Are There Limits on Trustee-to-Trustee Transfers?
Understand the distinction between retirement account transfer methods and how a direct transfer between trustees avoids common annual limitations.
A trustee-to-trustee transfer is a method for moving retirement funds that involves one financial institution sending the money directly to another on your behalf. In this transaction, the retirement account owner never takes possession of the funds. The check is made payable to the new trustee or custodian for your benefit, not to you personally. This process is often used when an individual wants to change the institution managing their Individual Retirement Arrangement (IRA) to access different investment options or lower fees.
The One-Rollover-Per-Year Rule
The Internal Revenue Service (IRS) imposes a limit on how frequently you can move funds between IRAs using a method known as an indirect rollover. This regulation, called the one-rollover-per-year rule, applies when you take a distribution from your IRA and then redeposit the funds into another IRA. Once you receive the money, you have a 60-day window to complete the rollover into a new retirement account. If you miss this 60-day deadline, the distribution is treated as taxable income and may be subject to a 10% early withdrawal penalty if you are under age 59 ½.
This once-per-year limitation is applied on an aggregate basis, meaning it covers all of your IRAs, including Traditional, Roth, SEP, and SIMPLE IRAs. You are permitted only one such IRA-to-IRA indirect rollover within any 12-month period, regardless of how many different IRAs you own. This 12-month period is not a calendar year; it begins on the date you receive the distribution from the first IRA.
Applicability of Limits to Trustee-to-Trustee Transfers
Trustee-to-trustee transfers are not subject to the one-rollover-per-year rule. The reason for this exemption is based on the concept of “constructive receipt.” Since the account owner never has direct control or access to the funds during the transfer process, the IRS does not consider it a distribution and subsequent rollover.
Because these direct transfers are not classified as rollovers, there is no IRS-imposed limit on the number of trustee-to-trustee transfers you can execute in a year. There are also no IRS-mandated dollar limits on the amount of money that can be moved via a trustee-to-trustee transfer. Other transactions, such as moving funds from an employer-sponsored plan like a 401(k) to an IRA, or converting a Traditional IRA to a Roth IRA, are also not subject to the one-rollover-per-year limitation.
How to Initiate a Trustee-to-Trustee Transfer
The process for initiating a trustee-to-trustee transfer begins with the new institution you want to move your money to. You will first need to open an account with this new firm and request their specific transfer initiation paperwork. This form is often called a “Transfer of Assets” form.
After receiving the form, you must complete it with details about your existing retirement account. This includes the name of the current institution, the account number, and an estimate of the value being transferred. You then submit the completed and signed paperwork to the new institution.
From that point, the new custodian takes over the process. They will use the information you provided to contact your old institution directly and request the funds. The old trustee will then liquidate the assets as needed and send a check, made payable to the new institution, to complete the transfer.