ACATS: Automating Asset Transfers
Generally, an ACATS transfer is faster and more convenient than other types of transfers.
TABLE OF CONTENTS
- Account Eligibility
- How to Start the Transfer
- Tax Implications
How ACATS Transfers Work at Betterment
Betterment uses the ACATS method (Automated Customer Account Transfer Service), which automates transfers of assets and cash between brokerage firms. Generally, an ACATS transfer is faster and more convenient than other types of transfers.
Here’s an overview of how the ACATS transfer process works at Betterment.
1. We’ll notify the current custodian of your account that you’d like to transfer.
- We can do all the heavy lifting—usually there is no paperwork needed on your side.
- See Account Eligibility for account types that do require a paper form in order to complete an ACATS transfer.
2. Your custodian will send us the investments and any cash in your portfolio.
- Note that when the transfer is complete, they may close your account.
3. We take care of aligning any assets or cash received to match our investment strategy.
- We automatically reinvest any cash received at the first available opportunity.
- All single stocks we receive will be sold and the proceeds will be reinvested into the Betterment portfolio.
- We will efficiently allocate the ETFs that match those used in the strategy for your receiving Betterment portfolio. Some selling may occur in the transition as we work to achieve desired asset weightings.
- For ETFs and mutual funds that do not align with our strategy, we will only sell assets that are currently at a loss or that you’ve held for at least a year to avoid short-term capital gains taxes, which are generally taxed at a higher rate than long-term capital gains.
- Once you have held the asset for at least a year or it begins trading at a loss, we will automatically rebalance your portfolio to sell and reinvest your assets into the Betterment portfolio.
Accounts Eligible for ACATS
Betterment generally supports nearly all ETFs, many mutual funds, some single stocks, and cash positions for automated transfers. When determining if your account is eligible for an automated transfer, we verify that the account meets all of the following requirements:
- Synced with Betterment as an external account.
- Contains assets currently supported by Betterment.
- Held by a custodian that supports ACATS transfers.
- Classified as an ACAT-eligible brokerage account or an IRA account by your other custodian.
If your account does not meet one of the above requirements, it may still be eligible for a transfer.
Additionally, certain account types (joint account, trust, or inherited IRA) must be transferred via a paper ACATS request form form rather than through the website, which we can assist with. Please email email@example.com for any questions regarding requirements or eligibility.
In certain cases, the transfer may fail. This may delay the completion of your transfer beyond the estimated date originally provided to you when you initiated the transfer. If your ACATS transfer fails for any reason, we’ll reach out to you with next steps.
Partial Account Transfers
If you want to transfer part of your IRA rather than the entire account, or if only part of your account is ACATS-eligible, you will be presented with the option to move forward with a partial transfer when you initiate the transfer on our website. For each asset that you hold shares of, you will be able to select the number of whole shares you’d like to transfer.
If the list of available shares doesn’t look correct, you can email firstname.lastname@example.org for assistance.
If you’d like to transfer only a portion of your current investments, we can help you do this manually with a form rather than through the website. Reach out to our support team at email@example.com to begin the process.
Automated Cash Transfers
Any cash in your other portfolio can also be transferred over along with the assets. If you are interested in an automated transfer but your account has assets that are currently not supported by Betterment, we can still utilize the ACATS system for an automated cash transfer. All you have to do is sell your ineligible investments before you follow the below steps to initiate the ACATS transfer on our website. Note that they may charge trading fees and there may be capital gains taxes as well.
How to Start the Transfer
1. Make sure your account is synced as an external account.
- To sync an account, log in on a web browser, scroll down to the External Accounts section, and click “Sync New.”
2. Initiate the transfer on our website.
- Taxable: If it’s a taxable account, arrows will appear underneath your synced account on your home screen indicating that it’s eligible for an automated ACATs transfer. Click there to start the process.
- IRA: If it’s an IRA, click “Transfer or Rollover” at the top of your home screen and then click “Start Rollover” to start the rollover process. After selecting the synced account and walking through the flow, we will determine if the account is eligible for either a full or a partial ACATS transfer.
- If it isn’t, you’ll be presented with the option to either e-fax paperwork straight to your provider or complete paperwork manually for your provider, who will then sell your assets and send us a check.
- Cash: If you would like to transfer the assets from your other investment account as cash, you must first sell your assets at your other custodian if you have not already done so. Note that they may charge trading fees and there may be capital gains taxes as well. Once the liquidation is complete, you can follow the steps above for either a taxable or an IRA account, depending on which type of account you hold the cash in.
You can find more information in our full ACATS terms and conditions.
Tax Implications of ACATS
When deciding whether to switch from another provider, it’s smart to consider benefits alongside the potential tax implications. We’ve built a calculator to help you with this decision.
Automated transfers of IRA accounts generally do not have tax implications. However, automated transfers for taxable accounts may have tax implications because we sell single stocks when we receive them. Taxes might also occur as we reallocate the ETFs that align with our strategy, as we work to reach target allocations. For ETFs and mutual funds that do not align with our strategy, we will only sell assets that are currently at a loss or that you’ve held for at least a year to help avoid short-term capital gains taxes, which are generally taxed at a higher rate than long-term capital gains. Once you have held the asset for at least a year or it begins trading at a loss, we will automatically rebalance your portfolio to sell and reinvest your assets into the Betterment portfolio.
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