Combined accounts amounts?

L1: Combined accounts amounts?Case details:
Two separate IRA”s
OneIRA account with $650,000 invested in Mutual Funds
A second IRA account with $225,000 invested in illiquidincome producing REITS(dividends going to cash)
Client wants $5,000/month, so with current rates must use both accounts in the calculation
By calculating a 72T payment for each IRA separatly, it comes out aprox $3900 from the larger account and $1100 from the smaller account. I could set them up this way, but if the REITS lower their dividends anytime within the next 5 years, the clientmay not have enough cash to pay the 72T payment from that account (and the REITSwill beilliquid for the next few years).
I knowit is permissibleto combine theaccounts to do the calculation, butcan I take any amount I want from each of the IRA”s as long asthey equal the correct payment?
Thank You.2008-01-20 12:15, By: Gordon Gekko, IP: [68.12.225.158]

L2: Combined accounts amounts?Multiple accounts can be used for a single 72t plan, and the actual distributions taken in any combination from the accounts in the “SEPP universe”. However, the exception will almost certainly need to be claimed using Form 5329.
The allocation of the 5,000 based on the two balances does not look correct. In the event that you actually plan two independent 72t plans, one for each IRA account, then the distribution CANNOT be aggregated as stated above. Why are the 1100 and the 3900 figures not proportionate to the account balances?2008-01-20 21:52, By: Alan S., IP: [24.116.165.60]

L2: Combined accounts amounts?The account valuesI am using for this forum are approximations, butif I totalup both accountsand use120% ofNovember rates & single life expectancy, it comes to about $5,250/month (I would lower the rate to get close to $5,000/month). I realize that if Icalculate 72T”s on each account separatly I can not aggregate, but I am concerned that the REIT accountmay not generate enough income to meet the payments, thus the idea of combining the balances and calculating the 72T payment on that amount, then taking a small amount from the REIT account and the remainder from the larger account. I guess what I am really asking is, can I calculate the 72T on the aggregate values, then take $4500/month fromthe largeraccount and $500/month from the REIT account?2008-01-21 06:50, By: Gordon Gekko, IP: [64.19.62.114]

L2: Combined accounts amounts?A follow-up question…does form 5329 need to be filed only if the custodian doest NOT code the distributions as 72t? Why would a Custodian not code them as 72T, if instructed? 2008-01-21 07:29, By: Gordon Gekko, IP: [64.19.62.114]

L2: Combined accounts amounts?Gordon,
To answer your last question, if you had two different IRA”s with different custodians, and used the combined balance to compute your 72t withdrawal and then tookall withdrawals or adisproportionate amount from one account, then the custodian of that IRA would have to code a ”1” on the withdrawal, since their math on the amount of your IRA with them would not translate into the payment you were taking under 72t. The other IRA would not be involved in sending you a 1099-R if you took no withdrawals from them. If you also took disproportionate 72t amount from second IRA,with regard to thatIRA balance, they would issue another code ”1”, so you would need to document both with 5329 filing(s).
In addition, many custodians are now coding ALL 72t payments with a ”1” no matter what you do, and are relying on you to prove to the IRS that your plan avoids the 10% penalty for early withdrawal. When I started my 72t at Vanguard in May 2007, their website had already warned me that they would issue 1099 with code 1 and not code 2, so I would have to file 5329 each year.
KEN2008-01-21 07:54, By: Ken, IP: [75.67.65.254]

L2: Combined accounts amounts?Gordon:
The simplest way to solve your problem is to transfer both the MF IRA and the REIT IRA into one brokerage account IRA. When the REIT pays it”s quarterly dividends, the cash simply accumulates in either the “cash account” or sweeps into the Money Market Fund within the brokerage IRA. Then you can set up systematic (usually monthly) distributions from the M Funds to follow along like the REIT distributions into the cash account or MM Fund. Then you make your monthly, SEPP Plan distributions from the brokerage IRA platform to the client”s checking account via EFT. When the REIT goes public in a few years then you can liquidate as needed to cintinue the SEPP Plan distributions and eventually the SEPP will die it”s natural death when the 5-year and age 59 1/2 requirements are met.
Jim2008-01-21 08:10, By: Jim, IP: [24.252.195.14]

L2: Combined accounts amounts?One more thought. Just accept the idea of filing Form 5329 to claim / support the 72(t) exception to the early distribution problem. Most IRA custodians have addopted the idea of issuing a Code 1 and letting the client deal with the tax issues via Form 5329. We have more important things to worry about than Form 1099-R coding under the current climate. Accept the Code 1, file Form 5329, and get on with your life.
Jim2008-01-21 08:14, By: Jim, IP: [24.252.195.14]

L2: Combined accounts amounts?Thank you to all those who have replied, your input is greatly appreciated. One final question, just to be clear, if I calculate the 72T payment using BOTH account values combined, can I take a payment from each IRA in any amount so long as they add up to the calculated amount? Thanks again.2008-01-21 08:52, By: Gordon Gekko, IP: [64.19.62.114]

L2: Combined accounts amounts?Yes.2008-01-21 08:58, By: Jim, IP: [24.252.195.14]

L2: Combined accounts amounts?Just so you understand, your distributions can, or will, come from any combination of Income, Capital Gains Dividends, Return of Capital Distributions, and principal/sales proceeds. It doesn”t matter how you get the cash to be distributed, and you do not have to take the same amount each month, only on an annual basis.2008-01-21 09:18, By: dlzallestaxes, IP: [151.197.219.130]