Can an IRA Used For College By Rolled Over to a Traditional IRA?

Thursday, May 29, 2014

By Joe Cicchinelli, IRA Technical Expert

Follow Me on Twitter: @JoeCiccEdSlott

This week’s Slott Report Mailbag talks about an “educational” IRA (a popular topic during graduation season), how to value non-spouse inherited IRAs and whether a retired individual can go through with a Roth conversion. As always, we stress the importance of working with a competent, educated financial advisor to keep your retirement nest egg safe and secure. Find one in your area at this link.

1.

Good afternoon Mr. Slott and Company,

My sister has an “educational” IRA that still has a balance after she graduated from college. She is looking to roll it over to a Traditional IRA. Is this a qualified rollover request or could there be tax and penalties for performing this transaction?

Thanks,

Prescott

Answer:
Funds from an “educational” IRA (now called Coverdell Education Savings Accounts) cannot be rolled over or transferred into an IRA.

2.

Would the value of a non-spouse inherited IRA be included in the aggregation of all of your traditional, SEP and SIMPLE IRAs on Line 6 of Form 8606? What about for a non-spouse inherited Roth IRA?

Beth

Answer:
For purposes of tracking basis (after-tax funds), any non-spouse inherited IRAs are handled separately from your own IRAs on a separate Form 8606. Also, non-spouse inherited IRAs are handled separately from non-spouse inherited Roth IRAs and your own IRAs.

3.

Mr. Slott,

My name is John and I am 75 years old. I have been retired since 2000 at age 62 and have no earned income. I noticed in AARP magazine an article about converting an IRA to a Roth IRA. I currently have both, but would like to know if I’m eligible for a conversion so everything is in a Roth.

Thank you,

John Glass

Answer:
You are eligible to convert your IRA to a Roth IRA. The conversion will be taxable. However, because you are older than age 70 ½, any required minimum distribution from your IRA must be taken first and is NOT eligible to be converted. The remaining IRA balance is eligible for conversion.
 

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