If you have a Traditional IRA, SEP IRA, or SIMPLE IRA (a pre-tax retirement account) and have recently celebrated your 70th birthday, be on the lookout for an RMD notice. RMD stands for Required Minimum Distribution. The IRS requires that you must start taking a portion of your funds out of your retirement account and pay the respective tax starting at age 70 1/2.
Each subsequent RMD must be taken by December 31st of each year.
RMDs are calculated based on your account’s value as of December 31st of the prior year. The value of your account is calculated using the life expectancy tables found in IRS Publication 590.
If you do not take your RMD, the IRS can penalize you up to 50% of the amount not distributed.
IMPORTANT: Even if you do not have liquid funds in your IRA, the IRS still requires you to take an RMD. Please read below on how to take an “In-Kind” distribution from your account.
Although you, as the IRA owner, are ultimately responsible for the correct RMD amount, when the time comes, Provident Trust Group will send you an RMD Notice advising you of your RMD valuation and options with us. Please remember your RMD amount is determined from the total value of all IRAs, not solely your account with Provident Trust Group. If and when you decide to take your distribution from Provident Trust Group, fill out a Distribution Request Form for the applicable amount. This form can be found here.
At the end of every January, an RMD notice is sent to all applicable clients:
When completing your RMD with Provident Trust Group, there are three options available to you:
You choose to take your distribution from an IRA at another institution.
You choose to take your distribution from Provident Trust Group AND you have cash on hand available for your distribution.
You choose to take your distribution from Provident Trust Group. However, you DO NOT have cash available. This is known as an “In-Kind” RMD.
With this option, you are re-registering a portion of your IRA Assets. A Change of Ownership Form is generated by Provident Trust Group to fulfill the IRS requirement of taking an RMD. Each re-registration incurs a fee of $95.
How does an “In-Kind” RMD work?
Instead of taking the distribution amount in cash, you can elect to take an “In-Kind” RMD. Think of it as an “I.O.U.” to yourself. You state that you wish to re-register a portion of your asset (equal to the amount of your RMD) from your IRA to you personally. You are then responsible for the taxable amount of the distribution.
When the asset matures, or becomes liquid, you will directly receive the funds for the RMD amount, and the remaining funds from the asset would be sent to the IRA.
In order to accomplish this, a document known as a “Change of Ownership” is completed. This Form is used to re-title an asset or a portion of an asset from one party (or institution) to another. It must reflect the name of the asset, the value and/or units to be re-titled, as well as the information of the resigning and receiving parties.
There are three parties listed on a Change of Ownership Form to ensure it is processed correctly. These parties are:
- The Partnership – the asset that is being re-titled.
- The Assignor – where the asset is currently held (Provident Trust Group).
- The Assignee – where the re-registration is being assigned to (You).
Typically, these are the steps of the process:
The Assignor must sign the Change of Ownership Form to acknowledge the change.
The Change of Ownership is then forwarded on to the Partnership to complete the re-titling.
The Partnership will then re-title the values designated on the Change of Ownership Form.
Confirmation of the change is then sent to both the Assignor and Assignee for their records.