Trustee to Trustee IRA transfer

Submitted by Manuel Valdes on Thu, 2021-03-18 02:10

My wife recently executed a Trustee to Trustee IRA transfer of her Traditional IRA from one institution to another. However, we noticed that the receiving institution wound classifying the new (receiving) account as a “rollover” IRA instead of designating it a “Traditional” IRA, which was as classified at the sending institution. I’ve researched several sources, including the irahelp web site, but have not found any discussion on the topic. It does not appear there is a fundemental difference between the IRA designations (“rollover” vs. “traditional”) but would appreciate advise on the subject. Should we ask the new financial institution to correct the error in account designation?



Submitted by Alan - IRA critic on Thu, 2021-03-18 03:48

If this transfer was to a newly opened IRA, there’s a question why the custodian flagged it as a “rollover IRA”. “Rollover” is an adjective added to a traditional IRA that reflects the origin as a qualified plan. It should not be used merely for a rollover or transfer from another IRA account. The “rollover” term used to reflect the ability for that IRA to be returned to an employer plan, but since 2001 an employer plan can accept rollovers from any IRA, but some still limit these rollovers to “rollover” IRA. In some states, the term can also indicate potential creditor protection of the IRA. There is no downside from this “rollover” flag on her account, and therefore no particular reason to insist that it be changed. Many custodians make no effort to determine if a given account actually is a rollover IRA or not. Finally, note that the flag alone does not make an IRA a rollover IRA. That depends on the actual facts and circumstances of how the account was funded. There are many accounts around with the flag that are not truly rollover IRAs, and your wife now appears to own one of them. It might be interesting to find out exactly how the custodian decided to flag the account as a rollover.

Submitted by William Tuttle on Thu, 2021-03-18 16:56

Some custodians do not allow any contributions to “Rollover IRAs”, except for additional rollover contributions from employer plans.
This is a good thing, because if you commingle with any other contributions. Some (the number is getting smaller each year) qualified plans will only accept a rollover from a “pure” Rollover IRA with no commingled assets. Also, commingled Rollover IRA accounts may not receive federal and state asset protection.
It is usually fairly easy to determine if this is the case. Go to your online account at the custodian and select the option to make a contribution. If your allowed contributions are $0, it is most likely a Rollover IRA.

Submitted by Nelie Cruz on Wed, 2024-08-14 12:29

I have several IRA accounts. One with Bank A, another with Investment Company X and another with Investment Company Y. They are all traditional IRA’s. I am thinking of consolidating and I would like to transfer my IRA with Bank A to Investment Company X. I have a 72T Plan with Investment Company Y that started in March 2022 and will end in March 2027.

My questions or concerns are: Should I wait for my 72T Plan with Investment Company Y to end in March 2027 before I do the transfer of my IRA with Bank A to Investment Company X? Or I can do it anytime since the transfer will not involve the Investment Company Y from where I have my 72T Plan? I worry that it might trigger an audit of all of my IRA’s  if I do a transfer while my 72T Plan is ongoing. Do you think it will trigger an audit if I do the transfer?

I understand that since it is a Trustee to Trustee transfer, this transaction will not be taxable, though  I will receive a 1099R and a 5498 form, is this correct?

I am looking forward to your prompt reply. Thank you and have a great day!

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