Can dividends be "lost" during transition period of a rollover IRA?

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yarnandthread
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Can dividends be "lost" during transition period of a rollover IRA?

Post by yarnandthread » Wed Jun 13, 2018 7:54 am

If a person is rolling over IRA assets (exact shares "in kind") from one brokerage company to a different company during the period of quarterly dividend payouts, can a person actually lose out on the dividend payments since the money is in limbo land? I wouldn't think so, but since this IRA transfer process can take days, it makes me wonder especially given dividends' variable dates of payouts. Anybody know the exact process?

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David Jay
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Re: Can dividends be "lost" during transition period of a rollover IRA?

Post by David Jay » Wed Jun 13, 2018 8:13 am

The quick answer is "no".

The long answer: If a dividend is declared before moving the assets, but after the dividend is actually paid, those funds end up at brokerage #1 and get transferred later. It took several weeks before the last penny of my Roth made it from Broker #1 to Broker #2.
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nisiprius
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Re: Can dividends be "lost" during transition period of a rollover IRA?

Post by nisiprius » Wed Jun 13, 2018 8:22 am

No. I've made in-kind transfers a number of times. I have no idea what goes on behind the scenes, it is obviously complicated, but dividends are not lost, although they can be temporarily invisible.

It's almost a nuisance. What happens in practice is that in a transfer from custodian X to custodian Y, first the transfer seems to occur, and you see zero online in your X account and all your stuff online in your Y account. But your X account stays open for a while. During the next month or so, there are crumbs and scraps of dividends that are still in the pipeline. So a few weeks later, if you are obsessively paying attention, your zero-balance X account suddenly receives the dividends and now show a balance of $61.13. They sit their for a few weeks, and then, if all goes well, custodian Y, a month later, does a "sweep" and asks custodian X, "hey, is there anything in there?" and the $61.13 gets transferred.

Sometimes the sweep doesn't happen and you have to call Y and tell them to arrange to get that last little bit transferred.

At least, the above has been my experience. Both the "automatic sweep happens" and the "automatic sweep fails to happen."
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vineviz
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Re: Can dividends be "lost" during transition period of a rollover IRA?

Post by vineviz » Wed Jun 13, 2018 8:22 am

David Jay wrote:
Wed Jun 13, 2018 8:13 am
The quick answer is "no".

The long answer: If a dividend is declared before moving the assets, but after the dividend is actually paid, those funds end up at brokerage #1 and get transferred later. It took several weeks before the last penny of my Roth made it from Broker #1 to Broker #2.
+1

The transfer process is designed to make sure you get the dividend payouts sent to the new account. If the payout arrives after the assets have moved, the old brokerage company will automatically send them to the new brokerage.

yarnandthread
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Re: Can dividends be "lost" during transition period of a rollover IRA?

Post by yarnandthread » Wed Jun 13, 2018 1:55 pm

Thank you to all for your insight.

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