USING FUNDS FROM AN EXISTING IRA TO FUND YOUR SELF-DIRECTED RETIREMENT PLAN

Published on June 5, 2018

Have an existing IRA?

You can transfer funds from there to open and fund a new self-directed IRA at Next Generation.
Here’s how:

A common question we get from our clients is whether they can transfer funds from an existing IRA into a new self-directed IRA. The simple answer is “yes.” However, note that you can only transfer funds between like accounts (Traditional IRA to Traditional IRA, Roth IRA to Roth IRA, etc.).

Here’s what you need to know about transferring funds between retirement accounts at Next Generation.

Transfer vs. rollover. There are some key differences between these two ways to fund an IRA.

• A transfer must be initiated by a financial institution while a rollover is initiated by the account holder.
• Unlike a rollover, a funds transfer is not reported to the IRS and is not a taxable event; it can be done as often as you like every year (rollovers are limited).

Paperwork

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Once you’ve opened your new Next Generation IRA, and any time you wish to fund an existing one, complete a transfer form, available on our website under Client Forms and included with the initial account application. This form must be accompanied by a current account statement from the other IRA custodian so that we can confirm the following:

1. a) the funds are being transferred from the same account type,
2. the requested transfer amounts are available, and
3. the account and routing numbers for a successful transaction

Be sure to check with your current custodian regarding their transfer requirements. Some require our form to be medallion guaranteed, which the account holder must obtain by a banking institution (most local banks can accommodate). Some do not need a medallion guarantee, but require the account holder’s original signature on the form with a hard copy mailed to their office. Others are more lenient and will accept the form via fax, with no medallion guarantee needed.

If you are unsure of how to obtain your custodian’s transfer requirements, our office can help.

Transfer options

You can make a complete or partial transfer of funds and/or an asset in kind.

• Funds – funds must be liquidated prior to the transfer. Since we are not a broker dealer, we can only accept non-publicly traded assets (cash or other alternative assets).
• Assets in kind – this type of transfer will require additional registration documentation, depending on the asset type.

Initiating the transfer

Upon receiving the transfer form and account statement, Next Generation signs the form as the administrator for the accepting custodian (Next Generation Trust Company) and initiates the transfer accordingly.
Our team will contact the current custodian for you and provide funding instructions to ensure the transaction is recognized by the IRS as a non-taxable transfer. Note that if you mail our transfer form directly to the current custodian, thinking this will expedite the process, it will actually cause delays because the transaction—initiated by the individual and not the institution—may be considered a rollover (and a taxable event). Next Generation must initiate the transfer in order to avoid that confusion.

Turnaround times.

Next Generation maintains a historical reference sheet of our prior custodian experiences that provides us with estimated turnaround times, general transfer requirements, and other matters. We always do our best to coordinate fund transfers with resigning custodians in the most expeditious manner possible. Here are some ways our clients can avoid funding delays.

• Next Generation’s form reserves a space for a Medallion Guarantee Stamp, which is like a notary stamp between financial institutions. Contact your current custodian to find out whether this is required or not. If required, the form must be signed in the presence of an authorized agent and the original form mailed to our office.
• Many custodians do not require originals and even accept requests by fax. Please determine whether originals are required; if faxes are accepted, confirm a fax number to which the form can be forwarded.
• The contact information we receive is often for a specific branch or office of the other custodian and not the actual transfer processor. If mailing the transfer request is selected, please confirm we have the correct mailing instruction.
• Recently, some custodians discontinued the practice of wiring funds out. If time is a factor, find out if expedited options—such as express delivery of a bank check— is doable with the custodian.

As with all matters connected to your self-directed retirement plan, please call our office at 1-888-857-8058 to discuss your questions about Next Generation’s transfer form or other transfer-related issues. We’re here to help!