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Getting an IRA back from a state's Office of Unclaimed or Abandoned Property


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#1 frisk455

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Posted 23 September 2003 - 10:41 AM

Has anyone had experience with getting an IRA back from a state's Office of Unclaimed or Abandoned Property?

If so, did the state take taxes out before giving you the money?

What was your experience generally?

Thanks

#2 JAMES PATRICK

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Posted 23 September 2003 - 04:49 PM

I don't know which state you are reffering to and don't know why they would take out taxes. Abandoned property is claimed by the state when the account owner has been "lost" by the custodian and they hold the funds to "insure" they are NOT taken by unethical individuals or institutions. When the original owner appears to collect their monies the state generally reduces the amount of your funds by any advertising expenses which were incurred to "locate" you.
I don't see any reason for taxes because this is a return of your Principal, income taxes would only be due on any interest you are paid for the time the funds were held (and added to your balance).
It has been over 15 years since I dealt with A/P from New York but doubt the rules have changed that much.

#3 frisk455

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Posted 24 September 2003 - 01:22 PM

My point was if the IRA reached the mandatory distribution date and no distribution was made did the holder of the IRA take out the penalty before reporting the funds to the state or was the state responsible for the the penalty.

Is a holder required to withhold from retirement plan funds and report the withholding on Form 1099R before turning the funds over as Unclaimed Funds or is the state responsible for that when it is claimed?

#4 JAMES PATRICK

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Posted 25 September 2003 - 10:50 PM

The holder has NO idea on whether or not an individual would owe that penlty and does not have the authority do so.

#5 GBurns

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Posted 02 October 2003 - 12:20 AM

Why would this IRA have been turned over to the State in the first place? Why would anything have benn reported to the State?
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#6 mbozek

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Posted 02 October 2003 - 09:10 AM

GB: State unclaimed property laws require that property in which there has been no activity by the owner(such as deposits or withdrawals) over a period of time (usually three years) is deemed abandoned and must be transferred to a state agency such as the controller as custodian until the owner comes forward to claim the property. The unclaimed property laws apply to property being held by banks, brokerages and insurance companies duing business in the state. Financial institutions are periodically audited by state regulators to see if abandoned property is being turned over to the state. IRAs are not covered by the non alienation rules of ERISA which preempt state unclaimed property laws.
mjb

#7 frisk455

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Posted 02 October 2003 - 01:13 PM

I don't think that ERISA rules supercede state laws in regards to IRAs. If that were the case why does just about every state have a statute that covers IRAs.