IRA Rollovers: Important Rule Changes

We have historically recommended that clients do trustee-to-trustee transfers when transferring assets from 401(k) to IRAs. But a recent ruling gives you yet another reason to avoid taking a check and along with it, the responsibility of making the rollover within a short window of time to avoid penalties.

Please see http://www.usatoday.com/story/money/personalfinance/2014/04/06/irs-ira-rule-change-rollover/7317035/ for a summary. The story covers a recent decision by the United States Tax Court that states a taxpayer can perform only one tax-free “rollover” of an individual retirement account each year — regardless of how many IRAs they may have.

While this situation should not impact many IRA owners, it is something to be aware of if you have several IRAs. For example, those who may have several IRAs sprinkled between many bank accounts could be affected. In addition to making a case for trustee-to-trustee transfers, this ruling makes our usual recommendation to consolidate accounts even more appealing. Perhaps it is time to spring clean finances along with the house and garden!