Fee Debit

Submitted by Jason Hochstadt on Wed, 2024-10-02 14:40

Hello,

I just want to confirm that if a client has at least 1 Non-IRA and at least 1 IRA, for fee billing/debiting purposes:

A. May the fee for the Non-IRA be debited from the IRA?

B. May the fee for the IRA be debited from the Non-IRA?

I believe one of the above (A) would be considered a prohibited transaction, but just want to confirm.  Depending on the Acct. values, holdings and underlying portfolios, sometimes it’s not easy to debit from each (let alone a pro-rata portion) in a given quarter.

Thank you!

Jason



Submitted by Alan - IRA critic on Wed, 2024-10-02 16:21

A)  No, as that would constitute a prohibited transaction as you indicated. The fee for a Roth IRA also cannot be debited from a non Roth IRA.

B)  Yes. And that would usually be preferable for a Roth IRA fee, but not beneficial for a pre tax IRA fee.

Submitted by Jason Hochstadt on Wed, 2024-10-02 16:57

Thx, Alan!

 

Submitted by Jason Hochstadt on Wed, 2024-10-02 17:02

So if I do a matrix:

Acct. Type                                                        Fee Debit Availability from Acct.

1. Non-IRA                                                                     Non-IRA only [1 option]

2. Traditional (or Rollover Trad. IRA)                     Traditional (or Rollover Traditional) IRA; OR Non-IRA [2 options]

3. Roth (or Roth Conversion) IRA                            Roth (or Roth Conversion) IRA [1 option]

Does the IRS ever investigate this?  Seems as if this is not something they are equipped/capable of auditing whatsoever.  The annoying thing is the Accts. and portfolio may own holdings designed to maximize the mgt. of the portfolio, which may not leave much $ in a given Acct. even if in a different Acct. type – yet, one is constrained in this regard given the above.

Jason

Submitted by Alan - IRA critic on Wed, 2024-10-02 17:45

The fee for a Roth IRA can either be debited from the Roth IRA or paid from taxable accounts, but the latter option is preferable to preserve more dollars in the Roth IRA.

The IRS and IRA custodians have so far paid little attention to the source of fee payments, but with increased staffing this could change at anytime and become a problem.

Submitted by Jason Hochstadt on Thu, 2024-10-03 10:00

One last one, Alan (I think – LOL) – Can the fee for a Roth IRA be debited from a Traditional (or Rollover) IRA?

Thank you!

Jason

Submitted by Alan - IRA critic on Thu, 2024-10-03 11:02

No. Would be nice if that was allowed, but it’s not.

Roth IRA fees are best paid from taxable funds outside of any IRA to preserve the Roth balance but can also be debited from the Roth IRA.

Add new comment

Log in or register to post comments