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TRUSTEE-TO-TRUSTEE TRANSFERS AND RMDS: TODAY’S SLOTT REPORT MAILBAG

Question:

Can you do trustee-to-trustee transfer from an Annuity Trad IRA to Mutual Fund Trad IRA?

Answer:

Yes. If you own a traditional IRA that has invested in an annuity, you can make a transfer from it to another traditional IRA to be invested in mutual funds. And the best, safest way make the move is through a trustee-to-trustee transfer, so funds go directly from one IRA to the other.

Be sure to check the terms of the annuity before making the move, however. The contractual terms of an annuity may impose fees or penalties if the annuity is cashed in before a specified date. Also, be aware that some custodians may be resistant to doing a trustee to trustee transfer even though it is clearly allowed by the tax rules. It may be helpful to keep in mind that a check payable to the new IRA custodian for the benefit of your IRA will still qualify as a transfer even if the check is sent to you and you deliver it to the new IRA custodian.

Question:

A taxpayer is over 70 ½ who is still employed full time is able to delay required distributions from her current employer’s 401(k).

Could this taxpayer in 2018 (1) avoid RMDs since there is no balance in an IRA as of 12/31/17 and (2) still make QCDs by making an in service rollover to an IRA during the year (up to $100,000) and distributing the full amount transferred to the IRA to charity in 2018?

Thanks,

Elliot

Answer:

Hello, Elliot:

An individual who has reached age 70 1/2 and has funds in a traditional IRA can use them to make a Qualified Charitable Distribution. Assuming the funds were properly transferred into the IRA through a permitted in service distribution from the 401(k), the fact that they originally came from a 401(k) is not a problem. Nor is it a problem that no RMD is due for the IRA for the year.

So the answer is yes, the transaction you describe is permitted. It is a way to indirectly make a gift to charity using funds in a 401(k).

https://www.irahelp.com/slottreport/trustee-trustee-transfers-and-rmds-todays-slott-report-mailbag

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Investment advisory services are offered through Foundations Investment Advisors, LLC and is a SEC registered investment advisor.

Investment advisory services are offered through Donato Wealth Management and is a SEC registered investment advisor.