How to Fund a Self-Directed IRA
Cash transfers are the safest, easiest and fastest way to fund a self-directed IRA. A transfer entails moving cash directly from one IRA to another like IRA (e.g., traditional IRA to Pacific Premier Trust traditional IRA). There’s no limit to the number of transfers that can be requested and because the account holder never takes physical receipt of the money, a transfer does not create a taxable event.
You can choose between transferring cash or assets in-kind. For cash transfers, Pacific Premier Trust will request the funds from your current custodian on your behalf, and the transfer typically takes three to four business days. See “In-Kind Transfer” for specifics on how to transfer assets in-kind.
If you don’t wish to liquidate an asset before transferring it, you may be able to do an in-kind transfer of the asset from another IRA to your like Pacific Premier Trust IRA. The process can take longer than a cash transfer and alternative assets must be reviewed by Pacific Premier Trust. You will also need to check with Pacific Premier Trust first to ensure we can hold the asset in question – if not, you may need to liquidate the asset and transfer the cash instead.
A rollover occurs when you move assets from a qualified plan, including non-IRA plans, such as a 401(k), profit sharing plan or other employee sponsored plan, to your Pacific Premier Trust IRA. This is a very common method of funding a self-directed IRA and there are several ways to do it this.
- In-kind direct rollover: The direct rollover of non-cash assets from an eligible non-IRA plan into an IRA. Moving the assets directly from another qualified plan to an IRA will avoid a taxable event. Check first to see if Pacific Premier Trust holds the assets in question – if not, you may need to liquidate the assets and rollover the cash instead.
- Cash direct rollover: The direct rollover of cash from an eligible non-IRA plan into an IRA. Moving the funds directly from a qualified plan to an IRA will allow you to avoid a taxable event.
- 60-day cash rollover: Allows the IRA owner to take receipt of funds from an IRA or eligible non-IRA plan, then deposit it into an IRA within 60 days without triggering a taxable event. You must return the funds to an IRA within 60 days, or it will be considered a reportable distribution which is subject to taxes and, if you are under 59.5, subject to penalties. Current rules only allow one rollover between IRAs per person per 12-month rolling period.
Roth IRA Conversion
Under certain circumstances, the IRS allows individuals to convert a traditional IRA into a Roth IRA. Pacific Premier Trust has extensive experience with the rules and processes around Roth IRA conversions, so just give us a call if you want to learn more.
Important note regarding IRA rollovers:
As of 2015, you can make only one rollover from an IRA to another IRA in any 12-month period, regardless of the number of IRAs you own. The limit applies by aggregating all of the individual IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit. However, the one per year limit does not apply to these rollovers:
- From traditional IRAs to Roth IRAs (conversions)
- From trustee to trustee transfers to another IRA
- From IRA to qualified plans (i.e., pensions, 401ks, etc.) and vice versa
- From qualified plan to qualified plan
Also, as of 2015, if you make more than one IRA to IRA rollover in any 12 month period:
- You must include in your gross income, the previously untaxed amounts distributed in the preceding 12 months from an IRA, and;
- You may be subject to the 10% early withdrawal tax on the amount you include in gross income.
For more information, visit our blog post and these IRS resources: