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When Transferring an IRA, How to Transfer In-Kind Assets

How to Directly Transfer Like Assets Between Differing IRA Custodians

We receive a lot of questions about how to transfer property assets from another IRA custodian to us. This is actually a really simple process that is known as an in-kind transfer of assets.

An in-kind asset transfer is simply the transfer of assets from an existing IRA to another like IRA. As we have discussed before, you cannot assign assets that you own personally to your account. However, if you own assets in a retirement plan with another custodian, you can transfer them into your IRA with Sunwest Trust.

To do this, you will simply fill out our transfer form. Where you see “Transfer assets in-kind as listed here,” you should write a description of the assets that you would like to have transferred. If you are transferring private stock, promissory notes, or membership units in an LLC, then your previous custodian will just need to create an assignment from your IRA with them to your new IRA custodian. If you have real estate, then your previous custodian will send us all of your paperwork and we can have an attorney create deeds that will deed the property to your IRA with Sunwest Trust.

In-Kind Transfers to Your Self-directed IRA

Scenario #1

When you do a transfer from another IRA custodian, you don’t necessarily have to liquidate all of your assets before you transfer them over, with the exception of transferring from a brokerage house, where you have purchased stocks, bonds, or mutual funds. These types of assets have to be liquidated because Sunwest Trust can’t hold them. The types of assets we hold are alternative investments, such as real estate, tax liens, promissory notes, and membership units in LLCs,

Scenario #2

If, on the other hand, you already have an account with another self-directed IRA custodian and you want to transfer your account over to us, then you can do that. Let’s say, for example, you have a promissory note with your current custodian, and you want to transfer the account. First, you would complete an in-kind transfer. In-kind just means that they are going to transfer the asset as is, and it is not going to be liquidated. Your previous custodian will assign the assets to us. On our transfer form, there’s a spot for in-kind transfer. You will name the asset on the form, and your previous custodian will assign the asset from your IRA with them to your IRA with us. It’s a pretty simple process. If your IRA owns real estate, your custodian will send us the actual deeds, and you can either have an attorney you choose or we can have an attorney handle the transfer process. We will create a new deed, which would deed the property over from your previous custodian to your new IRA with us.

In-Kind Distribution Rules

The same is true when you start taking distributions from your account. You don’t necessarily have to take a distribution of cash. You can take a distribution of an asset. All you need to do is to let us know that you want to take that distribution of the asset, and let us know how much the asset is currently worth.

Scenario #1

If your IRA owns physical precious metals, you will need to let us know what the metals are worth at the time of distribution.

Scenario #2

If your IRA owns a piece of property, you will need to get a formal appraisal of the property.

You will provide that to us along with a distribution form, and we will distribute the property to you at the appraised price. On your annual 1099 issued from us, we will show the value that you told us that your asset is worth and that amount is what you will have to pay taxes on. In the case of a piece of property, we would deed the property from your IRA to you personally.

Note: You do not have to distribute the entire property all at one time to yourself. Instead, you can just take smaller chunks of the asset as well.

What about Required Minimum Distributions (RMDs) with a Self -Directed Account?

Perhaps you are wanting to satisfy your minimum distribution requirement for the year when you are over the age of 70 ½, and all you have is a piece of property in your IRA. What you can do is deed a small percentage of the investment property over to yourself. We have talked about prohibited transactions in the past, where personally you and your IRA cannot own something together; however, since you are now receiving RMDs, those rules change. For example, let’s say you have a piece of property, and you want to take a 10% withdrawal of that property in order to satisfy the law regarding RMDs. You would provide us with an appraisal of the property and a distribution form stating you would like to take a 10% distribution. At that point, you and your IRA would be tenants in common on the deed, and we would just have an attorney deed that property over to you.

If you have any questions on any of this, make sure you talk to a CPA or a tax professional. If you have any questions for us, feel free to call us at 1-800-642-7167.

Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.