Blog 6: What Happens to My Accounts and Investments? (Part 2)
In Part 1 we covered what moves on its own, which for most of you is everything. This article covers the exceptions: account types where the law or LPL's rules call for more than an electronic transfer, plus one change that every IRA owner should understand. If none of these apply to you, this is a short read. If one does, you will hear from us directly, and this article should help that conversation make sense.
Your IRA has a new custodian
Every IRA has a custodian, the institution legally responsible for holding it. Today that is a Fidelity company. At the close of business on November 14, Fidelity resigns, and The Private Trust Company, N.A. becomes the custodian of your IRA. The Private Trust Company is a nationally chartered trust bank licensed in all 50 states, and it is owned by LPL.
This is a change of custodian, not a distribution. Your IRA keeps its tax status, and nothing is paid out to you. Your current custodial agreement is replaced by The Private Trust Company's agreement, which was included in the package Commonwealth mailed in August. For an IRA you own as an individual, there is nothing to sign.
Your beneficiary designations
Because the custodian is changing, your IRA beneficiary designation has to carry over to The Private Trust Company. For most of you, it will. A designation that names people and percentages on the standard form transfers automatically.
A designation that does more than that may not. If yours names a trust, uses language written by an attorney or attached as a separate page, or adds instructions about how or when a beneficiary receives the money, it has to be put back in place at LPL. We are reviewing every IRA for these now and will contact you if yours is one of them.
Whether or not yours is affected, this is a good moment to look at who you have named. Marriages, divorces, births, and deaths have a way of happening after a beneficiary form was last signed. If what is on file no longer matches what you intend, tell us and we will update it.
Why some accounts need paperwork
Some accounts are controlled by someone other than the person or people they benefit: a trustee, an officer of a company, or a custodian for a child. Before LPL will act on one of these accounts, it needs its own documents confirming who has that authority. Needing paperwork does not mean anything is wrong with your account. It is simply how these accounts are set up.
Trusts. Trust accounts require a signature at LPL. Commonwealth and LPL are still working out which trust accounts may be moved without one, and we do not expect an answer before late October. Until we have it, we are planning as though a signature will be needed for every one. If you own a trust account with us, we will bring you what is required.
Other accounts. The same is true of a few other account types:
Accounts owned by a corporation, LLC, or partnership
Custodial accounts for minors, such as UTMA accounts
Guardianship and conservatorship accounts
Certain alternative investments, such as nontraded REITs or private funds, where the sponsor requires its own form to re-register the holding
Nearly all of this paperwork can be signed electronically, and it can generally be completed after November 14 without interrupting your account. What we ask is that you respond promptly when we send it, because LPL allows a limited window after the conversion to finish it.
One timing note. If a child's custodial account is about to pass to the child because the child is reaching the age set by law, tell us now. The transfer to the child and the move to LPL need to happen in the right order, and that is easier to arrange in October than in November.
You do not need to sort this out yourself
We know which of your accounts fall into these categories. Please do not try to work out on your own whether you need to sign something or go looking for forms. That is our job, and we have already started it. When we reach out, it will be with the specific documents for your specific accounts.
What do I need to do?
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