Aug 30

The Difference Between Inheriting and Assuming an IRA

When opening an IRA, you should name beneficiaries who will inherit the account when you pass away.  This will make things a bit easier for your family; it’s one less thing to worry about.  When you pass, your IRA will go right to your beneficiary without having to go through probate.  The two ways that he or she will inherit the IRA is either through assumption or inheritance.  This will depend on who your beneficiary is.

Inheriting vs. Assuming an IRAWhat do assuming or inheriting an IRA actually mean?  If you inherit an IRA, you receive the assets in someone’s IRA after they pass away.  The decedent must have named you as the beneficiary in writing.  Further, there may be more beneficiaries than just you.  When choosing your beneficiaries, you may name as many as you wish.  Usually, a set percentage will be stated for each heir.

On the other hand, assuming is a special form of inheritance.  If the IRA is assumed, the new owner transfers the assets in his or her sole name.  The IRS will treat this IRA as if it always belonged to you.  However, not every heir can assume an IRA.  Only a spousal beneficiary has the option to inherit or assume an IRA and only if he or she is the sole beneficiary.  No other person can assume an IRA, not even a close family member such as a child.

When inheriting an IRA, you may not re title it in your own name.  It must be in the original owner’s name with you as a beneficiary.  You are not allowed to contribute to this IRA and may not roll it over into an IRA in your own name.  Moreover, you must take annual distributions from the account based on the decedent’s life expectancy, or your own.

If you are allowed to assume the IRA, you transfer the assets into an IRA in your own name.  If you already own an IRA, you may also transfer the assets into that one.  Since this is now your IRA, you may contribute to it as you wish.  The big advantage of assuming an IRA is that you do not have to immediately start withdrawing from the account.  As per IRS rules, you may wait until April 1 of the year following your 70 1/2 birthday.

If you have any questions about this or other things IRA-related, please contact a tax expert at the IRA Financial Group @ 800.472.0646 today.  They will help you best decide what to do with your money to set up a comfortable retirement.

Aug 29

What separates the IRA Financial Group from everyone else?

The IRA Financial Group is owned and operated by tax and ERISA professionals who have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP. As a result, our retirement tax professionals’ tax and IRA knowledge in this area is unmatched.

Attorney Direct Tax Consultation Service for All Self-Directed IRA ClientsUnlike our competitors, our tax and ERISA professionals are always available to answer client questions and regularly attempt to field all incoming customer phone or email inquiries. When choosing the IRA Financial Group, you will have direct and unlimited access to our in-house tax and ERISA professionals. Each client of the IRA Financial group is assigned a retirement tax professional in order to ensure that the tax structure established is in compliance with IRS rules. Because we are owned and operated by tax and ERISA professionals, we are able to do all necessary IRA rollover or transfer paperwork and consultation in-house, allowing us to expedite the process from start to finish for significantly less than our competition.

Our retirement tax professionals have helped thousands of clients establish IRS compliant Self-Directed IRA LLC and Solo 401(k) Plan structures.

Talk to one of our retirement tax professionals today and begin experiencing the benefits of tax-free investing!  Please contact one of our IRA Experts at 800-472-0646 for more information.  Be sure to follow us on Twitter @BergmanIRA, as well as the IRA Financial Group @IRAFG!

Aug 27

Self-Storage Self-Directed IRA LLC for the Purchase of IRS Approved Coins

New “self-storage” self-directed IRA LLC will allow for the purchase and holding of IRS approved coins at home or outside the United States

IRA Financial Group, the leading provider of “checkbook control” Self-Directed IRA LLC solutions announces the new introduction of the “self-storage” self-directed IRA for IRS approved coins. “IRA Financial Group’s newly designed “self-storage” self-directed IRA LLC solution will allow retirement investors the ability to hold IRS approved coins at their home or outside the United States,” stated Adam Bergman, an in-house tax attorney with the IRA Financial Group.

The IRS does not list the type of assets or investments that may be purchased with retirement funds, but does indicate which categories of assets or investments are not permitted.
The categories of transactions that are not permitted to be purchased using a Self-Directed IRA LLC can be found in Internal Revenue Code Sections 408 & 4975.

Self-Storage Self-Directed IRA LLC for the Purchase of IRS Approved Coins When it comes to coins or metals, Internal revenue Code Section 408 is generally the provision that applies. In general, collectibles such as artworks, rugs, stamps, certain coins, beverages and antiques, etc. are not allowed within a Self-Directed IRA LLC, pursuant to Internal Revenue Code Section 408.

Internal Revenue Code Section 408 is specific as to what defines a collectible. Some notable exceptions are allowed for certain gold (such as American Eagle) and silver coins and any coins issued by a state. Legislation in 1997 further liberalized the rules for IRAs by making reference to specific definitions of acceptable coins in USCS, title 31; IRC Sections 5112(a), (e) and (k); the Commodity Exchange Act; and IRC Section 408(m)(3).

According to Mr. Bergman, “unlike precious metals, the Internal revenue Code and the legislative history does not include a requirement that IRS approved coins be held in the physical possession of a U.S. trustee.” “If so, the requirement would have been so stated in the tax code, “ Mr. Bergman states. Accordingly, according to Mr. Bergman, many tax practitioners take the position that IRS approved coins can be purchased by a Self-Directed IRA LLC and not be held at a depository or U.S. Bank.”

With IRA Financial Group “self-storage” self-directed IRA, American Eagle coins can be held personally by the IRA holder and even outside the United States. However, the IRA Financial Group recommends that retirement investors hold IRS approved coins at a bank safe deposit box, depository, or some sort of third-party vault in the name of the IRA LLC. “Irrespective of the fact that it appears that IRS approved coins are not required to be held in the “physical possession of a U.S. trustee”, holding the coins in the physical possession of a disqualified person puts the onus on the IRS holder, as the disqualified person, to prove that no self-dealing or conflict of interest event occurred in the case of an IRS inquiry, “ stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control” Self Directed IRA and Solo 401(k) Plan provider. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

Aug 23

Using a Self-Directed Roth IRA LLC To Purchase Real Estate

Most people mistakenly believe that their Roth IRA must be invested in bank CDs, the stock market, or mutual funds. Few Investors realize that the IRS has always permitted real estate to be held inside IRA retirement accounts. Investments in real estate with a Self-Directed Roth IRA LLC are fully permissible under the Employee Retirement Income Security Act of 1974 (ERISA). IRS rules permit you to engage in almost any type of real estate investment, aside generally from any investment involving a disqualified person.

In addition, the IRS states the following on their website : “…..IRA law does not prohibit investing in real estate but trustees are not required to offer real estate as an option.”

Advantages of Using a Self-Directed Roth IRA LLC to Purchase Real Estate

Income or gains generated by a Roth IRA generate tax-free profits. Using a Self-Directed Roth IRA LLC to purchase real estate allows Using a Self Directed Roth IRA LLC To Purchase Real Estatethe Roth IRA to earn tax-free income/gains and never pay taxes on any future date, rather than in the year the investment produces income.

With a Self-Directed IRA Roth LLC, you can invest tax-free and not have to pay taxes ever! All the income or gains from your real estate deals flow though to your Roth IRA tax-free!

Types of Real Estate Investments

Below is a partial list of domestic and foreign real estate-related investments that you can make with a Self-Directed Roth IRA LLC:

  • Raw land
  • Residential homes
  • Commercial property
  • Apartments
  • Duplexes
  • Condos/townhomes
  • Mobile homes
  • Real estate notes
  • Real estate purchase options
  • Tax liens certificates
  • Tax deeds
  • Farm land
  • Any domestic or foreign real property

Investing in Real Estate with a Self-Directed Roth IRA LLC is Quick & Easy!

Purchasing real estate with a Self-Directed Roth IRA LLC is essentially the same as purchasing real estate personally.

  • Set-up a Self-Directed Roth IRA LLC with the IRA Financial Group
  • Identify the investment property
  • Purchase the investment property with the Self-Directed Roth IRA LLC. As manager of the Self-Directed Roth IRA LLC, you will not be required to seek the consent of the custodian to make a real estate investment providing you with “checkbook control” over your Roth IRA funds.
  • Title to the investment property and all transaction documents should be in the name of the Roth IRA LLC. Documents pertaining to the property investment must be signed by the LLC manager (you).
  • All expenses paid from the investment property go through the Self-Directed Roth IRA LLC. Likewise, all rental income checks must be deposited directly in to the Self-Directed Roth IRA LLC bank account. No Roth IRA related investment checks should be deposited into your personal accounts and no Roth IRA funds should be deposited into your personal account.
  • All income or gains from the investment flow through to the Roth IRA tax-free!

Tax Advantages of Using a Self-Directed Roth IRA LLC!

Using a Self-Directed Roth IRA LLC to make real estate investments presents a number of exciting tax planning opportunities.

The primary advantage of using a Self-Directed Roth IRA LLC to make real estate investments is that all income and gains associated with the Roth IRA real estate investment grow tax-free and will not be subject to tax upon withdrawal or distribution. This is because unlike traditional IRAs, you are generally not subject to any tax upon taking Roth IRA distributions once you reach the age of 59 1/2.

Structuring the Purchase of Real Estate with a Self-Directed Roth IRA LLC

When using a Self-Directed Roth IRA LLC to make a real estate investment there are a number of ways you can structure the transaction:

1. Use your Self-Directed Roth IRA LLC funds to make 100% of the investment

If you have enough funds in your Self-Directed Roth IRA LLC to cover the entire real estate purchase, including closing costs, taxes, fees, insurance, you may make the purchase outright using your Self-Directed Roth IRA LLC. All ongoing expenses relating to the real estate investment must be paid out of your Self-Directed Roth IRA LLC bank account. In addition, all income or gains relating to your real estate investment must be returned to your Self-Directed Roth IRA LLC bank account.

2. Partner with Family, Friends, Colleagues

If you don’t have sufficient funds in your Self-Directed Roth IRA LLC to make a real estate purchase outright, your Self-Directed Roth IRA LLC can purchase an interest in the property along with a family, friend, or colleague. The investment would not be made into an entity owned by the IRA owner, but instead would be invested directly into the property.

For example, your Self-Directed Roth IRA LLC could partner with a family member, friend, or colleague to purchase a piece of property for $150,000. Your Self-Directed Roth IRA LLC could purchase an interest in the property (i.e. 50% for $75,000) and your family member, friend, or colleague could purchase the remaining interest (i.e. 50% for $75,000).

All income or gain from the property would be allocated to the parties in relation to their percentage of ownership in the property. Likewise, all property expenses must be paid in relation to the parties’ percentage of ownership in the property. Based on the above example, for a $2,000 property tax bill, the Self-Directed Roth IRA LLC would be responsible for 50% of the bill ($1000) and the family member, friend, or colleague would be responsible for the remaining $1000 (50%).

Isn’t Partnering with a family member in a Real Estate Transaction a Prohibited Transaction?

Likely no if it the transaction is structured correctly. Investing in an investment entity with a family member and investing in an investment property directly are two different transaction structures that impact whether the transaction will be prohibited under Code Section 4975. The different tax treatment is based on who currently owns the investment. Using a Self-Directed Roth IRA LLC to invest in an entity that is owned by a family member who is a disqualified person will likely be treated as a prohibited transaction. However, partnering with a family member that is a disqualified person directly into an investment property would likely not be a prohibited transaction. Note: If you, a family member, or other disqualified person already owns a property, then investing in that property with your Self-Directed Roth IRA LLC would be prohibited.

3. Borrow Money for your Self-Directed Roth IRA LLC

You may obtain financing through a loan or mortgage to finance a real estate purchase using a Self-Directed Roth IRA LLC. However, two important points must be considered when selecting this option:

  • Loan must be non-recourse – A “prohibited transaction” is a transaction that, directly or indirectly involves the loan of money or other extension of credit between a plan and a disqualified person. Normally, when an individual purchases real estate with a mortgage, the traditional loan provides for recourse against the borrower (i.e., personal liability for the mortgage). However, if the IRA purchases real estate and secures a mortgage for the purchase, the loan must be non-recourse; otherwise this will be a prohibited transaction. A non-recourse loan only uses the property for collateral. In the event of default, the lender can collect only the property and cannot go after the IRA itself.
  • Tax is due on profits from leveraged real estate – Pursuant to Code Section 514, if your Self-Directed Roth IRA LLC uses non-recourse debt financing (i.e., a loan) on a real estate investment, some portion of each item of gross income from the property are subject to Unrelated Business Income Tax (UBIT). Debt-financed property” refers to borrowing money to purchase the real estate (i.e., a leveraged asset that is held to produce income). In such cases, only the income attributable to the financed portion of the property is taxed; gain on the profit from the sale of the leveraged assets is also UDFI (unless the debt is paid off more than 12 months before the property is sold). There are some important exceptions from UBIT: those exclusions relate to the central importance of investment in real estate – dividends, interest, annuities, royalties, most rentals from real estate, and gains/losses from the sale of real estate. However, rental income generated from real estate that is “debt financed” loses the exclusion, and that portion of the income becomes subject to UBIT. Thus, if the IRA borrows money to finance the purchase of real estate, the portion of the rental income attributable to that debt will be taxable as UBIT.

For example, if the average acquisition indebtedness is $50 and the average adjusted basis is $100, 50 percent of each item of gross income from the property is included in UBTI.

A Self-Directed Roth IRA LLC subject to UBTI is taxed at the trust tax rate because an IRA is considered a trust. For 2011, a Self-Directed Roth IRA LLC subject to UBTI is taxed at the following rates:

  • $0 – $2,300 = 15%
  • $2,300 – $5,350 = $345 + 25%
  • $5,350 – $8,200 = $1,107.50 + 28%
  • $8200 – $11,200 = $1,905.50 + 33%
    Over $11,200 = $2,895.50 + 35%

The IRA Financial Group will take care of the entire setup of your Self-Directed Roth IRA LLC “Checkbook Control” structure. The whole process can be handled by phone, email, fax, or mail and typically takes between 7-21 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our IRA experts and tax and ERISA professionals are onsite greatly reducing the setup time and cost. Most importantly, each client of the IRA Financial Group is assigned a retirement tax professional to help with the establishment of the Self-Directed Roth IRA LLC “Checkbook Control” structure. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

To learn more about using a Self-Directed Roth IRA LLC to invest in real estate, please contact one of our Self-Directed Roth IRA Experts at 800-472-0646 for more information.

Aug 22

The Special Self-Directed IRA for Hard Money Lenders

Hard money lending specialized self-directed IRA was designed specifically for hard moneylenders and real estate investors.

IRA Financial Group, the leading provider of self-directed IRA LLC solutions, announces the introduction of the special self directed IRA LLC solution for hard money lenders. The special hard money lender self-directed IRA LLC solution was introduced specifically for hard money lenders in the real estate industry in order to take advantage of the attractive returns available for private financing of real estate transactions. “We have experienced significant demand for a specialized self-directed IRA product that focuses on the hard money lending industry, specifically in the real estate industry, “ stated Adam Bergman, an in-house tax attorney with the IRA Financial Group. “IRA Financial Group hard money lending self-directed IRA LLC solution will allow hard money lenders with IRA or 401(k) plan funds to make loans and defer the tax due on the returns, “ stated Mr. Bergman.

The primary advantage of using a Self Directed IRA LLC to make hard money loans is that the loan can be made by simply writing a check. In addition, all income and gains associated with the self directed IRA hard money loan would grow tax-deferred.

IRA Financial Group Introduces the Special Self-Directed IRA for Hard Money LendersWith IRA Financial Group’s self directed IRA hard money lending solution, traditional IRA or Roth IRA funds can be used to buy real estate throughout the United States and globally in a tax-deferred account by simply writing a check. “Even with real estate prices increasing, our clients are still finding attractive real estate opportunities for the self-directed IRA LLC and gaining the opportunity to move quickly on a potential investment, “ stated Adam Bergman, an in-house tax attorney with the IRA Financial Group. “Using a Self Directed IRA LLC to buy real estate presents a number of exciting tax planning opportunities, “ stated Mr. Bergman.

IRA Financial Group’s Self-Directed IRA for hard money lenders, is an IRS approved structure that allows one to use their retirement funds to make hard money and real estate loans tax-free and without custodian consent. The Self-Directed IRA LLC involves the establishment of a limited liability company (“LLC”) that is owned by the IRA (care of the Roth IRA custodian) and managed by the IRA holder or any third-party. As manager of the IRA LLC, the IRA owner will have control over the IRA assets to make traditional as well as non-traditional investments, such as hard money loans by simply writing a check

Using IRA Financial Group’s self directed IRA LLC with “checkbook control” solution to make hard money loan investments offers hard money lenders the ability to make loans i quickly without any custodian delay. “By using a “checkbook control” self-directed IRA LLC our clients have been able to make hard money loans quickly and without any custodian delay,” stated Mr. Bergman.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control” Self Directed IRA Facilitator. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

Aug 20

The Facts About the Checkbook IRA

About twenty years ago, the self-directed IRA was introduced to the masses.  This type of retirement account allowed you to invest your retirement funds in any number of investments, including real estate.  Under Section 408 of the Internal Revenue Code, so long as you don’t directly benefit from it, you can use any or all of your funds in an IRA to purchase real estate.  However, up until 1996, you had to use a custodian to do everything, thus incurring costly fees.

Then in ’96, in the case of Swanson vs. Commissioner, came a new feature of the self-directed IRA: checkbook control. This allowed you to completely take over your IRA and how it was invested without needing a costly custodian.  Under this type of format, a self-directed IRA is funded with money that’s rolled over from another retirement account.  Then, an LLC is created which purchases all the membership units.  Now the LLC holds your money and you can invest freely.

Self-Directed IRAs with checkbook control puts you in controlSo, if you’re not into following the markets and have no clue between a bear and a bull market, you can invest in things that you are familiar with.  Here we’ll focus on real estate, but there’s so much more you can invest in from small businesses and certain precious metals.

As for real estate, you can now buy, sell and manage all sorts of properties, from domestic and foreign to commercial and residential.  The funds are in a normal business account and as the account manager you can write checks and sign contracts with it.  This affords you the ability to quickly act on new properties and not have to go through a custodian, which can cause you to miss out on that great new property that just became available while you wait for them to act on your behalf.

There are restrictions when using a checkbook control self-directed IRA.  Foremost, you (or your family) cannot use the property as a primary residence or vacation home for example.  Further, you cannot earn a salary from work done with a property (such as maintenance).  Also, just like a regular IRA, if you withdraw from the account before you reach age 59 1/2, you will incur a 10% early withdrawal penalty.

Some other things to consider:

  • Rental income is tax-deferred and there is no capital gains tax when you sell the IRA-owned property.
  • Any property you purchase with your IRA is owned by the IRA, not you personally.
  • You can invest in raw land, real estate contracts or trust deeds that back mortgages.  If you do not have enough money to make the full purchase, you can combine your resources with others to get the deal done.
  • When buying a property, all the money must come from the IRA and not from you personally.  Further, all costs (like closing costs, maintenance fees and taxes) must also come from the IRA.
  • All income from IRA properties must go directly into the IRA.
  • You cannot do business with family members including spouses, parents and children.

There are fees to be paid and you must still have a custodian, but since you do not need your custodian to deal with every transaction you need to make, you’ll save a ton of money when doing it yourself.

If you’re looking for more information about self-directed IRAs with checkbook control, contact the tax experts at the IRA Financial Group @ 800.472.0646.  They can walk you through what can and can’t be done with an IRA as well as set one up for you.  All at a fair price.  Stop wasting time with something you don’t understand and start making money with your personal knowledge and nohow!

Aug 19

Self-Directed IRAs Offering New Funding Opportunities for Entrepreneurs

Start-up Entrepreneurs using IRA and 401(k) Plan funds of family members and friends to help fund new start-up business opportunities

IRA Financial Group, the leading provider of “checkbook control” self directed IRA and Solo 401(k) Plans has announced the finding of it’s internal client report which shows that a large number of entrepreneurs seeking funding for their new start-up business are turning to their family members and friends available retirement assets as a source of financing. “Many of our clients seeking funding for a new business have been able to tap into their family members and friends retirement accounts as a means of financing their new business, “ stated Adam Bergman, a tax attorney with the IRA Financial Group. “The attitude of many of these investors is that their retirement investments have not been doing very well so they might as well invest those funds into a business of a family member of friend,” stated Mr. Bergman.

Self-Directed IRAs Offering New Funding Opportunities for EntrepreneursWhen it comes to using retirement funds to make an investment is an active trade or business, the Internal revenue Service (IRS) proscribes certain prohibited transaction rules which can be found under Internal Revenue Code (IRC) Section 4975. Under IRC 4975, an IRA holder cannot engage in any transaction with a disqualified person. The term “Disqualified Person” includes virtually anyone having a direct or indirect relationship to the plan other than as a participant or beneficiary. Under Internal Revenue Code Section 4975, the principal categories of Disqualified Persons are: (i) the IRA participant (holder), (ii) the IRA participant’s spouse, (iii) the IRA’s participant’s ancestors and lineal descendants (mother/father/daughter/son), (iv) spouses of the IRA participant’s lineal descendants (son/daughter’s spouse), (v) fiduciaries of the plan (custodian or trustee), (vi) investment managers and advisers, or any corporation, partnership, trust, or (vii) an estate in which the IRA holder has a 50% or greater interest. However, according to IRC Section 4975, siblings, aunts, uncles, cousins, and friends are not included in the definition of Disqualified Persons. “Therefore, entrepreneurs are able to seek IRA business financing from non-disqualified family members, such as siblings, aunts, uncles, cousins, and friends,” stated Maria Ritsi, a senior paralegal with the IRA Financial Group.

According to Mr. Bergman, after confirming that the investment into the start-up would not produce a prohibited transaction under IRC 4975, it is crucial that the individual verify that the transaction does not trigger the unrelated business taxable income (UBTI or UBIT) tax. The UBTI tax is triggered when an individual uses retirement funds to invest in an active trade or business through a passthrough entity, such as an LLC or using margin. “In the case of an investment into a start-up, if the business is set-up a C Corporation then the UBTI tax would not apply, however, if the business is an LLC, then the UBTI could be triggered,” stated Mr. Bergman. According to Mr. Bergman, one way of minimizing the impact of the UBTI tax is to include a tax distribution section in the LLC Operating Agreement, which would require the operating business to pay any of the UBTI tax due if no distribution of cash is made to the IRA investor.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.  To learn more about self-directed IRAs and Solo 401(k) plans, please contact a tax expert at 800.472.0646.

Aug 16

The Self Directed IRA Checkbook Control Facts

A Self-Directed IRA LLC with “Checkbook Control” plan is an IRS and tax court approved structure that will allow you to use your IRA funds to make almost any type of investment, including real estate, tax liens, precious metals, foreign currency and much more tax free!

With a “checkbook control” Self Directed IRA LLC you will never have to seek the consent of a custodian to make an investment or be subject to excessive custodian account fees based on account value and per transaction.

To establish the Self-Directed IRA LLC “Checkbook Control” structure, a limited liability company (“LLC”) is established that is owned by the Self Directed IRA LLC With Checkbook ControlIRA and managed by the IRA account owner (you). The IRA owner’s funds are then transferred by the passive custodian to the new IRA LLC bank account. As the manager of the IRA LLC, the IRA owner will have the authority to make investment decisions on behalf of the IRA providing the IRA owner with “checkbook control” over his or her IRA funds.

With a “checkbook control” Self Directed IRA LLC you will never have to seek the consent of a custodian to make an investment or be subject to excessive custodian account fees based on account value and per transaction.

By having “checkbook control” over your IRA funds you will gain the following advantages:

Investment Opportunities: A Self-Directed IRA LLC with “Checkbook Control” will allow you to invest in almost any type of investment opportunity that you discover, including: Real Estate (rentals, foreclosures, raw land, tax liens etc.), private businesses, precious metals, foreign currency, stock options, hard money & peer to peer lending; you’re only limit is your imagination.  Of course, you can still make traditional investments, such as stock and mutual fund investments, as you did with a regular IRA. The income from these IRA investments will flow back into your IRA tax-free.

“Control”: With a Self-Directed IRA LLC, you will no longer have to get each investment approved by the custodian of your account. Instead, as manager of the Self-Directed IRA LLC, all IRA investment decisions are truly yours. To make an investment, simply write a check or wire funds straight from your Self Directed IRA LLC bank account.

Example 1: Joe has a Self-Directed IRA LLC set-up by the IRA Financial Group. Joe has established his Self Directed IRA LLC bank account with Bank of America. The name of Joe’s LLC is Joe Smith IRA LLC. Joe wishes to use his IRA funds to purchase a home from Steve, an unrelated third-party (non-disqualified person). Steve is anxious to close the transaction as soon as possible. With a “checkbook control” Self-Directed IRA LLC, Joe can simply write a check using the funds from his IRA LLC account or can wire the funds directly from the account to Steve. Joe, as manager of the LLC, no longer is required to seek the consent of the IRA custodian before making the real estate purchase. In contrast, with a regular Self- Directed IRA without “checkbook control” Joe may not be able to make the real estate purchase since seeking custodian approval would likely take too much time.

Example 2: Joe has a Self0Directed IRA LLC set-up by the IRA Financial Group. Joe has established his Self Directed IRA LLC bank account with Bank of America. The name of Joe’s LLC is Joe Smith IRA LLC. Joe wishes to use his IRA funds to invest in tax lien certificates via auction. Purchasing tax lien certificates requires Joe to make the tax lien payment at the auction. With a “checkbook control” Self-Directed IRA LLC, Joe can simply bring his LLC checkbook to the auction or secure a certified check from the bank in order to make payments at the auction. In contrast, with a regular Self-Directed IRA without “checkbook control” Joe would not be able to make tax lien certificate investments because he would need IRA custodian approval before each tax lien certificate purchase and would not have sufficient time to seek the consent of the custodian.

Lower Custodian Fees: With a Self-Directed IRA LLC with “checkbook control” you can save a lot of money on IRA custodian fees. With a Self-Directed IRA LLC with “checkbook control” you no longer have to pay excessive custodian fees based on account value and transaction fees. Instead, with a “checkbook control” Self-Directed IRA LLC, an FDIC backed IRS approved passive custodian is used. The custodian in the “checkbook control” Self Directed IRA LLC structure is referred to as a “passive” custodian largely because the custodian is not required to approve any IRA related investment and simply serves the role of satisfying IRS regulations. By using a Self Directed IRA LLC with “checkbook control” you can take advantage of all the benefits of self-directing your retirement assets without incurring excessive custodian fees and custodian created delays since you as manager of the IRA LLC have “checkbook control” over your IRA funds (“checkbook control”).

See how much you can save in custodian fees with a Self Directed IRA LLC Structure:

Self Directed IRA Custodian
Checkbook Control
Annual Fees – Assuming $100,000 IRA Value and 2 Transactions per year
Equity Trust
No
Approximately $640 per year – Fees may increase based on increase in value of investment(s)
Entrust

No

Approximately $765 per year – Fees may increase based on increase in value of investment(s)
Pensco Trust
No
Approximately $675 per year – Fees may increase based on increase in value of investment(s)
IRA Services

Yes

$180 flat fee for Year 1
$115 flat fee for Year 2+
Sunwest Trust
Yes
$275 flat fee for Year 1
$225 flat fee for Year 2+

Below are a number of examples that demonstrate the financial savings one can enjoy using a “checkbook control” Self Directed IRA LLC versus a Self Directed IRA without “checkbook control.

Example 1: Jim, who resides in Missouri, wants to use his retirement funds to invest in real estate and is debating between using a “checkbook control” Self Directed IRA LLC and a Self Directed IRA without “checkbook control”.

If Jim selected Equity Trust as the custodian, Jim would be paying approximately $640 each year for a custodian plus will require custodian approval to purchase or sell a real estate investment. Over a 4 year period, Jim would pay approximately $2560 to Equity Trust for custodian services.

Alternatively, if Jim elected to use the IRA Financial Group’s Self Directed IRA LLC “checkbook control” structure, Jim would pay approximately $1400 in year 1. However, for every year thereafter Jim would only be required to pay approximately $105 per year for maintenance of the “checkbook control” structure. Thus, over a 4 year period, Jim would be required to pay approximately $1715, a saving of $845 or a savings of approximately 33%.

Example 2: Beth, who resides in Michigan, wants to use her retirement funds to invest in precious metals and is debating between using a “checkbook control” Self Directed IRA LLC and a Self Directed IRA without “checkbook control”.

If Beth selected Entrust as the custodian, Beth would be paying approximately $765 each year for a custodian plus will require custodian approval to purchase or sell precious metals. In addition, Beth would have to pay approximately $250 a year for depository services to store the metals. Over a 3-year period, Beth would pay approximately $3045 to Entrust for custodian services.

Alternatively, if Beth elected to use the IRA Financial Group’s Self Directed IRA LLC “checkbook control” structure, Beth would pay approximately $1400 in year 1. However, for every year thereafter would only be required to pay approximately $105 per year for maintenance of the “checkbook control” structure. Thus, over a 3 year period, Beth would be required to pay approximately $1700, a saving of $1345 or a savings of approximately 44%.

Example 3: Dan, who resides in Kentucky, wants to use his retirement funds to invest in real estate and is debating between using a “checkbook control” Self Directed IRA LLC with the IRA Financial Group and a Self Directed IRA without “checkbook control”.

If Dan selected Pensco Trust as the custodian, Dan would be paying approximately $675 each year for a custodian plus will require custodian approval to purchase or sell a real estate investment. Over a 5 year period, Dan would pay approximately $3375 to Pensco Trust for custodian services.

Alternatively, if Dan elected to use the IRA Financial Group’s Self Directed IRA LLC “checkbook control” structure, Dan would pay approximately $1400 in year 1. However, for every year thereafter Dan would only be required to pay approximately $105 per year for maintenance of the “checkbook control” structure. Thus, over a 5 year period, Jim would be required to pay approximately $1820, a saving of $1555 or a savings of approximately 46%.

Example 4: Lisa, who resides in Iowa, wants to use her retirement funds to invest in tax liens and is debating between using a “checkbook control” Self Directed IRA LLC and a Self Directed IRA without “checkbook control”.

If Lisa selected Entrust as the custodian, Lisa would be paying approximately $765 each year for a custodian plus will require custodian approval to make each tax lien purchase. Over a 7-year period, Lisa would pay approximately $5300 to Entrust for custodian services.

Alternatively, if Lisa elected to use the IRA Financial Group’s Self Directed IRA LLC “checkbook control” structure, Lisa would pay approximately $1400 in year 1. However, for every year thereafter would only be required to pay approximately $105 per year for maintenance of the “checkbook control” structure. Thus, over a 7-year period, Lisa would be required to pay approximately $2030, a saving of $3270 or a savings of approximately 62%.

Speed: With a Self-Directed IRA LLC with “Checkbook Control”, you, as manager of the IRA LLC, can act quickly on a great investment opportunity. With a Self-Directed IRA LLC, when you find an investment that you want to make with your IRA funds, simply write a check or wire the funds straight from your Self-Directed IRA LLC bank account to make the investment. The Self-Directed IRA LLC allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

Diversification: With a Self-Directed IRA LLC, you can invest in almost any type of investment, including real estate, allowing you to diversify and better protect your retirement portfolio.

Access: With a Self-Directed IRA LLC with “checkbook control”, you, as manager of the IRA LLC, will have direct access to your IRA funds allowing you to make an investment quickly and efficiently. There is no need to obtain approvals from your custodian, or deal with time delays in awaiting approval from your custodian or paying any review fees. Instead making an IRA investment is as simple as writing a check or wiring funds directly from your IRA LLC checking account.

The IRA Financial Group will take care of setting up your entire Self Directed IRA LLC “Checkbook Control” structure. The whole process can be handled by phone, email, fax, or mail and typically takes between 7-21 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our IRA experts and tax and ERISA professionals are on site greatly reducing the set-up time and cost. Most importantly, each client of the IRA Financial Group is assigned a tax professional to help with the establishment of the Self-Directed IRA LLC “Checkbook Control structure. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.  For more information, please contact an IRA expert @ 800.472.0646!

Plus, don’t forget to follow us on Twitter (@BergmanIRA) for updates on new blog posts, interesting articles and helpful links!

Aug 14

Types of Non-Permitted IRA Transactions

The Internal Revenue Code does not describe what a Self Directed IRA can invest in, only what it cannot invest in. Internal Revenue Code Sections 408 & 4975 prohibits Disqualified Persons from engaging in certain type of transactions. The purpose of these rules is to encourage the use of IRAs for accumulation of retirement savings and to prohibit those in control of IRAs from taking advantage of the tax benefits for their personal account.

Who is a “Disqualified Person”?

The IRS has restricted certain transactions between the IRA and a “disqualified person”. The rationale behind these rules was a congressional assumption that certain transactions between certain parties are inherently suspicious and should be disallowed.

The definition of a “disqualified person” (Internal Revenue Code Section 4975(e)(2)) extends into a variety of related party scenarios, but generally includes the IRA holder, any ancestors or lineal descendants of the IRA holder, and entities in which the IRA holder holds a controlling equity or management interest. In essence, under Code Section 4975, a “Disqualified Person” means:

     A fiduciary (e.g., the IRA holder, participant, or person having authority over making IRA investments),

     A person providing services to the plan (e.g., the trustee or custodian),

     An employer, any of whose employees are covered by the plan (this generally is not applicable to IRAs but dos include the owner of a business that establishes a qualified retirement plan),

     An employee organization any of whose members are covered by the Plan (this generally is not applicable to IRAs),

     A 50 percent owner of C or D above,

     A family member of A, B, C, or D above (family members include the fiduciary’s spouse, parents, grandparents, children, grandchildren, spouses of the fiduciary’s children and grandchildren (but not parents-in-law),

     An entity (corporation, partnership, trust or estate) owned or controlled more than 50 percent by A, B, C, D, or E. Whether an entity is a disqualified person is determined by considering the indirect stock-holdings/interest which would be taken into account under Code Sec. 267(c), except that members of a fiduciary’s family are the family members under Code Sec. 4975(e)(6) (lineal descendants) for purposes of determining disqualified persons.

     A 10 percent owner, officer, director, or highly compensated employee of C, D, E, or G,

     A 10 percent or more partner or joint venturer of a person described in C, D, E, or G.

Note: brothers, sisters, aunts, uncles, cousins, step-brothers, step-sisters, and friends are NOT treated as “Disqualified Persons”.

Use a self-directed IRA to invest in just about anythingProhibited Transactions

Pursuant to Internal Revenue Code Section 4975, a Self Directed IRA is prohibited from engaging in certain types of transactions. The types of prohibited transactions can be best understood by dividing them into three categories: Direct Prohibited Transactions, Self-Dealing Prohibited Transactions, and Conflict of Interest Prohibited Transactions.

Direct Prohibited Transactions

Subject to the exemptions under Internal Revenue Code Section 4975(d), a “Direct Prohibited Transaction” generally involves one of the following:

4975(c)(1)(A): The direct or indirect Sale, exchange, or leasing of property between an IRA and a “disqualified person”

Example 1: Jack sells an interest in a piece of property owned by his IRA to his son.

Example 2: Judy leases real estate owned by her IRA to her father.

Example 3: Brian uses his IRA funds to purchase an LLC interest owned by his son.

4975(c)(1)(B): The direct or indirect lending of money or other extension of credit between an IRA and a “disqualified person”

Example 1: Keith lends his wife $10,000 from his IRA.

Example 2: Amy personally guarantees a bank loan to her IRA.

Example 3: Peter uses IRA funds to lend an entity owned and controlled by his mother $60,000.

4975(c)(1)(C): The direct or indirect furnishing of goods, services, or facilities between an IRA and a “disqualified person”

Example 1: Eric buys a piece of property with his IRA funds and hires his father to work on the property.

Example 2: Marilyn buys a home with her IRA funds and personally fixes it up.

Example 3: Sara owns an apartment building with her IRA and hires her father to manage the property.

4975(c)(1)(D): The direct or indirect transfer to a “disqualified person” of income or assets of an IRA

Example 1: Dan is in a financial jam and takes $12,000 from his IRA to pay his mortgage and credit card bill.

Example 2: Steve uses his IRA to purchase a rental property and hires his friend to manage the property. The friend then enters into a contract with Steve and transfers those funds back to Steve.

Example 3: Victoria invests her IRA funds in a real estate fund and then receives a salary for managing the fund.

Self-Dealing Prohibited Transactions

Subject to the exemptions under Internal Revenue Code Section 4975(d), a “Self-Dealing Prohibited Transaction” generally involves one of the following:

4975(c)(1)(E): The direct or indirect act by a “Disqualified Person” who is a fiduciary whereby he/she deals with income or assets of the IRA in his/her own interest or for his/her own account

Example 1: Jessica who is a real estate agent uses her IRA funds to buy a home and earns a commission from the sale.

Example 2: James wants to buy a piece of property for $110,000 and would like to own the property personally but does not have sufficient funds. As a result, James uses $90,000 from in his IRA and $20,000 personally to make the investment.

Example 3: Dana uses her IRA to funds to invest in a real estate fund managed by her Son. Dana’s son receives a bonus for securing Dana’s investment.

Conflict of Interest Prohibited Transactions

Subject to the exemptions under Internal Revenue Code Section 4975(d), a “Conflict of Interest Prohibited Transaction” generally involves one of the following:

4975(c)(i)(F): Receipt of any consideration by a “Disqualified Person” who is a fiduciary for his/her own account from any party dealing with the IRA in connection with a transaction involving income or assets of the IRA

Example 1: Joe uses his IRA funds to loan money to a company in which he manages and controls but owns a small ownership interest in.

Example 2: Michelle uses her IRA to lend money to a business that she works for in order to secure a promotion.

Example 3: Brandon uses his IRA funds to invest in a hedge fund that he manages and where his management fee is based on the total value of the fund’s assets.

Statutory Exemptions

Under Internal Revenue Code Section 4975(d), Congress created certain statutory exemptions from the prohibited transaction rules outlined under Internal Revenue Code Section 4975(c). For these certain transaction, Congress believed there is a legitimate reason to permit them. For these transactions, Congress has issued a blanket statutory exemptions permitting these transactions assuming that certain requirements specified are satisfied. Below is a list of some of the statutory exemptions found in Internal Revenue Code Section 4975(d) that apply to IRAs:

   Any contract with a disqualified person for office space, legal, accounting or other services necessary for the operation of the IRA as long as reasonable compensation is paid.Note – this exemption does not apply to an IRA fiduciary (the IRA holder) as per Treasury Regulation Section 54.4975-6(a)(5).

     The provision of ancillary services to an IRA by a bank trustee

     Receipt by a disqualified person of any benefit to which he may be entitled as a participant or beneficiary in the plan, so long as the benefit is computed and paid on a basis which is consistent with the terms of the plan as applied to all other participants and beneficiaries;

Life Insurance and Certain Collectibles

In general, an IRA cannot Invest in life insurance contracts or collectibles defined below:

     Any work of art

     Any metal or gem

     Any alcoholic beverage

     Any rug or antique

     Any stamp

     Most coins

Types of Collectibles That may be Purchased Using IRA Funds

     one, one-half, one-quarter or one-tenth ounce U.S. gold coins (American Gold Eagle coins are the only gold coins specifically approved for IRAs. Other gold coins, to be eligible as IRA investments, must be at least .995 fine (99.5% pure);

     one ounce silver coins minted by the Treasury Department;

     any coin issued under the laws of any state;

     a platinum coin described in 31 USCS 5112(k) ; and

     gold, silver, platinum or palladium bullion (other than bullion that is made into a coin) of a certain fineness that is in the physical possession of a trustee that meets the requirements for IRA trustees under Code Sec. 408(a).

S Corporation Stock

Because of the shareholder restrictions imposed on “S” Corporations, an IRA cannot own stock in an S Corporation. Note – an IRA can own stock in a “C” Corporation.

In general, an IRA can generally make any investment other than the following categories:

  • Collectibles
  • Stock of an S Corporation
  • Life Insurance
  • Any investment involving a “disqualified person”

When using an IRA to invest in things other than the usual stocks and bonds, be sure to follow the rules so the IRS doesn’t come after you and your hard-earned money.  The tax experts at the IRA Financial Group can help reduce your risk and steer you to the best financial decisions when it comes to meeting (and exceeding) your retirement goals.  Give them a call at 800.472.0646 or visit their website today!

Aug 13

Tax Consultation Service Specifically for Self-Directed IRA Real Estate Investors

New tax consulting and advisory service with focus on the IRS rules concerning using a self-directed IRA to purchase real estate

IRA Financial Group, the leading provider of self-directed IRA LLC solutions, announces the introduction of its new tax consultation and advisory service specifically geared towards self-directed IRA real estate investors. “The new self-directed IRA real estate tax consultation service will be offered at no cost to our self-directed IRA clients, “ stated Susan Glass, a tax professional with the IRA Financial Group. IRA Financial Group’s new self-directed IRA real estate tax advisory service will help our real estate IRA investors navigate the IRS rules, including the prohibited transaction and unrelated business taxable income (UBTI) rules, as they pertain to making real estate investments. “The experience of our tax professionals in the area of self-directed IRA real estate investing is unmatched, “ stated Adam Bergman, an in-house tax attorney with the IRA Financial Group.

IRA Financial Group Introduces New Tax Consultation Service Specifically for Self-Directed IRA Real Estate InvestorsEach client of the IRA Financial Group will have direct and unlimited access to our in-house tax and ERISA professionals. Unlike other companies, IRA Financial group will not limit your access to our tax professionals; in fact, you will likely have the opportunity to talk with one of them before you even get started. In addition, each client of the IRA Financial Group is assigned a retirement tax professional to assist in establishing an IRS compliant Self-Directed IRA structure.

IRA Financial Group’s Self-Directed IRA for real estate investors, also called a real estate IRA with checkbook control, is an IRS approved structure that allows one to use their retirement funds to make real estate and other investments tax-free and without custodian consent. The Self-Directed IRA LLC involves the establishment of a limited liability company (“LLC”) that is owned by the IRA (care of the Roth IRA custodian) and managed by the IRA holder or any third-party. As manager of the IRA LLC, the IRA owner will have control over the IRA assets to make traditional as well as non-traditional investments, such as real estate.

The new self- directed IRA real estate tax advisory service is a perfect tool for all real estate investors looking for a detailed overview of all the IRS rules concerning the use of IRA funds to purchase real estate. The tax advisory service will include advice concerning the IRS prohibited transaction rules, the application of the UBTI and unrelated debt financed income tax rules (UDFI), as well as the federal income tax rules relating to the use an IRA LLC in connection with the purchase of real estate.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control Self Directed IRA Facilitator. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.  Be sure to follow us on Twitter (@BergmanIRA) for updates on new blog posts, interesting articles and helpful links!