"Direct Rollovers" | Ed Slott and Company, LLC

"Direct Rollovers"

I am wondering if a "direct rollover" can be performed IRA to IRA by making a check payable to the new trustee and sending it to the client, the way it can with a QRP to an IRA. Does anyone know if IRA custodians do this if the client wants to avoid using there 60-day rollover but the recieving custodian won't take wire transfers?

Yes, this will work with IRA distributions as it does with QRP direct rollovers. The key is that the check cannot be cashed by the IRA owner, only by the succeeding IRA custodian FBO owner's new IRA account. In doing this, special effort should be expended to make sure the info provided to the former custodian is correct, and to get confirmation that the old custodian will not report the distribution on a 1099R, but consider it a direct transfer.

Thanks Alan!

Your question is about an IRA to IRA transfer, as there are no "direct rollovers" from an IRA to another IRA. A wire transfer does not equate to a "transfer" as well. Just because an IRA custodian will not send a transfer by wire, or an IRA custodian will not accept a transfer by wire, does not mean that you have no other transfer options that are much better than what you are planning to do. Although it would be within the guidelines of what the IRS would consider a non-reportable transfer to simply have a check made payable to the successor IRA custodian or trustee, it is a method that leaves room for too many possible mistakes and I would never advise that a transfer be completed this way. The safest way to complete a transfer is to approach the financial institution that will receive the funds and have them send a transfer request to the financial institution that currently holds the IRA. They can then send an official check to the receiving IRA custodian and there will be no question that this was an IRA to IRA Transfer. In fact, the policy of one or both of the financial institutions may very well require that the transfer be completed this way only.

urusei; The custodian is writing cash only apps to limit premium, therefore they won't send out transfer paperwork. To move the assets from IRA to their IRA, we could use th 60-day option, but thats where I was wondering if making the check payable to the new custodian FBO "client" would forgo having to use the 60-day option and be considered a direct transfer, while still being accepted by the new custodian..

Understandable, I would make sure that the receiving IRA custodian is aware that you will be sending them a non-reportable IRA transfer in this way. It would be helpful if the financial institution sending the IRA Transfer also send a note explaining that the check represents a non-reportable transfer of funds to their financial institution.

Thank you!
 

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