Transfer in kind of bond from inherited IRA to Ira
My financial advisor says I can sell a bond to meet RMD for my inherited IRA, and “transfer in kind”, purchase with my own IRA funds. Is this legitimate? How does it work? Thank you!
My financial advisor says I can sell a bond to meet RMD for my inherited IRA, and “transfer in kind”, purchase with my own IRA funds. Is this legitimate? How does it work? Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2018-09-04 17:42
Your inherited IRA RMD can be satisfied by either distributing the bond in kind or more typically by selling it in the inherited IRA and distributing cash. You can then purchase more shares of the same bond in your own IRA if you wish. You cannot directly sell distributed bonds to your IRA as that is self dealing and a prohibited transactions. However, if you purchase the bond through an exchange on the open market and end up with the same bond because it is thinly traded, that would be OK as an arms length transaction.
Permalink Submitted by ellen dawmdellipizzi on Tue, 2018-09-11 09:16
Can I distribute the bond into my own brokerage account? Is this what is called a “transfer in kind”? Please explain the exact way to do this? It’s a first-time for me. Thanks!
Permalink Submitted by Alan - IRA critic on Tue, 2018-09-11 16:36
Yes, you can distribute any of the inherited IRA holdings in kind to your taxable brokerage account. If both accounts are at the same firm, you can probably do this on line. Note that when you request the transfer, you will not have control of the value at the time the custodian actually makes the transfer, so you will have to either transfer a few extra shares and exceed your RMD somewhat, or undershoot on the number of shares, then after that transaction is completed, make up the difference in cash as a second transfer. In other words, it takes some extra work if you want to hit your RMD amount on the nose by transferring holdings other than cash.