South Carolina Life Insurance Practice Exam

What is required to allow the transfer of funds from one retirement account to another without immediate tax consequences?

1. Written consent from the beneficiary

2. Written consent from an insurance regulatory authority

3. A notarized statement from the policyholder

4. No specifics are required

The correct answer is: Written consent from an insurance regulatory authority

To transfer funds from one retirement account to another without incurring immediate tax consequences, certain regulations guide this process. The key requirement is that the transfer be characterized as a "direct rollover." This process typically does not necessitate the written consent of a beneficiary or regulatory authority. Instead, funds are moved directly from one financial institution to another, thus maintaining their tax-deferred status. While you noted the need for written consent from an insurance regulatory authority, this is not a standard requirement for the completion of fund transfers between retirement accounts. Proper documentation may be needed, but this would generally be handled through the financial institutions involved rather than requiring an external authority's approval or notarization. Overall, understanding the direct rollover procedure and its tax implications is crucial for managing retirement funds effectively.