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Self-directed conversion (plan to IRA)


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Never had a plan do this before, but plan allows for in-kind distributions.  Any particular issues out there for self directed brokerage accounts that would like to basically rename their plan as an IRA and treat the value on that date as the direct rollover?

 

(Edit a few days later:  aw fiddlebeans, another terminology error on my part - I meant to type 'trust', not 'plan' in the phrase 'rename their trust'.)

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2 hours ago, QDROphile said:

Your description is unconventional, so a bit confusing.  A distribution event is necessary, but I presumed that.

TPApril, it is so unconventional that I will reiterate QDROphile's comment. You can't rename a qualified plan into an IRA. You are presumably terminating the 401(a) and distributing the property from it. The custodian (obviously, line up a willing custodian in advance if you have not already done that) will then take a trustee-to-trustee transfer of the property. The distributing plan will issue a 1099-R, the IRA a 5498. 

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Thank you (again with embarrassment) for setting me straight.  I really meant to separate the 'trust' from the 'plan'.

Owner of this one-person plan 'simply' wants to convert his trust account at his brokerage without formally selling all assets, distributing/rolling over into an IRA and then rebuying everything.  I've just never been involved in such a transaction.

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On 6/20/2022 at 9:31 PM, Bill Presson said:

Correct. Just be sure the plan document allows an "in-kind" transfer.

Going off-topic, sort of, but back in the days when we submitted for favorable letters on termination, we had checked on the 5310 that there would be in-kind transfers. This got the IRS' attention and they asked exactly what would be transferred. I told them mutual funds and securities, and they said "oh we don't consider that an in-kind transfer" or words to that effect. I said, "um, okaaaay" and moved on.

Ed Snyder

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22 hours ago, Bird said:

Going off-topic, sort of, but back in the days when we submitted for favorable letters on termination, we had checked on the 5310 that there would be in-kind transfers. This got the IRS' attention and they asked exactly what would be transferred. I told them mutual funds and securities, and they said "oh we don't consider that an in-kind transfer" or words to that effect. I said, "um, okaaaay" and moved on.

Good grief.

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070
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