my last distribution this past Jan 7 2010.
Can I change custodians this year 2010? If so, how careful must I bewith regard to handling of the fund balance? For example, can I take a direct rollover and get the money into the new custodian’s hands before 60 days runs out?The last thing I want to do is jeopardize the whole SEPP and have to pay the 10% +penalties/interest for all the
prior years payments. Thanks
2010-05-10 18:30, By: 72Newbie, IP: [184.108.40.206]
L2: Change of custodian last year of SEPPIf you have met all 72(t) requirements then you can do whatever your little heart’s desire is. But the easiest and probably quickest method of transfer from one custodian to another is to use the “trustee-to-trustee transfer” method rather than the “take possession of the funds, deposit into your checking account, write a check to the new custodian, send it to the new custodian, and hope the post office doesn’t lose it” method. This way you don’t have to worry about the 60-day restriction and any other concerns.After the funds show up in your new account at the new custodian, simply begin “Normal Distributions” in any manner and frequency you wish.Jim2010-05-10 18:57, By: Jim, IP: [220.127.116.11]
L3: Change of custodian last year of SEPPAnd to add to Jim’s suggestion, when you do the trustee to trustee transfer, there is nothing to report to the govt on your next tax return, but when you are sent a check from your IRA and then reinvest in a < 60 day rollover, you have to list the payment and then tell them you did a rollover on lines 15a and 15b of your 1040 to explain the 1099-R you will get for the payment. A lot less moving parts in the T-to-T transfer, and I have done one where the investments all came over "as is", and there was no need to sell into cash and then reinvest later. Check that option out as well with new custodian to see if they can handle that. Ken2010-05-10 19:35, By: Ken, IP: [18.104.22.168] L3: Change of custodian last year of SEPPJim, thanks for taking the time to reply. I'm not sure that I can "do as your little heart desires". Isn'ttransfer activity in the plan sometimes deemed to be some sort of a distribution in excess of the substantially equal amounts that have come out each of the last 5 years. Keep in mind, that I'm still in the last year (5th) of the SEPP having taken the last payment severalmonths ago. I'm particularly worried about violating any strict obscure rule interpretations sinceI might elect to hold the funds in my checking for a month or so before choosing my replacement custodian. Thanks to everyonefor their input. 2010-05-10 19:43, By: 72Newbie, IP: [22.214.171.124] L2: Change of custodian last year of SEPPHello, 72Newbie!We have done many trustee to trustee transfers. As it was mentioned, it is much easier to do the transfer rather than take a check and then deposit it within 60 days. Here is what I suggest you do:1. Open the new IRA at your new custodian first.2. Tell them you will be transfering your existing IRA to them. They love this and will do whatever it takes to help you.3. Ask them for the Account Transfer Form, ACAT, Trustee to Trustee Form, Etc. (usually called Account Transfer Form)4. Complete the form and send it to your new custodian. From that point, they should take care of everything. Basically they will contact yourexisting broker and show them your authorization to initiate a transfer. The transfer is usually fairly quick. As it was also mentioned, this is nice because you can transfer your investments over as well, so this avoids having to sell your portfolio and re-allocate if that is not a very appealing idea to you.Good luck and do not hesitate to ask if this seems confusing at all.2010-05-10 19:50, By: WCM, IP: [126.96.36.199] L3: Change of custodian last year of SEPPEveryone is usually so careful on this website. I'm surprised that no one has asked for the exact date that the SEPP 72-T plan started, and your date of birth. Were you 59 1/2 as of 1/7/2010 ?We need this to be sure that the plan is not terminated until the LATER of 5 years (60 months) or age 59 1/2. Too often people state that their plan is 5 years old, whenin realitythey have taken 5 annual payments, with the 5th one between the 49th and 60th month.2010-05-10 20:24, By: dlzallestaxes, IP: [188.8.131.52] L3: Change of custodian last year of SEPPI fully agree that a TtoT transfer is by far the best way to go, even more so when the change is being done in the final stub year of a 72t plan. However, since the poster's prime concern is not busting the plan at this stage, I would ask that he provide the date of his first distribution and the date he turned or will turn 59.5. Also need to know how much was distributed in January, 2010 if it was any different than 1/12 of the annual 72t distribution amount.Once the modification date is confirmed as correcthe is no longer restricted by the plan. However, indirect rollovers or other distributions taken in the final stub year can make 1040 reporting more prone to IRS inquiry, particularly since custodians are not consistent in coding their 1099R forms.2010-05-10 20:37, By: Alan S., IP: [184.108.40.206]