Indirect Qualified Transfer Tax Consequnces?

[scmb]

I came across a client who had a retirement account with LPL financial, he very recently decided to sell off and close the account because he felt like his advisor lied to him and requested a check to be mailed directly to him with no tax withholding at all.

I'm trying to move the funds to a Qualified FIA since it's less then 60 days by having him endorsing the check directly to the annuity when he receives it.

No past experience with the 60 day rule or a indirect transfer such as this.

What would be different from a regular 1035 exchange between the companies directly?

The check was already issued and mailed.

Thanks

 

[scagnt83]

A 1035 is an exchange between insurance contracts (ie. annuity to annuity). What you are speaking of is a Qualified Transfer of Funds.

The difference between a Transfer and a Rollover is that with the Rollover the client actually takes physical possession of the funds by having a check sent to them, then sending the funds to the new company.

The main difference is checking a different box on the annuity application... and risking going over the 60 day limit. The client is also limited to just one Rollover per year vs. as many Transfers as they want.

I also do not think they will accept just signing over the check to them, I could be wrong though.

 

[jmhalvo]

I came across a client who had a retirement account with LPL financial, he very recently decided to sell off and close the account because he felt like his advisor lied to him and requested a check to be mailed directly to him with no tax withholding at all. I'm trying to move the funds to a Qualified FIA since it's less then 60 days by having him endorsing the check directly to the annuity when he receives it. No past experience with the 60 day rule or a indirect transfer such as this. What would be different from a regular 1035 exchange between the companies directly? The check was already issued and mailed. Thanks

he cashes it then starts his new IRA within 60 days. It is NOT a transfer. But it will work just fine as a rollover with a new check.

 

[SWM]

The new IRA custodian will send IRS form 5498 to the IRS showing date of receipt of the qualified funds. New custodian must receive funds within the 60 day window.

 

[scmb]

Great. Thanks for the help

 

[SanDiego619]

I may be late to the ball game on this one but depending on the carrier you plan on using for the policy you may not need to go through the trouble of starting a new IRA. I just worked on a case the other day with Great American and all the agent had to tell the client was to endorse the check to Great Amer. "payable to Great American Life" with the client sig on the back. May have already done the other route but call your FMO next time and make them call the carrier

Oh and of course still just a roll-over

 

[scagnt83]

I may be late to the ball game on this one but depending on the carrier you plan on using for the policy you may not need to go through the trouble of starting a new IRA. I just worked on a case the other day with Great American and all the agent had to tell the client was to endorse the check to Great Amer. "payable to Great American Life" with the client sig on the back. May have already done the other route but call your FMO next time and make them call the carrier

Oh and of course still just a roll-over

I never knew that you could just endorse the check over like that for an IRA. Im guessing it is probably company specific as to who lets you do that?


Technically you do not start a "new IRA" with a rollover. (other than the new IRA for the new product)
You can take the check from the old company, deposit it in your normal bank account, and then cut a new check for the same amount to the new company. You have 60 days to get it into an IRA again.


Its been a very long time since Ive done a Rollover. There usually are few reasons to not do a Transfer.

 

[SanDiego619]

I never knew that you could just endorse the check over like that for an IRA. Im guessing it is probably company specific as to who lets you do that? Technically you do not start a "new IRA" with a rollover. (other than the new IRA for the new product) You can take the check from the old company, deposit it in your normal bank account, and then cut a new check for the same amount to the new company. You have 60 days to get it into an IRA again. Its been a very long time since Ive done a Rollover. There usually are few reasons to not do a Transfer.

Definitely another case by case. You would think everyone would have the same set of rules/guidelines. Haha nope! Just like how some carries (only know one off top of my head) that allow inherited IRAs to go into an income rider product and most don't.

 

[scagnt83]

You would think everyone would have the same set of rules/guidelines. Haha nope! .

That would be too logical!! lol