Can my account invest in an entity that I or a family member owns or controls?

If your IRA or Qualified Retirement Plan loans funds to certain family members, such as lineal descendants and spouses of lineal descendants, or an entity that you or certain family members own or control, whether controlled individually or as an officer of a corporate general partner, managing member, etc., the transaction could possibly be a prohibited transaction under the Internal Revenue Code Section 4975. Our policy on this issue is that if you or another disqualified person is an officer or director of an entity, or an officer of a corporate general partner, managing member, etc., and you will collectively own less than 50% of the entity, then you will need to obtain a legal opinion from an ERISA or tax attorney addressed to you in which the transaction is discussed in detail prior to us processing your investment instructions. If you, any family member, or disqualified persons collectively will own 50% or more of the entity, we will not process the investment even if you are able to obtain a legal opinion.

How can an individual convert a traditional IRA to a Roth IRA?

A traditional IRA can be converted to a Roth IRA by:

  • Rollover – A distribution from a traditional IRA can be contributed to a Roth IRA within 60 days after distribution.
  • Trustee-to-trustee transfer – The financial institution holding the traditional IRA assets will provide directions on how to transfer those assets to a Roth IRA with another financial institution.
  • Same trustee transfer – As with the trustee-to-trustee transfer, the financial institution holding the traditional IRA assets will provide directions on how to transfer those assets to a Roth IRA. In this case, things should be simpler because the transfer occurs within the same financial institution.

A conversion results in taxation of any untaxed amounts in the traditional IRA. Also, the conversion is reported on Form 8606, Nondeductible IRAs.

How do I initiate a cash transfer to our platform using the paper Incoming Transfer Form?

To initiate a transfer of cash to your account with us, please complete the Incoming Transfer Form and select either Option A) Complete Transfer or Option B) Partial Transfer and select Cash.  Please enter the amount of cash you would like to transfer in the line beside the Cash option. If selecting a “Complete Transfer”, please note that we cannot hold publicly traded stock, bonds, or mutual funds. This means that all assets must be liquidated prior to submitting the request. Incoming Transfer Forms must be sent to us so that we can execute the document and include a Letter of Acceptance with our submission to your current custodian. Sending this form directly to them without our signature or letter of acceptance will result in the rejection of your transfer request. This form can be sent to us via fax or email (if the resigning custodian accepts faxed transfer requests) or mail (required if the resigning custodian requires original transfer requests).

What is the difference between an indirect rollover and a direct rollover?

A direct rollover is a direct movement of assets from an eligible retirement plan to an IRA or another eligible retirement plan, or from an IRA to an eligible retirement plan, in which the individual does not take constructive receipt of the assets. An indirect rollover is a distribution of IRA or eligible retirement plan assets to an individual (individual takes receipt of the assets) that within 60 days is rolled over to the same type of IRA or to another eligible retirement plan. The amount sent to the new financial institution must be the same amount distributed from the old financial institution. This means that if funds were withheld for taxes, the amount withheld must be made up for by the client. Funds must be sent to the new financial institution within 60 days of constructive receipt of the funds from the old financial institution.

How is a transfer different from a rollover?

A transfer is a direct, nonreportable movement of assets, generally between two IRAs of the same type. A rollover is a reportable movement of assets between IRAs, between IRAs and eligible retirement plans, or between eligible retirement plans. Please note that as of 2015, the IRS has issued limitations on the number of IRA-to-IRA Rollovers. Only one IRA-to-IRA rollover can be done per 12-month period. Please see IRA One Rollover Per Year Rule for additional information regarding this change.

What is a transfer?

A transfer is a direct movement of assets, generally between two IRAs of the same type (i.e., Traditional IRA to Traditional IRA, Roth IRA to Roth IRA, etc.) from one financial institution to another in which the account owner does not take constructive receipt of the assets.

If I hold property in my IRA, can I use it?

No. You or any disqualified person may not have any personal use or benefit of the property while it is held in your IRA account. The property is to be purchased for investment purposes only.

What are the Consequences of a Prohibited Transaction?

If an IRA holder is found to have engaged in a prohibited transaction under Internal Revenue Code Sections 4975 or 408 with IRA funds, it will result in a “deemed distribution” of the IRA. The taxes and penalties are severe and are applicable to all of the IRAs assets on the first day of the year in which the prohibited transaction occurred. If this deemed “distribution” occurs, it will be subject to ordinary income tax and, if you were under the age of 59 1/2 at that time, a ten (10%) percent excise tax on premature distributions may also be assessed. In addition, if the “prohibited transaction” is not corrected within the taxable period, Internal Revenue Code Section 4975(b) imposes a tax equal to 100 percent of the amount involved.