72T
If a 72t is set up in an IRA and I am transferring this IRA to another custodian what happens if not all the assets transfer at the time of the 72t withdrawal?
Thank you…What if we transfer the IRA funds from one custodian to another and the monthly 72t withdrawl is missed during transit? Can it be made up? It was my understanding once the 72t is set up nothing can be changed.
Plenty of things can be changed without a problem. Your investments can be bought and sold, your annual distributions can be done at different times from year to year and in a different pattern, such as monthly one year and a full annual the next. If you do more than one direct transfer to move the account to a new custodian, you can take your distributions from either the first account or the second in any combination, but the total distributed must be correct. While it attracts less attention to just have one 1099R form, if you transfer the account before completing the 72t distribution, you have no choice but to complete the 72t amount from the second account.
Permalink Submitted by Alan - IRA critic on Tue, 2019-04-23 19:30
The IRS will normally just expect the 1099R totals to equal the 72t calculation. Since the IRS has busted a couple plans for partial transfers, if the first IRA is being transferred at different times to a new custodian, the entire account balance should be transferred before the end of the year by direct transfers which are not reportable on a 1099R and also avoid the one rollover limitation. To avoid attracting too much attention from the IRS, it would be preferable to have the entire distribution done from just ONE of these accounts so there is only one 1099R. However, depending on the timing of the transfers and the 72t distribution, it may be necessary to complete the distribution from a combination of both accounts, producing two 1099R forms. This shouldn’t be a problem, but has the potential to attact IRS attention to the plan.