Deducting Investment Mgt Fees from Roth IRA
I’ve got a unique client situation where the client has two accounts under management; a traditional IRA and a Roth IRA. The traditional IRA only holds company stock (rolled over from a 401k) and the client does not want to sell the position at this time. Is it permissible to have funds withdrawn from a Roth IRA to pay the management fees for a traditional IRA? I know with a traditional IRA you can’t pay the investment management fees of other accounts without the withdrawal being considered as a taxable distribution, but what about the Roth since the withdrawal would not be taxable anyway (account was opened over 5 years ago and owner is over age 59 1/2)?
Obviously the best course of action in this case would be to have the owner just pay the investment management fees for the traditional IRA with outside funds and not from the Roth IRA. Just wasn’t sure if paying the investment management fees for the traditional IRA from the Roth IRA was even an option, even though there are better options. If anyone has anything concrete to pass along on this issue, please let me know.
Thanks
Permalink Submitted by Alan - IRA critic on Fri, 2014-02-14 16:14
If fees are withdrawn from the IRAs, they should be pro rated based on the balances in the IRAs. For a client in or nearing retirement, usually the best option is to have the TIRA portion of the fees deducted from the account as this amounts to pre tax payments of the fees. Since the Roth is qualified, for that portion the fees should be paid from outside funds. It would seem that the fees should not be high enough to cause the TIRA stock sales to be more than just a minor portion of the shares and probably better for diversification, but if client has his mind made up, he needs to pay the TIRA portion from outside funds. While unlikely,if he can itemize he might have a misc itemized deduction for fee payment from outside funds.