Why and How to Transfer a Roth IRA to a Self-Directed Roth IRA
May 30th, 2018
Individuals may generally transfer Roth IRA or rollover eligible qualified retirement plan assets into a self-directed Roth IRA LLC structure. Individuals may not rollover Roth IRA funds into a qualified retirement plan, such as a Solo 401(k) Plan or a pre-tax IRA account, such as a Traditional IRA or SEP IRA.
Roth IRA Transfers to a Self-Directed Roth IRA
A Roth IRA-to Roth IRA transfer is one of the most common methods of moving assets from one Roth IRA to another. A transfer usually occurs between two separate financial organizations, but a transfer may also occur between Roth IRAs held at the same organization. If a Roth IRA transfer is handled correctly the transfer is neither taxable nor reportable to the IRS. With a Roth IRA transfer, the Roth IRA holder directs the transfer, but does not actually receive the Roth IRA assets. Instead, the transaction in completed by the distributing and receiving financial institutions. In sum, in order for the Roth IRA transfer to be tax-free and penalty-free, the Roth IRA holder must not receive the Roth IRA funds in a transfer. Rather, the check must be made payable to the new Roth IRA custodian. Also, there is no reporting or withholding to the IRS on a Roth IRA transfer.
The retirement tax professionals at the IRA Financial Group will assist you fund your Self-Directed Roth IRA LLC by transferring your current Roth IRA funds to your new Self-Directed Roth IRA structure tax-free and penalty-free.
How the Roth IRA to Self-Directed Roth IRA Transfer Works?
Your assigned retirement tax professional will work with you to establish a new Self-Directed Roth IRA account at a new FDIC and IRS approved Roth IRA custodian. The new custodian will then, with your consent, request the transfer of your Roth IRA assets from your existing Roth IRA custodian in a tax-free and penalty-free Roth IRA transfer. Once the Roth IRA funds are either transferred by wire or check tax-free to the new Roth IRA custodian, the new custodian will be able to invest the Roth IRA assets into the new Roth IRA LLC “checkbook control” structure. Once the funds have been transferred to the new Roth IRA LLC, you, as manager of the Roth IRA LLC, you would have “checkbook control” over your retirement funds so you can make traditional as well as non-traditional investments tax-free and penalty-free.
60-Day Rollover Rule
An individual generally has sixty (60) days from receipt of the eligible rollover distribution from a Roth IRA account to roll the funds into a Self-Directed Roth IRA LLC structure. The 60-day period starts the day after the individual receives the distribution. Usually, no exceptions apply to the 60-day time period. However, in cases where the 60-day period expires on a Saturday, Sunday, or legal holiday, the individual may execute the rollover on the following business day.
An individual receiving an eligible rollover distribution may rollover the entire amount received or any portion of the amount received. The amount of the eligible rollover distribution that is not rolled over to a Roth IRA is generally included in the individual’s gross income and could be subject to a 10% early distribution penalty if the individual is under the age of 591/2.
How the 60-Day Rollover Works with a Self-Directed Roth IRA
The retirement tax professionals at the IRA Financial Group will assist you in rolling over your 60-day eligible rollover distribution to a new FDIC and IRS approved IRA custodian. Once the 60-day eligible rollover distribution has been deposited with the new Roth IRA custodian within the 60-day period, the new custodian will be able to invest the Roth IRA assets into the new Roth IRA LLC “checkbook control” structure. Once the Roth IRA funds have been transferred to the new Roth IRA LLC, you, as manager of the Roth IRA LLC, you would have “checkbook control” over your retirement funds so you can make traditional as well as non-traditional investments tax-free and penalty-free.
The retirement tax professionals at the IRA Financial Group will assist you in transferring your Roth IRA tax-free and penalty-free to a “checkbook control” self-directed Roth IRA LLC solution. Each client of the IRA Financial Group will work directly with an assigned retirement tax professional to establish the Self-Directed Roth IRA LLC solution and make sure that the self-directed IRA transaction is structured in the most tax efficient manner and is not in violation of any IRS rules.
To learn more about the Self-Directed Roth IRA transfer or direct or indirect rollover rules, please contact a tax professional at 800-472-0646.