Contributions that bypass IRA trustee and go directly to mutual funds

[Guest T Hoffman]

Is it permissible to have IRA account holders make contribution checks out directly to their existing IRA accounts in the underlying mutual fund or annuity contract and thus bypass the trustee of the IRA?

[Kathy]

Probably not - Is it an IRA contribution if the trustee (who is supposed to purchase the assets and hold them at the direction of the investor) doesn't know about it or report it? However, there are situations where the mutual fund family is set up to capture any contribution and distribution info. and provide it to the trustee for reporting if it is that mutual fund family's IRA. So, are you trying to bypass the trustee for some reason (avoiding fees?) or are you concerned because someone has written a contribution check to the mutual fund rather than their trustee (which is how it works with our funds)?

[Guest T Hoffman]

The concern is that the checks are going directly to the mutual funds and insurance companies. Will that fact cause any problems (such as those contributions being treated as non-IRA amounts)?

[John Olsen]

I don't see the problem. I have an IRA with Oppenheimer, and my checks are sent to them, payable to "Oppenheimer Funds".

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John L. Olsen, CLU, ChFC

Olsen Financial Group

St. Louis, MO

[John G]

You need to clarify your Q. Is the trustee someone other than the mutual fund or fund family? If so, then you probably want to channel $$ through the trustee. You also could just set up a new separate mutual fund for an IRA. No limit on the number of IRAs or mutual funds other than the practical matter of keeping records and making decisions when things get too fragmented. If you designate funds as IRA money on the check and with the appropriate cover letter, all you need to do is make sure they actually do what you requested.

[Guest T Hoffman]

Yes, the trustee is someone other than the mutual fund manager or insurance company that is investing the money. Everyone intends that all contributions be considered part of a single IRA under this one trustee, but contributions have been made directly to the mutual fund and/or insurance company. How important is the actual payee designation on contribution checks? I am issue spotting and need some guidance on possible problems.