BENEFICIARY GUIDE

Private Equity

The Process

Step 1: Open an IRA with New Direction Trust Company

This allows us to communicate with you and share documents back and forth in a secure manner when logged into our client Portal.
Complete the Inherited IRA Election Form (IEF), which provides us with your beneficiary type, (designated or eligible designated) and authorizes the internal transfer of assets to your IRA account.
Provide a copy of the Death Certificate. This can be done securely through the messaging center in the client portal if not provided previously.

Step 2: Review the assets you have inherited from the decedent.

NDTCO will provide you with a copy of a statement from the decedent’s account.
NDTCO will provide you with a copy of any paperwork we have for the initial purchase of the asset.
If there is more than one beneficiary, the account will need to be divided according to the beneficiary designation.
Review this article Investing in Private Equity With Your Retirement Plan.

Step 3: Determine how to divide the asset if there is more than one beneficiary.

In some cases, the asset held in the account does not divide evenly according to the beneficiary designation. In these cases, the beneficiaries must come to an agreement on how they will divide the assets to meet the designation.
The beneficiaries will draw up a document outlining this division. Guidance will be provided for this document at the appropriate time. Each beneficiary will sign this document in front of a notary public.

Step 4: Determine which option you want to complete for your inherited Private Equity.

Move the Private Equity to your new IRA account. You will need to provide us with re-assignment paperwork to complete this. Keep reading for more information.
Distribute the Private Equity to yourself personally – this will be reported to the IRS as income. You will need to provide us with re-assignment paperwork.
Liquidate the Private Equity, if possible.
- Move the sale proceeds to your IRA. Once the funds are in your account, you can re-invest or transfer to a new custodian.
- Distribute the sale proceeds to yourself – this will be reported to the IRS as income.

BENEFICIARY GUIDE

Additional Important Information

Information about Private Equity in an IRA

Private Equity can be Private Stock, Pre-IPOs, Equity Crowdfunding, or LLC, C-Corp, LP, Etc.
The Private Equity held in the IRA was chosen by the decedent. NDTCO does not recommend, endorse, or provide investments for our clients.
For many assets, you will have the option to keep the asset as it is or liquidate it. Some assets are not able to be liquidated. This is beyond the control of NDTCO, as we do not buy, sell, or offer investments.
For more details on these and other important topics, review the IRS Rules and Regulations, and Private Equity Investment Guide.

Dividend or interest received by the asset while still held by the decedent’s IRA

All dividend or interest payments must be made to the decedent’s IRA if the asset is still held by the decedent’s IRA.
It could be considered a prohibited transaction to have dividends or interest paid directly to the beneficiary prior to the distribution of the asset to the beneficiary. Prohibited Transactions and Self-Directed Investing.

Re-Titling documents

It will be the responsibility of the beneficiary to work with the investment provider to prepare any re-titling documents necessary.
- If you are a spousal beneficiary and took the account as your own, the title of your IRA is NDTCO, as Custodian, FBO (Your Name) (Trad or Roth) IRA
- If you have an Inherited IRA, the title of your IRA is NDTCO, as Custodian, FBO (Your Name), Bene – (Decedent Name) dcdt (Roth – when applicable) IRA
- If you are distributing the asset, it must be re-titled to your name.

Distributing the Private Equity Investment

It will be the responsibility of the beneficiary to work with the investment provider to prepare any re-titling documents necessary.
The documents will need to be titled to your name.
It will be the responsibility of the beneficiary to provide NDTCO with a Fair Market Valuation (FMV) of the asset if the most recent FMV is more than 12 months old. Please review this article for more information. Fair Market Valuations.
You will need to provide approval of the documents. NDTCO will provide you with instructions.
You complete the Distribution and Notice of Withholding Form, found in the client portal.
NDTCO will sign all documents and will send any original documents to you.
The value of any assets distributed will be reported to the IRS.
See the NDTCO Fee Schedule for any associated fees for a distribution.

Liquidating your Private Equity

You will need to reach out to the investment company to determine if the asset is able to be liquidated. Some assets are not able to be liquidated. This is beyond the control of NDTCO.
If the asset can be liquidated, you will need to complete the Sell Direction Letter, which will be provided to you at the appropriate time.
It will be the responsibility of the beneficiary to work with the investment provider to arrange the liquidation of the asset.
Some documents may require approval of the beneficiary. Instructions will be provided.
NDTCO will sign any required documents on behalf of the decedent’s IRA.
See the NDTCO Fee Schedule for any associated fees for liquidating an asset.
Once the asset is liquidated, the cash is deposited in the decedent’s IRA account.
The cash will be moved to your own IRA account within one week from when the cash is available in the decedent account and fees have been paid.
You can choose to re-invest the cash in your new IRA, transfer to a new custodian, or take a distribution. All distributions will be reported to the IRS.

Internal Movement of Assets to your IRA

For in-kind assets, you may need to supply NDTCO with appropriate re-titling documents and provide approval. NDTCO will provide instructions in this situation and will need to sign all documents on behalf of the IRAs.
It will be the responsibility of the beneficiary to work with the investment provider to prepare any re-titling documents necessary.
The beneficiary will need to provide NDTCO with a Fair Market Valuation (FMV) of the asset if the most recent FMV is more than 12 months old. Please see this article for more information. Fair Market Valuations
We complete internal transfers for all beneficiaries of the same account on the same day. We work on internal transfers once a week. This means that all beneficiaries need to have their paperwork completed before transfer of the assets into the beneficiary’s accounts.
Assets will be moved to the beneficiary’s accounts once all these steps have been completed.
You can choose to leave the assets with NDTCO in your new account or to transfer the assets to a new custodian.

NOTE: NDTCO understands there is a lot to consider when inheriting Private Equity in an IRA. We would like you to provide us with a decision as to if you plan to sell or keep the Private Equity within 60 days from when you complete the Inherited IRA Election Form. An NDTCO Life Events Specialist will work with you during this process, but it is going to take time and attention on your part. We ask that you communicate with us regularly on the steps you have taken. Any inaction or non-communication for 6 months may result in the decedent account being found not in Good Standing and may be distributed to the beneficiary at the last reported value. The beneficiary would be responsible for any taxes as a result.

FAQ

How long does the process take?

This will be in part dependent on how quickly the beneficiary acts and completes the steps that they are required to complete. In addition, it will depend on what the beneficiary is planning to do.

Why does NDTCO have to sign the documents for distribution or internal transfer?

The decedent’s IRA owns the Private Equity, so an authorized signer for NDTCO must sign on behalf of the IRA.

Can NDTCO advise me on what to do with the assets I have inherited?

No, NDTCO is a non-fiduciary custodian and cannot provide tax, legal or financial advice. You will want to talk with a trusted CPA or tax attorney if you need advice.

Will I have to pay taxes on the private equity since I inherited it?

Moving your Private Equity to your IRA is not a taxable event. At some time, you may choose to distribute your assets. If the decedent had a pre-tax account, such as a Traditional or SEP IRA, the distribution is typically taxable. If they had a Roth IRA, then the distribution may not be taxable. You will want to check with your trusted CPA or tax attorney to understand what tax rules apply to the account you have inherited.

Will NDTCO notify me when I need to take a distribution and how much I need to take?

Generally, a designated beneficiary must distribute the entire account within 10 years after the date of death. There are multiple options for an Eligible Designated Beneficiary. You should consult your trusted CPA or a tax attorney to make sure you understand your options, whether RMDs are necessary, and the consequences for each. It is the responsibility of the account holder to understand when and how much needs to be distributed from an IRA they have inherited.

Why do I have to wait for the other beneficiaries to complete their paperwork before I can have my assets?

We need to make sure we are following the decedent’s beneficiary designation. It also helps to ensure that no errors are made.

Are there any fees associated with this process?

We do not charge our application fee to beneficiaries of NDTCO clients. There will be fees for the internal transfer, a sale, or distribution. Any past due fees or upcoming fees on the decedent’s account are the responsibility of the beneficiaries. The fees will be split according to the percentages listed in the beneficiary designation. Our fee schedule outlines all NDTCO fees associated with your account. It can be reviewed here Fees – New Direction Trust Company (ndtco.com)

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