Fwd: Roth IRA question
I have not yet heard back from my former colleague at US Trust. I will also ask him about a Trusteed Roth IRA (with the thought that the borrower's Roth IRA be converted to a Trusteed Roth IRA).
I have not done one of these but my understanding is that it works like a trust after the IRA owner dies or becomes incompetent. With the Trusteed IRA, I believe it is possible for the IRA owner to name you as a beneficiary for the outstanding amount of the loan after his death. This would at least give you some protection if he dies (or becomes incapacitated) before he reaches age 59-1/2 and has met the 5-year requirement. Perhaps the Trust Agreement could even be drafted to mandate distributions to you of the amount loaned once the IRA owner has reached age 59-1/2 and met the 5-year requirement. I know Merrill Lynch does these so my former colleague may know.
Ada Clapp
Elysium Management LLC
445 Park Avenue
Suite 1401
New York, New York 10022
Email:
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I spoke to my colleague. He is trying to find out if the trust agreement creating a Trusteed Roth IRA may include a provision that would mandate a distribution at age 59-1/2 to satisfy an outstanding debt of the IRA owner.
Even if you can do this-I am not sure it makes sense. I learned that banks who do the Trusteed IRA thing only do it if they are managing the funds in the IRA. That means the IRA account owner will pay Trustees fees to the bank AND interest to you on the loan.
I will let you know if I hear back.
Ada Clapp
Elysium Management LLC
445 Park Avenue
Suite 1401
New York, New York 10022
This communication and any attachment is for the intended recipient(s) only and may contain information that is privileged, confidential and/or proprietary. If you are not the intended recipient, you are hereby notified that further dissemination of this communication and its attachments is prohibited. Please delete all copies of this communication and its attachments and notify me immediately that you have received them in error. Thank you.
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as discussed, only why you cant , no suggestions , Forwarded message From: Ada Clapp <I Date: Wed, Sep 17, 2014 at 11:27 AM Subject: RE: Roth IRA question To: "jeffrey E." jeevacation@gmail.com
I finally heard back from my former colleague at US Trust. I don't think the Trusteed IRA gives you any real protection as collateral because (i) while the IRA owner is living and competent, he can always change the IRA Trust document to take out the provision mandating a distribution at 59-1/2 to satisfy a debt, (ii) US Trust was concerned that putting such a provision in the trust document might cause it not to qualify as a Trusteed IRA (they only permit limited changes to their trust form since they have a ruling blessing it.
Also, it would be somewhat risky to the IRA owner as the IRS might see that provision and conclude that the IRA was used as collateral.
Hope that was helpful.
Ada Clapp
Elysium Management LLC
445 Park Avenue
Suite 1401
New York, New York 10022
Email:
This communication and any attachment is for the intended recipient(s) only and may contain information that is privileged, confidential and/or proprietary. If you are not the intended recipient, you are hereby notified that further dissemination of this communication and its attachments is prohibited. Please delete all
EFTA00869356
copies of this communication and its attachments and notify me immediately that you have received them in error. Thank you.