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Question for the Money Doctors

Question submitted on Aug 10, 2011.

Question

I''m wondering if once a Trusteed IRA is established, whether it can be "converted" to another form of IRA (i.e.: Custodial IRA and/or Annuity Contract)? Say, for example I have established a Trusteed IRA at one financial institution and then I decide that I no longer want to do business there...if the new firm at which I will manage my assets does not offer Trusteed IRAs, or if I self-direct my own investments, can I just convert the Trusteed IRA to a Custodial IRA and then handle the "estate planning" aspects of the IRA after my death independently?

Answer

All IRAs are Trusteed accounts.    You may be referring to the type of custodian.   This could be a brokerage firm, insurance company, bank, or an independent trustee.   You may have one held through an independent trustee, hence the moniker of Trusteed IRA.   You can always change custodians, however the custodians may have restrictions on the types of assets held in their accounts.   For example a brokerage firm might not be able to hold real estate or collectibles in their IRA accounts.   Banks and brokerage firms are generally limited to the type of securities they handle.

Please make sure you follow all the IRA rules when you have a Trusteed IRA.   This includes the annual valuation and be careful not to violate the self dealing rules.   This can get very complicated and expensive.

Please take a look at IRS Publication 590 Individual Retirement Arrangements.  You can pick up a copy at the local IRS office, call the IRS at 1-800-829-1040, or you can download a copy at.


For additional information visit http://www.360financialliteracy.org/