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6 Reasons Your Clients May Have Multiple IRA Accounts

Posted by Russell E. Towers JD, CLU, ChFC on 4 Nov 2016
Russell E. Towers JD, CLU, ChFC

The IRS announced the “one rollover per year” rule in 2014, which is an important rule to keep in mind when planning for multiple IRA accounts. IRC Section 408(d)(3)(B) has been interpreted by the IRS to mean that an IRA owner can only do one 60-day IRA to IRA rollover per year. However, the IRS also reaffirmed that an unlimited number of “direct transfers” can be made when transferring funds directly from one IRA account to another IRA account.

Read More: RMD Planning Options for Clients with Multiple IRAs

Multiple accounts can arise for a variety of planning situations. The following is a list of 6 ways in which multiple IRA accounts can prove useful as a planning tool for IRA owners:

  1. Marital-credit shelter type of estate planning may dictate one type of IRA for the benefit of a spouse alone. The other IRA can be used for the benefit of the children alone or a trust for the benefit of children alone.

  2. Second marriage situations may require one type of IRA for the benefit of the second spouse and the other IRA for the benefit of the children from the first marriage.

  3. One type of IRA may be more oriented towards growth with equity investments while the other IRA account may be more oriented towards fixed type of accounts (i.e. bond mutual funds, U.S. government securities mutual funds or fixed annuities).

  4. Special needs planning for certain disadvantaged children may require a special needs trust for that child to be the beneficiary of one IRA. Meanwhile, the other IRA account may name other adult children as designated beneficiaries.

  5. One type of IRA account may have an individual named as designated beneficiary while the other IRA account may name a trust as the designated beneficiary. The trust can provide for the long term management of “inherited” post-death IRA distributions after the death of the IRA owner.
  6. A classic approach is to have one IRA account invested for growth with the other IRA account providing a guaranteed income stream from a SPIA IRA.

Learn More: Approach To Take with Clients Who Don't Need Their RMDs 

To discuss how to do a 60 day “rollover” from one IRA to another IRA, or how to do an unlimited number of “direct transfers” from one IRA to another IRA contact your BSMG Annuity Advisor. Your BSMG Annuity Advisor can provide access to competitive deferred annuity products or immediate annuity products to fund the multiple IRAs needed by your clients.

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Topics: IRAs, RMD

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