Permalink Submitted by Alan - IRA critic on Tue, 2018-12-18 19:21
No, you cannot make an IRA contribution starting in the year you reach 70.5. In other words, when your first RMD year arrives, you can no longer contribute to the IRA. If you are thinking about making an intentional excess IRA contribution, your custodian would probably not accept it as they know your age. But if you somehow made the excess contribution anyway, withdrawing it cannot satisfy both your RMD and removal of the excess contribution. So if you withdrew this contribution such that the custodian did not code it as an excess removal on the 1099R, it would count toward your RMD, but would leave you with an excess contribution subject to the 6% excise tax each year. In addition the excess contribution would increase your RMD for the following year. Therefore, contributing to the IRA by creating an intentional excess contribution is not a solution, even if the custodian accepted the contribution. If you foresee a chance to sell the investment soon, for example by 2020, you could take a chance and NOT take your RMD, planning to make up the late RMDs as soon as the investment is sold and filing Form 5329 requesting that the penalty be waived for reasonable cause (illiquid investment). The IRS would probably waive the penalty if you made up the late RMDs before the IRS notified you first, but this also is risky. Don’t know what type of investment this is, but the custodian has the obligation of reporting to the IRS the value of it as of the end of each year. That value is used to determine your RMD amount in the first place. If the custodian contacts you to send them information (possibly pay for an appraisal if this is real estate), you are obligated to cooperate with them. If the investment is with a self directed IRA custodian, you may want to call them to see if a partial distribution to a taxable account can be done, as that would satisfy your RMD as indicated earlier, but would also produce new complications.
Permalink Submitted by Alan - IRA critic on Wed, 2018-12-19 18:33
If you convert the account to a Roth IRA, you must first distribute your TIRA RMD. Then you could convert the remainder of the TIRA balance and would owe tax on both the RMD and the conversion of the remainder. A small portion of the policy would be in a taxable account and the rest in your Roth IRA, but I do not know if the insurer would agree to split the policy into segments. You would have to ask the insurer that question.
Permalink Submitted by Alan - IRA critic on Tue, 2018-12-18 19:21
No, you cannot make an IRA contribution starting in the year you reach 70.5. In other words, when your first RMD year arrives, you can no longer contribute to the IRA. If you are thinking about making an intentional excess IRA contribution, your custodian would probably not accept it as they know your age. But if you somehow made the excess contribution anyway, withdrawing it cannot satisfy both your RMD and removal of the excess contribution. So if you withdrew this contribution such that the custodian did not code it as an excess removal on the 1099R, it would count toward your RMD, but would leave you with an excess contribution subject to the 6% excise tax each year. In addition the excess contribution would increase your RMD for the following year. Therefore, contributing to the IRA by creating an intentional excess contribution is not a solution, even if the custodian accepted the contribution. If you foresee a chance to sell the investment soon, for example by 2020, you could take a chance and NOT take your RMD, planning to make up the late RMDs as soon as the investment is sold and filing Form 5329 requesting that the penalty be waived for reasonable cause (illiquid investment). The IRS would probably waive the penalty if you made up the late RMDs before the IRS notified you first, but this also is risky. Don’t know what type of investment this is, but the custodian has the obligation of reporting to the IRS the value of it as of the end of each year. That value is used to determine your RMD amount in the first place. If the custodian contacts you to send them information (possibly pay for an appraisal if this is real estate), you are obligated to cooperate with them. If the investment is with a self directed IRA custodian, you may want to call them to see if a partial distribution to a taxable account can be done, as that would satisfy your RMD as indicated earlier, but would also produce new complications.
Permalink Submitted by Ron Ziegenfuss on Wed, 2018-12-19 14:07
My Illiquid IRA is life settlements (SRPLS -200) life insurance policies.can I turn them over to a roth ira and just pay first rollover RMD
Permalink Submitted by Alan - IRA critic on Wed, 2018-12-19 18:33
If you convert the account to a Roth IRA, you must first distribute your TIRA RMD. Then you could convert the remainder of the TIRA balance and would owe tax on both the RMD and the conversion of the remainder. A small portion of the policy would be in a taxable account and the rest in your Roth IRA, but I do not know if the insurer would agree to split the policy into segments. You would have to ask the insurer that question.