Dividend and capital gains options
ARTICLE TAKEAWAYS
- What options are available for dividends and capital gains
- How to update your clients’ options
- Tax considerations when updating dividend and capital gains options
What options are available for dividends and capital gains
When a new account is established, dividends and capital gains are automatically reinvested into the same fund within the same account and share class unless otherwise selected. Different options can be selected for dividends and for capital gains.
For most accounts, the following options are available for dividends and capital gains:
- Distributed by Automated Clearing House (ACH) to the bank on file*
- Cross-reinvested into a different fund in the same account
- Cross-reinvested into a different account in the same share class
- Sent by check to a third party (signature guarantee is required)
*If the account does not have any bank information on file, the request to add a bank must be made in writing. Review Managing client banking information for additional requirements.
Restrictions apply for the following accounts:
- Traditional and Roth IRAs: The investor must be over age 59½ to have dividends or capital gains distributed, and Roth IRA accounts also require that the five-year holding period is satisfied. We are currently unable to withhold income taxes from dividends and capital gain distributions.
- Inherited IRAs: Dividends and capital gains must be reinvested into the same account
- Non-retirement accounts: Dividends and capital gains cannot be cross-reinvested into a Capital Bank and Trust (CB&T) IRA
- Coverdell ESA: Dividends and capital gains must be reinvested into the same account
- CollegeAmerica®: Dividends and capital gains must be reinvested into the same fund and account
- ABLEAmerica®: Dividends and capital gains must be reinvested into the same fund and account
How to add, change and remove options
Non-retirement accounts:
Options can be added or modified online or in writing using the Mutual Fund Account Options form.
To add or modify the options online:
- Log in to Client Accounts
- Look up the account
- Click Profile & Settings
- Under Investments, next to Dividend and Capital Gains Options, click Cash or Reinvest
Retirement accounts:
Options can be added or modified in writing with a letter of instruction that includes:
- The account number
- The name of the account owner
- Instruction for dividends and capital gains
To cancel a distribution or cross-reinvest option, contact us.
Dividend and capital gain tax information
Non-retirement accounts will receive a 1099-DIV form for all dividends and capital gains. Dividend and capital gain distributions are either ordinary or qualified dividends. Generally, ordinary dividends are included as income and taxed at the investor’s income tax rate whereas qualified dividends are eligible for a reduced tax rate. Visit the Tax center for more information.
Retirement accounts receive Form 1099-R only if dividends or capital gains were cross-reinvested into another account type or sent to the investor. In these cases, distributions are reported to the IRS and are subject to taxes.
Dividends that are reinvested into the same account and fund are not reportable, and no tax forms are generated.
Tax forms are available the following year. They will be posted online in mid-January or mailed by January 31.
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