72T Rules/Laws
I have 2 accounts with Meryll Lynch. I just made 56. One is the IRA which I draw $24,000/year as per 72T till I’m 60. The other is a variable annuity which has a value of $380,000. The one I draw from is about $85,000. Both fluctuate of course with the markets. Merryl Lynch have both accounts linked together as 72t. I am wanting to surrender my annuity. I want to take $250,000 of that and buy a fixed annuity with North American. Leave the remainder with Merryl Lynch which would be approximately $120,000 plus and the 85,000 with Merryl Lynch continuing my 72T. Merryl Lynch is stating I can’t do that. Is that true? They say the accounts are linked and I can’t split them up because the 72T is with them. Merryl Lynch is saying I would have to move it all. I don’t understand that because my tax returns would show that I am still taking 24,000/year. Merryl Lynch states that the 24000/year is 5% of the total assets with them at the time when I started and that can’t be split up.
Thank you
Permalink Submitted by Alan - IRA critic on Fri, 2023-01-27 16:14
What ML is telling you is incorrect, but this post is very similar to another posted under a different name. That said, a 72t plan is between you and the IRS. What you want to do is somewhat risky but ML cannot stop you from transferring these accounts to another custodian if you wish. Distributions are probably being coded 1 (early) on the 1099R forms and you must then file a 5329 to claim the 72t exception anyway. Personally, I would advise against doing this because a 72t plan structure should be as simpler as possible to avoid IRS scrutiny. That said, if no mistakes are made with this transfer, the IRS would most likely still consider your plan valid. If you want to use annuities for your 72t plan, it is best to complete the transfers before starting your plan, and then leave that stucture alone until the plan ends.
Permalink Submitted by Richard Lobre on Fri, 2023-01-27 19:55
Thank you for the reply.