Segregation of Roth Assets & Rechar.
An IRA owner converted assets from their traditional IRA into 3 separate Roth IRAs. They segregated “like” assets into each Roth IRA so as to preserve recharacterization options for specific asset classes rather than the assets as a whole.
Now the IRA owner has to pay fees out of one of the Roth IRAs, but does not have the cash to cover those fees (and they don’t want to sell anything). If they were to transfer cash from one of the other 2 Roth IRAs, would they be able to do so while still preserving the ability to recharacterize a specific Roth account based on asset class?
Any insight would be appreciated!
Permalink Submitted by Alan Spross on Mon, 2010-10-11 19:45
Yes, the separate recharacterization options remain. The effect of the transfer is as follows:
1) The adjusted opening balance of the receiving Roth is increased by the amount of the transfer in for purposes of the “net earnings attributed” formula
2) The adjusted closing balance of the source Roth is adjusted by increasing it by the amount transferred out.
If the transferred amount is quite small in relation to the recharacterized amount, the transfer should not change the recharacterization amount by much.
Permalink Submitted by Alanna Crawford on Mon, 2010-10-11 20:31
Very helpful- thank you!