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► IRA Individual Retirement Accounts Approximately 50 million Americans own Individual Retirement Accounts (IRA) worth an estimated $3 trillion. Types of IRAs include:
About half of all IRAs are administered by and invested in various mutual funds. One-third are held in brokerage accounts, while bank deposits and life insurance annuities account for the remainder. Due to the long term nature of this type of investment, each year large numbers of owners and heirs - who may not be aware of a deceased family member's IRA or roll-over 401k - fail to claim accounts to which they're entitled. While unclaimed 401(k) retirement plan assets come under the purview of federal guidelines mandated by ERISA (Employee Retirement Income Security Act of 1974); missing and forgotten IRAs at banks, brokerages and insurance companies do not. The rules for determining how a dormant or unclaimed IRA is treated depends on the type of IRA and the state of residence of the owner. |
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► Unclaimed Traditional IRA A Traditional IRA is any IRA that is not a Roth, SEP, SIMPLE, or Qualified Plan, or a Coverdell ESA. Any individual who has taxable compensation or self-employment income in a particular year, and will not reach age 70.5 by the end of that year, may establish and fund a Traditional IRA.A Traditional IRA must be established with an institution that has received IRS approval to offer IRAs. These include banks, brokerage companies, federally insured credit unions, saving & loan associations and any other IRS-approved institution.
There
is no limit to the number of IRAs that an individual can have. IRAs may
contain a variety of investments, including bank accounts, certificates
of deposit, stocks, bonds, precious metals, commodities, and even real
estate; but half of all IRAs are administered by and invested in various
mutual funds. About a third are held in brokerage accounts, while bank
deposits and life insurance annuities account for the remainder.
Earnings on Traditional IRAs grow on a tax-deferred basis until
withdrawals begin.
26 CFR 1.401 of the US Code requires owners
to begin to take distributions not later than April 1 of the calendar
year following the year in which the owner reaches the age of 70½.
A traditional Individual Retirement Accounts is considered unclaimed if a withdrawal is not made by age 70½; the age at which non-withdrawal triggers the 50% tax penalty. Both Traditional and Roth IRAs may be considered abandoned if one or more distribution checks are not cashed, which can occur as soon as the owner reaches age 59½. Under Uniform Unclaimed Property guidelines, abandonment of an IRA may be presumed where funds have been distributed, distribution has been attempted, distribution is mandated, or where non-distribution would result in a tax penalty, i.e. age 70½. Where contact has been lost with the owner, therefore, dormant and unclaimed Traditional IRAs may be reported and remitted to state unclaimed property custodians after age 70½ if no distribution has been made, or, if distributions have previously been made and then have stopped, at an earlier time. ► Roth IRA A Roth IRA - unlike a traditional IRA - has no age "70½ " rule. You can make contributions to a Roth IRA at any age if you have taxable compensation, and the Traditional IRA requirement that you start making withdrawals at age 70½ does not apply to a Roth IRA. |
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Roth IRA contributions are not deductible from
taxable income at the time they are made. With Roth IRAs you don't pay
income tax when you withdraw the money, not on the gains, interest or
dividends - if you are at least age 59½ and the account has been open
for five years. Tax-free withdrawals are also allowed for first-home
purchase ($10,000 lifetime cap), or upon death or disability; but the
five-year requirement still applies. If the administrator does not have
contact with the owner, Roth IRAs may be considered abandoned at some
period determined by each state, with three years being typical.
Roth IRAs may be reported and remitted as
unclaimed property at some number of years (determined by each
individual state) after the election date (age 59.5), or earlier if
there have uncashed distribution checks or returned statements.
► Coverdell Education Savings IRA Coverdell Education Savings Accounts were created to help parents and students save for education expenses. The total contributions for the beneficiary of this type of account cannot be more than $2,000 in any year. A beneficiary is someone who is under age 18, or is a special needs beneficiary. Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed.
If there is a balance in the Coverdell ESA when
the beneficiary reaches age 30, it must generally be distributed within
30 days. A beneficiary may avoid these taxes by rolling over the full
balance to another Coverdell ESA for another family member;
but otherwise the portion representing earnings on the account will be
taxable and subject to the additional 10% tax; and may be reported as
unclaimed property if contact with the owner has been lost.
► Rollover IRA This can include contributions rolled over from retirement plans maintained by an employer, such as 401(k), 403(b) and 457(b) plans, as well as trustee-to-trustee transfers from other traditional IRAs, SEP IRAs and SIMPLE IRAs. Note: Unclaimed 401(k) and other employee retirement plans established or maintained by employers come under federal guidelines mandated by ERISA; missing and forgotten IRAs at banks and brokerages do not. For information on these types of accounts go to: Unclaimed Pensions or Unclaimed 401(k) Accounts |
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| © 2015 NUPA - NATIONAL UNCLAIMED PROPERTY ASSOCIATES |
