IRA rollover vs Direct Transfer vs Direct 401k Rollover Which is More Advantageous
intro music Hi, my name is Terry White, CEO of Sunwest Trust. Today is Tuesday at two o’clock. Last week, and for the last couple of weeks, we’ve been talking about freedom freedom to invest in things other than stocks, bonds and mutual funds and then last week we talked about freedom to move your retirement account. So we’re going along with that same idea, freedom to move your account We’re going to talk about how you move your account.
Everybody talks about moving their account, and typically uses the word rollover quot;I want to roll my account over to you guys.quot; So I want to explain the difference between a rollover and a transfer because there’s a very distinct difference and it’s a very important difference Number one is the transfer Now transfer is when you move your IRA account from an existing custodian to another custodian. And that’s a transfer; the money never comes to you individually.
It just goes from one IRA to another IRA and that does not get reported to the IRS, because you never actually had receipt of the money. So there’s no taxable event in a transfer. Now, the word that most people use is rollover, and that means something very specific. A rollover is if you go to your existing custodian and you say quot;I’d like to have a check for $50,000 out of my account.quot;.
They’re going to write a check to you personally. Then, no matter what you do with that check if you put it in your checking account and then you turn around later and write a check to Sunwest Trust to roll the money over into Sunwest Trust into another IRA or whether you just take the check from whatever custodian you’re with, And you bring it to Sunwest Trust and you endorse the back of it, no matter what the old custodian is going to send you a 1099.
And they’re going to report that as a distribution to you And then what happens is when you come to Sunwest Trust we’re going to have you sign a rollover certification which basically says you haven’t had that money more than 60 days And in that event then we’ll do the rollover certification the money will be rolled over into your IRA at Sunwest Trust and you’ll report it to the IRS as a rollover Line 15 and 15a on your 1040 will say how much was the distribution.
And how much of it was taxable I’m not really sure about the line numbers so you need to have your tax person look at it So basically I took fifty thousand out of my IRA and by the way I put it into an IRA at another institution And I did all that within less then 60 days Recently, up until sometime this year, there was an IRS decision that you can only do that once a year per taxpayer.
Prior to that it was once a year per IRA account But the IRS decided that no, you can only do one rollover Not even per calendar year, it’s per twelve month period So if I do a rollover in October of 2014, I cannot do another rollover until November of 2015 I can’t do one in January, even though we’re now in the year 2016, it has to be only one within a twelve month period. I hope that answers those two questions.
Choosing a Beneficiary for your Self Directed IRA Primary and Contingent
Choosing a Beneficiary for your IRA Today we’re going to talk about beneficiaries, and I just thought maybe the first thing to do would be to go all the way back to the basics, and explain what a beneficiary is. And what a beneficiary is, is when you set up a selfdirected IRA account, you’re going to be asked on the first page of the application, to write who your beneficiaries are.
And that is the person that is going to inherit this account when you pass away. So, you have what are called primary beneficiaries, which are the first ones in line, then you have contingent beneficiaries, which, that means, if your primary beneficiaries pass away, before you do, and you don’t change, make new primary beneficiaries, it’ll go to the contingent beneficiaries, or if a beneficiary, primary beneficiary, chooses not,.
That they don’t want the inheritance, they can allow that to pass them, and go on to the contingent beneficiaries. So, it’s just the person that’s going to receive your IRA account when you pass away. And, so, what I’ve said before, many times, is be sure that your beneficiary knows that they are the beneficiary, and they talked about that before, so I think that’s very important. On the first page of your application, you’ll see down on the left side,.
Near the bottom, there’s space for three people to be put in as beneficiaries. And to the left of that, there’s a little circle that says ‘primary’, or ‘contingent’. So, you would check whichever box you need, and at least one primary beneficiary; so that your account will go to that person, a hundred percent. If you don’t have a beneficiary, then your account ends up going to your estate, and there are maybe some other issues with that,.
That you need to talk to a lawyer about. We ask for the name of the beneficiary, the address of the beneficiary, city, state, zip, their social security number, which is very important for us, because we’ll have to do some filing and stuff when they take over the account. We need their date of birth, because they will then, they’ll have various opportunities on how they take the accounts, we talked about that before, they could take it over a lifetime if they’re a spouse beneficiary,.
Then they could treat it as their own account, if they’re not a spouse beneficiary, they could take it all at once, they could take it over five years, they could take it over their lifetime. So, the other two important things is, we ask you the relationship; we’d like to know what that is, so we know who we’re dealing with, and it doesn’t have to be a family member, but many times it is. It’s important that if it’s not a spouse, then there’s a place on the righthand side of the form at the bottom,.
Where the spouse has to sign, acknowledging that they know they’re not the beneficiary. A situation there might be, if I wanted to, for whatever reason, not leave my IRA to wife, but I wanted to leave it to my three boys, then I would have to have my wife sign this form, acknowledging that she knew that’s what we had done. Another very important thing is, at the bottom of the information that you have provided for each beneficiary,.