When clients change jobs, they often must make decisions with regard to accumulated balances in employer-sponsored qualified plans, such as 401(k) accounts. In many cases, the employee leaving a position will want to take personal control of the money, and also minimize any income taxes associated with the qualified plan money.
If a client starts a new job, sometimes the new employer will offer options for participating in another qualified plan. The new plan may allow transfers of other qualified balances into it. The client will want to know the tax and practical consequences of making a transfer.
Other clients with substantial IRA balances may be interested in moving their accounts to different IRA fiduciaries, or possibly to their employer-sponsored pension plans. Still others with IRAs may want to split those accounts between administrators for tax or practical reasons.
When an IRA or pension participant dies, the account beneficiary may want to transfer any benefits to which he or she is entitled to another vehicle under the beneficiary’s control.
Clients will need our help to understand how they can make transfers of qualified accounts to another account on an income tax free basis. Tax free transfers might be made by trustee-to-trustee transfer, direct rollover or 60-day rollover.
Clients will want to know:
- Does the account they’re starting with qualify for a tax free transfer to another qualified account?
- Is the vehicle into which they intend to transfer a qualified plan balance one that can accept a tax free transfer?
- What administrative procedures need to be followed to accomplish the transfer?
- What special considerations need to be evaluated to help determine whether the proposed transfer makes sense?
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