Dec 12

New Bitcoin Future Market to Increase Popularity of Cryptocurrencies for Self-Directed IRA Investors

Bitcoin futures contract expected to allow retirement account investors using cash to purchase future contracts without margin

IRA Financial Group, the leading provider of self-directed IRA LLC and Solo 401(k) Plans, expects that the new Bitcoin futures exchange will increase the popularity for Bitcoins and other cryptocurrencies for all investors, including self-directed IRA investors.

New Bitcoin Future Market to Increase Popularity of Cryptocurrencies for Self-Directed IRA InvestorsThe launch of the bitcoin futures by CME Group, one of the largest exchange groups in the world, represents a milestone for the digital currency. Bitcoin has been the best-performing asset in financial markets in 2017 rising approximately 1500%. According to Adam Bergman, partner with the IRA Financial Group, “the Bitcoin exchange will allow two parties to exchange Bitcoin at a specified price at an agreed upon date in the future. Because CME’s bitcoin futures will settle in cash, retirement investors will be able to use their IRA or 401(k) funds to purchase future contracts and generate tax-deferred or tax-free returns.”

IRA Financial Group & IRA Financial Trust Company’s Crypto IRA platform with checkbook control will allow retirement account holders to buy, sell, or hold Bitcoins and other cryptocurrency assets and generate tax-deferred or tax-free gains, in the case of a Roth IRA. The primary advantage of using a self-directed IRA LLC to make Bitcoin investments is that all income and gains associated with the IRA investment grow tax-deferred or tax-free in the case of a Roth IRA.

IRA Financial Group & IRA Financial Trust Company has partnered to offer a Bitcoin IRA LLC platform for cryptocurrency investors. The self-directed IRA LLC is an IRS approved structure that allows one to use their retirement funds to make Bitcoin and other investments tax-free and without custodian consent.

IRA Financial Group is the market’s leading provider of self-directed retirement plans. 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.

The IRA Financial Trust Company, a self-directed IRA custodian, was founded by Adam Bergman, a partner with the IRA Financial Group.

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

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Dec 04

Tax Efficiency is Most Popular Reason for Investors Establishing a Self-Directed IRA to Purchase Cryptocurrencies

Opportunity to generate tax-free income and gains from cryptocurrency investments most popular reason behind using a self-directed Roth IRA to make investment

IRA Financial Group, the leading provider of self-directed IRA LLC and Solo 401(k) Plan announces the finding of its internal report which concluded that tax efficiency was the primary reason behind investors using a self-directed IRA or Roth IRA to purchase cryptocurrencies, such as bitcoins. “The primary advantage of using a self-directed IRA LLC to make Bitcoin investments is that all income and gains associated with the IRA investment grow tax-deferred or tax-free in the case of a Roth IRA,” stated Adam Bergman, a partner with the IRA Financial Group.

IRA Financial Group & IRA Financial Trust Company has partnered to offer a Bitcoin IRA LLC platform for cryptocurrency investors. The self-directed IRA LLC is an IRS approved structure that allows one to use their retirement funds to make Bitcoin and other investments tax-free and without custodian consent.

Tax Efficiency is Most Popular Reason for Investors Establishing a Self-Directed IRA to Purchase CryptocurrenciesIRA Financial Group is the market’s leading provider of self-directed retirement plans, including the Bitcoin IRA and cryptocurrency self-directed IRA. 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.

The IRA Financial Trust Company, a self-directed IRA custodian, was founded by Adam Bergman, a partner with the IRA Financial Group.

Adam Bergman, IRA Financial Group partner, has written six books the topic of self-directed retirement plans, including, “The Checkbook IRA”, “Going Solo,” Turning Retirement Funds into Start-Up Dreams, Solo 401(k) Plan in a Nutshell, Self-Directed IRA in a Nutshell, and in God We Trust in Roth We Prosper.

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

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Nov 20

Maximum Contributions for Your Self Directed IRA and Roth IRA

The maximum contribution limit for a self-directed IRA for 2017 is $5,500 or $6,500 if you’re age 50 or older, or your taxable compensation for the year, if less. Contributions to a self-directed Roth IRA may be limited based on your filing status and income.

Contributions made to a self-directed IRA LLC must be made to the IRA administrator/custodian and may not be contributed directly to the LLC. Once the IRA contribution is made to the IRA administrator/custodian, the funds can then be transferred to the IRA LLC.

Is my IRA contribution deductible on my tax return?

If neither you nor your spouse is covered by an employer retirement plan, such as a 401(k), your deduction is allowed in full.

For contributions to a traditional IRA, the amount you can deduct may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. In the case of a Roth IRA, contributions aren’t deductible.

Maximum Contributions for Your Self Directed IRA and Roth IRACan I contribute to a traditional or Roth Self-Directed IRA if I’m covered by a retirement plan at work?

Yes, you can contribute to a traditional and/or Roth self-directed IRA even if you participate in an employer-sponsored retirement plan (including a SEP or SIMPLE IRA plan). If you or your spouse is covered by an employer-sponsored retirement plan, such as a 401(k) plan and your income exceeds certain levels, you may not be able to deduct your entire contribution.

Can I establish a self-directed IRA if only one spouse has earned income for the year?

Yes. If you file a joint return, you and your spouse can each make IRA contributions even if only one of you has taxable compensation. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return and cannot exceed the maximum IRA contributions for the year (for 2017 $5500 or $6500 if over the age of 50). It doesn’t matter which spouse earned the compensation.

How can I make a Roth IRA contribution if I earned too much money in 2017?

For 2017, if your modified adjusted gross income is below $181,000 and you file a joint return, you can make a Roth IRA contribution. For those who earned greater than $181,000 during the year, the IRS provides a formula, which will set forth the reduced maximum amount of Roth IRA contributions permitted for the year, if any.

One way to circumvent the Roth IRA income threshold rules, if to simply make an after-tax traditional IRA contribution and then convert the Traditional IRA into a Roth IRA. Since the Traditional IRA contribution was made after-tax there would be no tax on the Roth IRA conversion. This tactic was made possible when the IRS removed the income level restrictions for making Roth conversions in 2010.

Can I Make IRA contributions after age 70½

You can’t make regular contributions to a traditional IRA in the year you reach 70½ and older. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.

To learn more about the self-directed IRA and self-directed Roth IRA contribution rules, please contact a self-directed IRA tax expert at 800-472-0646.

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Nov 16

The Secret to the Self-Directed Roth IRA

In 1997, Congress introduced the Roth IRA to be like a traditional IRA, but with a few attractive modifications. The big advantage of a Roth IRA is that if you qualify to make contributions, all distributions from the Roth IRA are tax-free – even the investment returns – as long as the distributions meet certain requirements. In addition, unlike traditional IRAs, you may contribute to a Roth IRA for as long as you continue to have earned income (in the case of a traditional IRA, you can’t make contributions after you reach age 701/2).

NEW RULES FOR CONVERSIONS FROM IRAS TO ROTH IRAS

For tax years starting in 2011, the $100,000 modified adjusted gross income limit for conversations to Roth IRA is eliminated and married taxpayers filing a separate return can now convert amounts to a Roth IRA.

The Self-Directed Roth IRA LLC Secret

Alternative investments such as real estate have always been permitted in IRAs, but few people seemed to know about this option- until the last several years. This is because large financial institutions have little incentive to recommend something other than stocks, bonds or mutual funds which bring in extremely profitable commissions and fees for them.

The Secret to the Self-Directed Roth IRAThere are approximately 2.5 million Self-Directed IRA accounts in the United States, a large portion of which are Roth IRA accounts. In the last several years, the number of Self-Directed IRA LLC accounts has grown significantly. The significant increase in the number of Self-Directed IRAs formed can be largely attributed due to the poor performance of the stock market, the growth of the real estate market, the lack of liquidity in the small business loan market, and the increase in media coverage by the Wall Street Journal, CNBC, The New York Times, Business Week, and some of the other major financial media companies.

It is not entirely uncommon for a tax or financial advisor to have not heard of self-directed IRAs given the fact that the traditional financial institutions have concealed their benefits due to their focus on selling the more profitable equities, bonds, and mutual funds.

The Self-Directed Roth IRA LLC Solution

The Self-Directed IRA LLC structure was affirmed in the Tax Court case Swanson v. Commissioner, 106 T.C. 76 (1996), and further confirmed by the IRS in Field Service Advisory (FSA) 200128011 (April 6, 2001).

A Self-Directed Roth IRA LLC offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. Tired of being forced to invest in stocks or mutual funds? Have an investment opportunity, such as real estate or a business investment that you would love to make with your Roth IRA funds? Then the Self-Directed Roth IRA LLC is your solution. In addition to the tremendous Roth IRA benefits (tax-free profits, tax deductions, asset protection and estate planning), the Self-Directed Roth IRA LLC allows you to invest tax-free in investments that you know and understand. Aside from life insurance, collectibles and certain “prohibited transaction” investments outlined in Internal Revenue Code Section 4975, a Self-Directed IRA can invest in most commonly made investments, including real estate, private business entities, public stocks, private stocks, and commercial paper.

The self-directed Roth IRA LLC, similar to a Self-Directed IRA LLC, allows the IRA holder to:

  • Use the same Self-Directed Roth IRA LLC to purchase domestic and foreign real estate, private mortgages, gold and stocks, bonds and mutual funds inside the same plan and generate profits tax-free.
  • Purchase real estate foreclosures and tax liens on the spot, or make personal loans by simply writing a check and generate profits tax-free.
  • Buy your retirement home now at today’s prices, rent it out, and then move in tax-free at the age of 59 1/2!
  • Buy a vacation home now at today’s prices anywhere in the world, rent it out, and then use it tax-free at the age of 59 1/2!
  • Buy an office building now at today’s prices, rent it out, and then move your business in tax-free at the age of 59 1/2.

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 the Self-Directed Roth IRA LLC structure, contact one of our IRA Professionals at 800-IRA-0646 today!

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Nov 09

Rules for a Self-Directed IRA when Investing in Real Estate

A Self-Directed IRA LLC offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS and Department of Labor only describe the types of investments that are prohibited, which are very few.

The basis of the prohibited transaction rules are based on the premise that investments involving IRA and related parties are handled in a way that benefits the retirement account and not the IRA owner. The rules prohibit transactions between the IRA and certain individuals known as “disqualified persons”. These rules can be found in Internal Revenue Code Section 4975. In general, 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.

Rules for a Self-Directed IRA when Investing in Real EstateThe IRS permits using a Self-Directed IRA LLC to purchase real estate or raw land. Since you are the manager of the Self-Directed IRA LLC, making a real estate investment is as simple as writing a check from your Self-Directed IRA bank account. The advantage of purchasing real estate with your Self-Directed IRA LLC is that all gains are tax-deferred until a distribution is taken. In the case of a Roth Self-Directed IRA, all gains are tax-free.

For example, if you purchased a piece of property with your Self-Directed IRA LLC for $100,000 and you later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-deferred. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and in most cases state income tax.

When it comes to using a self-directed IRA to purchase real estate, there are a number of rules that should be followed in order to make sure the real estate IRA investment does not violate any of the IRS prohibited transaction rules.

  • The deposit and purchase price for the real estate property should be paid using Self-Directed IRA LLC funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used
  • All expenses, repairs, taxes incurred in connection with the Self-Directed IRA real estate investment should be paid using retirement funds – no personal funds should be used
  • If additional funds are required for improvements or other matters involving the real estate investments, all funds should come from the Self-Directed IRA or from a non “disqualified person”
  • If financing is needed for a real estate transaction, only nonrecourse financing should be used. A nonrecourse loan is a loan that is not personally guaranteed and whereby the lender’s only recourse is against the property and not against the borrower.
  • The IRA holder or “disqualified person” in connection with the real estate investment should perform no services in connection with the use of self-directed IRA LLC. In general, other than standard management type of services (necessary and required tasks in connection with the maintenance of the LLC), no active services should be performed by the LLC manager or a “disqualified person” with respect to the real estate transaction.
  • Title of the real estate purchased should be in the name of the Self-Directed IRA LLC. For example, if Joe Smith established a Self-Directed IRA LLC and named the LLC XYZ, LLC, title to real estate purchased by Joe’s Self-Directed IRA LLC would be as follows: XYZ LLC
  • Although the use of a nonrecourse loan is permitted with a self-directed IRA when buying real estate, the use of a nonrecourse loan would impose a tax pursuant to IRC 514 on a percentage of the income generated by the IRA investment based off a percentage of the debt used in proportion to the amount of cash invested.
  • Keep good records of income and expenses generated by the real estate investment
  • All income, gains or losses from the Self-Directed IRA LLC real estate investment should be allocated to the IRA and be returned to the IRA LLC bank account
  • Make sure you perform adequate diligence on the property you will be purchasing especially if it is in a state you do not live in
  • Make sure you will not be engaging in any self-dealing real estate transaction which would involve buying or selling real estate that will personally benefit you or a “disqualified person”
  • If you need to make additional IRA contributions to your self-directed IRA, the contribution should be made to the IRA custodian/administrator and then the funds will be transferred to the IRA LLC.

Using a self-directed IRA LLC to buy real estate is quick and easy, however, there are a number of IRS rules and potential tax issues that must be addressed before making the self-directed IRA real estate investment.

For more information on using a self-directed IRA LLC to buy real estate, please contact a tax professional at 800-472-0646.

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Nov 07

IRA Financial Group & IRA Financial Trust Company Partner to Introduce Platform to Trade Cryptocurrency

New Crypto IRA Platform will allow one to use IRA or 401(k) funds to buy and sell bitcoins & other cryptocurrencies through special purpose LLC

IRA Financial Group, the leading provider of self-directed IRA LLC and Solo 401(k) Plan & IRA Financial Trust Company, a leading self-directed IRA custodian, announces that it has partnered to offer a platform for using IRA or 401(k) plan funds to purchase cryptocurrencies, such as bitcoins. The Bitcoin IRA platform will allow one to invest IRA or 401(k) plan funds via a special purpose limited liability company (“LLC”) that will be controlled by the IRA owner, as manager of the LLC. “The great thing about using a special purpose self-directed IRA LLC to purchase bitcoins with retirement funds is that you have total control over the bitcoin investment,” stated Adam Bergman, a partner with the IRA Financial Group.

IRA Financial Group & IRA Financial Trust Company Partner to Introduce Platform to Trade CryptocurrencyAccording to Mr. Bergman, one of the main issues with using a full-service IRA custodian to purchase cryptocurrencies is that due to the high volatility involved in the investment, relying on an IRA custodian to make investments will result in time delays and missed opportunities, which can have a negative financial impact on the IRA holder.

IRA Financial Group & IRA Financial Trust Company’s Crypto IRA platform with checkbook control will allow retirement account holders to buy, sell, or hold Bitcoins and other cryptocurrency assets and generate tax-deferred or tax-free gains, in the case of a Roth IRA. The primary advantage of using a self-directed IRA LLC to make Bitcoin investments is that all income and gains associated with the IRA investment grow tax-deferred or tax-free in the case of a Roth IRA.

IRA Financial Group & IRA Financial Trust Company has partnered to offer a Crypto self-directed IRA LLC platform for cryptocurrency investors. The self-directed IRA LLC is an IRS approved structure that allows one to use their retirement funds to make Bitcoin and other investments tax-free and without custodian consent.

IRA Financial Group is the market’s leading provider of self-directed retirement plans. 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.

The IRA Financial Trust Company, a self-directed IRA custodian, was founded by Adam Bergman, a partner with the IRA Financial Group.

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

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Nov 01

Is Your Self-Directed IRA Protected from Creditors?

Retirement accounts have become many Americans’ most valuable assets. That means it is vital that you have the ability to protect them from creditors, such as people who have won lawsuits against you.

In general, the asset/creditor protection strategies available to you depend on the type of retirement account you have (i.e. Traditional, IRA, Roth IRA, or 401(k) qualified plan, etc), your state residency, and whether the assets are yours or have been inherited.

Using a Self-Directed IRA LLC will offer you the ability to make a wide range of traditional as well as non-traditional investments, such as real estate, in addition to offering you strong asset and creditor protection. In addition, by using an LLC wholly owned by your IRA, you will also gain another layer of limited liability protection. In this regard, using a Self-Directed IRA LLC to make investments offers you far greater asset and creditor protection versus making the investment personally. For this reason, growing and investing your retirement funds through a Self-Directed IRA LLC is a great tool to protect your retirement assets from creditors, inside or outside of bankruptcy.

Federal Protection for IRAs for Bankruptcy

Like 401(k) qualified plans, The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA” or the “Act”) effective for bankruptcies filed after October 17, 2005, gave protection to a debtor’s IRA funds in bankruptcy by way of exempting them from the bankruptcy estate. The general exemption found in sec­tion 522 of the Bankruptcy Code, 11 U.S.C. §522, pro­vides an unlimited exemption for IRAs under section 408 and Roth IRAs under section 408A. IRAs created under an employer-sponsored section 408(k) sim­plified employee pension (a “SEP IRA”) or a sec­tion 408(p) simple retirement account (a “SIMPLE IRA”), as well as pension, profit sharing, or qualified section 401(k) Plan wealth transferred to a rollover IRA.

Traditional and Roth IRAs that are created and funded by the debtor are subject to an exemp­tion limitation of $1 million in the aggregate for all such IRAs (adjusted for inflation and subject to increase if the bankruptcy judge determines that the “interests of justice so require”). It is understood that a rollover from a SEP or SIMPLE IRA into a rollover IRA receives only $1 million of protection since such a section 408(d)(3) rollover is not one of the rollovers sanctioned under Bankruptcy Code section 522(n).

Protection of IRAs from Creditors Outside of Bankruptcy

In general, ERISA pension plans, such as 401(k) qualified plans, are afforded extensive anti-alienation credi­tor protection both inside and outside of bankrupt­cy. However, these extensive anti-alienation protections do not extend to an IRA, including a Self-Directed IRA, arrangement under Code section 408. Therefore, since an individually estab­lished and funded Traditional or Roth IRA is not an ERISA pension plan, IRAs are not preempted un­der ERISA. Thus, for anything short of bankruptcy, state law determines whether IRAs (including Roth IRAs) are shielded from creditors’ claims.

Note – on June 12, 2014, the Supreme Court unanimously upheld a Seventh Circuit decision that said inherited IRAs do not enjoy the protections of IRAs in bankruptcy proceedings.

The following table will provide a summary of state protection afforded to IRAs, including Self-Directed IRAs, from creditors outside of the bankruptcy context.

State State Statute Special Statutory Provision State Traditional IRA Exemption from Creditors State Roth IRA Exemption from Creditors
Alabama Ala. Code §19-3B-508 Yes No
Alaska Alaska Stat. §09.38.017 The exemption does not apply to amounts contributed within 120 days before the debtor files for bankruptcy. Yes Yes
Arizona Ariz. Rev. Stat. Ann. § 33-1126C The exemption does not apply to amounts contributed within 120 days before a debtor files for bankruptcy. Yes Yes
Arkansas Ark. Code Ann. §16-66-220 Yes Yes
California Cal. Civ. Proc. Code § 704.115 Yes – IRAs are exempt only to the extent necessary to provide for the support of the judgment debtor when the judgment debtor retires and for the support of the spouse and dependents of the judgment debtor, taking into account all resources that are likely to be available for the support of the judgment debtor when the judgment debtor retires. No
Colorado Colo. Rev. Stat. §13-54-102 Yes Yes
Connecticut Conn. Gen. Stat. §52-321a Yes Yes
Delaware Del Code Ann. § 10-4915 Yes Yes
D.C. D.C. Code § 15-501(a)(9) & (10) Yes Yes
Florida Fla. Stat. Ann. §222.21 The debtor’s IRAs are exempt from creditors, but one Florida court has held that inherited IRAs are not exempt from creditors (Robertson v. Deeb, 16 So. 3d 936 (Fla. 2d Aug. 14, 2009). Yes Yes
Georgia Georgia Code Ann. § 44-13-100(a)(2.1) IRAs are exempt only to the extent necessary for the support of the debtor and any dependent. Yes No
Hawaii Hawaii Rev. Stat. § 651-124 The exemption does not apply to contributions made to a plan or arrangement within three years before the date a civil action is initiated against the debtor. Yes No
Idaho Idaho Code §§ 11-604A, 55-1011 Yes No
Illinois I.L.C.S. § 5/12-1006 Yes Yes
Indiana Ind. Code Ann. § 55-10-2(c)(6) Yes No
Iowa Iowa Code Ann. § 627.6(8)(e), (f) Yes Yes
Kansas Kan. Stat. Ann. § 60-2308 Yes Yes
Kentucky Ky. Rev. Stat. Ann. § 427.150(2)(f) The exemption does not apply to any amounts contributed to an individual retirement account if the contribution occurred within 120 days before the debtor filed for bankruptcy. The exemption also does not apply to the right or interest of a person in individual retirement account to the extent that right or interest is subject to a court order for payment of maintenance or child support. Yes Yes
Louisiana La. Rev. Stat. Ann. §§ 20:33(1), 13:3881(D) No contribution to an IRA is exempt if made less than one calendar year from the date of filing bankruptcy, whether voluntary or involuntary, or the date rights of seizure are filed against the account. The exemption also does not apply to liabilities for alimony and child support. Yes Yes
Maine Me. Rev. Stat. Ann. Tit. 14, § 4422(13)(E) Exempt only to the extent reasonably necessary for the support of the debtor and any dependent. Yes Yes
Maryland Md. Code Ann. Cts. & Jud. Proc. § 11-504(h)(1) Yes Yes
Massachusetts Mass. Gen. L. Ch. 235 § 34A; 236 § 28 The exemption does not apply to an order of court concerning divorce, separate maintenance or child support, or an order of court requiring an individual convicted of a crime to satisfy a monetary penalty or to make restitution, or sums deposited in a plan in excess of 7% of the total income of the individual within 5years of the individual’s declaration of bankruptcy or entry of judgment. Yes Yes
Michigan Mich. Comp. Laws Ann. §§ 600.5451(1), 600.6023(1)(k) The exemption does not apply to amounts contributed to an individual retirement account or individual retirement annuity if the contribution occurs within 120 days before the debtor files for bankruptcy. The exemption also does not apply to an order of the domestic relations court. Yes Yes
Minnesota Minn. Rev. Stat. Ann. § 550.37(24) Protection limited to $60,000 (adjusts for inflation). Yes Yes
Mississippi Miss. Code Ann. § 85-3-1(e)Applies to solo 401k plans Yes Yes
Missouri Mo. Ann. Stat. § 513.430.1(10)(e) and (f) Exemption limited to extent reasonably necessary for support. Yes Yes
Montana Mont. Code Ann. §§ 19-2-1004, 25-13-608, 31-2-106 Yes Yes
Nebraska Neb. Rev. Stat. § 25-1563.01 For IRAs – Limited to the extent reasonably necessary for support.Individual Retirement Accounts are generally protected from attachment and garnishment to the extent the funds contained therein are reasonably necessary for the support of the debtor or any dependent of the debtor. Novak v. Novak, 245 Neb. 366, 513 N.W.2d 303 (1994). Yes Yes
Nevada Nev. Rev. Stat. § 21.090(1)(q) The exemption is limited to $500,000 in present value held in an IRA. Yes Yes
New Hampshire N.H. Code Ann. § 511:2, XIX Yes Yes
New Jersey N.J. Stat. Ann. § 25:2-1(b) Yes Yes
New Mexico N.M. Stat. Ann. §§ 42-10-1, 42-10-2 Yes Yes
New York N.Y. Civ. Prac. L. and R. § 5205(c) Yes Yes
North Carolina N.C. Gen. Stat. § 1C-1601(a)(9) Yes Yes
North Dakota N.D. Cent. Code § 28-22-03.1(3) Retirement funds that have been in effect for at least one year, to the extent those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986. The value of those assets exempted may not exceed one hundred thousand dollars for any one account or two hundred thousand dollars in aggregate for all account. Yes Yes
Ohio Ohio Rev. Code Ann. § 2329.66(A)(10)(b) and (c) SEP and SIMPLE IRAs are not protected. Yes Yes
Oklahoma 31 Okla. St. Ann. § 1(A)(20) Yes Yes
Oregon 42 Pa. C.S. §§ 8124(b)(1)(vii), (viii), (ix) Yes Yes
Pennsylvania 42 Pa. C.S. §§ 8124(b)(1)(vii), (viii), (ix) 100%, except for amounts (1) contributed within 1 year (not including rollovers), (2) contributed in excess of $15,000 in a one-year period, or (3) deemed to be fraudulent conveyances. Yes Yes
Rhode Island R.I. Gen. Laws § 9-26-4(11), (12) Yes Yes
South Carolina S.C. Code Ann. § 15-41-30(12) IRA exemption limited to the extent reasonably necessary for support. For Solo 401(k) Plans, not limited to the extent reasonable necessary for support. Yes Yes
South Dakota S.D. Cod. Laws §§ 43-45-16

S.D. Cod. Laws §§ 43-45- 17

Exempts “certain retirement benefits” up to $1,000,000. Yes Yes
Tennessee Tenn. Code Ann. § 26-2-105 Distributions 100% exempt to the extent they are on account of age, death, or length of service and debtor has no right or option to receive other than periodic payments at or after age 58. Yes Yes
Texas Tex. Prop. Code § 42.0021 Yes Yes
Utah Utah Code Ann. § 78-23-5(1)(a)(xiv) The exemption does not apply to amounts contributed or benefits accrued by or on behalf of a debtor within one year before the debtor files for bankruptcy. Yes Yes
Vermont 12 Vt. Stat. Ann. § 2740(16) Yes Yes
Virginia Va. Code Ann. § 34-34 Limited to interest in one or more plans sufficient to produce annual benefit of up to $25,000 (pursuant to actuarial table in statute). Yes Yes
Washington Wash. Rev. Code § 6.15.020 Yes Yes
West Virginia W. Va. Code § 38-10-4(j)(5) Principal 100% protected. Exemption for distributions limited to the extent reasonably necessary for support. Yes No
Wisconsin Wisc. Stat. Ann. § 815.18(3) Yes Yes
Wyoming Wy. Stat. Ann § 1-20-110(a)(i), (ii). No statutory exemption for IRAs. – only mentions retirement plans No statutory exemption for IRAs. – only mentions retirement plans No No

 

IRA Asset Protection Planning

The different federal and state creditor protection afforded to 401(k) qualified plans and IRA, including Self-Directed IRAs, inside or outside the bankruptcy context presents a number of important asset protection planning opportunities.

If, for example, you have left an employer where you had a qualified plan, rolling over assets from a qualified plan, like a 401(k), into an IRA may have asset protection implications. For example, if you live in or are moving to a state where IRAs are not protected from creditors or have in excess of $1million dollars in plan assets and are contemplating bankruptcy, you would likely be better off leaving the assets in the company qualified plan.

Note – If you plan to leave at least some of your IRA to your family, other than your spouse, the assets may not be protected from your beneficiaries’ creditors, depending on where the beneficiaries live. IRA assets left to a spouse would likely receive creditor protection if the IRA is re-titled in the name of the spouse. However, you will likely be able to protect your IRA assets that you plan on leaving to your family, other than your spouse, by leaving an IRA to a trust. To do that, you must name the trust on the IRA custodian Designation of Beneficiary Form on file.

The IRA Asset & Creditor Protection Solution

By having and maintaining an IRA, you will have $1 million of asset protection from creditors in a bankruptcy setting. However, the determination of whether your IRA will be protected from creditors outside of bankruptcy will largely depend on state law. As illustrated above, most states will afford IRAs full protection from creditors outside of the bankruptcy context.

Why Work With the IRA Financial Group?

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. Over the years, we have helped thousands of clients establish IRS compliant Self-Directed IRA LLCs specifically for asset and creditor protection purposes. With our work experience at some of the largest law firms in the country, our retirement tax professionals’ tax and IRA knowledge in this area is unmatched.

To learn more about using a “Checkbook Control” Self-Directed IRA LLC to make real estate and other investments without tax, please contact one of our Self-Directed IRA Experts at 800-472-0646 for more information.

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Oct 26

Here’s What You Need to Know About the 2018 IRA Contribution Limits

Last week, the IRS announced the new limits for retirement plans for 2018.  Here’s what you need to know about your IRA Contributions –

2018 IRA (including Self-Directed IRAs) Contribution Limit – Limits remain the same as 2017.  For individuals under age 50, the limit is $5,500.  For those 50 and older, you can make an additional $1,000 catch-up contribution, bringing the total limit to $6,500.

Here's What You Need to Know About the 2018 IRA Contribution Limits2018 Deductible IRA Phase-outs – If you participate in en employer-sponsored plan (such as a 401(k) plan), there are income restrictions for a deduction.  If you are single or head-of-household, you can get a full deduction if your adjusted gross income (AGI) is $63,000 or less.  It phases out until an AGI of $73,000.  An AGI above that means you cannot deduct your IRA contribution for the year.  If you are married filing jointly, you receive a full deduction if your AGI is $101,000 or less.  This phases out until an AGI of $121,000.  If you are married filing jointly and your spouse participates in an employer’s plan, the phase-out starts at $189,000 and you are not eligible for a deduction if your AGI is above $199,000.

2018 Roth IRA (including Self-Directed Roth IRAs) Contribution Limit – Again, these are the same as last year (and the same amount as traditional plans).  $5,500 if you are under age 50 and $6,500 if you are age 50+.

2018 Roth IRA Income Limits – You may only contribute directly to a Roth IRA if you are below the income limits.  If you are single or head-of-household, you may make a full contribution if your AGI is less than $120,000.  Your contribution limit phases out until $135,000, in which you may not contribute to a Roth directly.  If you are married filing jointly, an AGI of less than $189,000 allows for a full contribution.  This amount phases out until it reaches $199,000.

Note: You must have earned income in the year(s) in which you wish to contribute to an IRA.  The amount you may contribute is the lesser of the annual limit or your earned income for the year.

SEP IRA – Contribution limit increases $1,000 to $55,000 for 2018.

SIMPLE IRA – The limit remains the same as 2017 at $12,500 with a $3,000 catch-up for those age 50 and up.

For more information about the IRA Contribution limits, please contact us @ 800.472.0646.

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Oct 19

Factors To Consider When Contemplating A ‘Backdoor’ Roth IRA

The following article, written by Adam Bergman, originally appeared on Forbes.com –

There have been no income level restrictions for making Roth IRA conversions since 2010, hence a high income earner can do a conversion of after-tax (non-deductible) IRA funds to a Roth IRA, which is known as a ‘backdoor’ Roth IRA. In other words, the ‘backdoor’ IRA allows a high- income earner, who has exceeded the Roth IRA annual income contribution limits, to circumvent those rules and make a Roth IRA contribution. However, as detailed below, a tax could be due on the conversion under the pro rata (aggregation) rules if the IRA holder has other traditional pre-tax IRAs that have not been taxed. In general, the taxes owed on the conversion will depend on the ratio of IRA assets that have been taxed to those that have not, making the ‘backdoor’ IRA unattractive for some.

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A regular contribution to a Roth IRA is generally limited to the lesser of the annual contribution limit or 100 percent of the individual’s compensation. The Roth IRA contribution limit is the same as the traditional IRA limit. For the year 2017, the annual contribution limit for an individual under the age of 50 is $5,500, and $6,500 for an individual over the age of 50.

An individual making Roth IRA contributions must reduce those contributions by the amount of any contributions made to a traditional IRA.  However, not all individual taxpayers are eligible to make Roth IRA contributions.  For taxpayer’s filing as single, one must have a modified adjusted gross income under $133,000 to contribute to a Roth IRA for the 2017 tax year, but contributions are reduced starting at $118,000.  Taxpayers filing as married, the combined modified adjusted gross income must be less than $196,000, with reductions beginning at $186,000.

Before considering a “backdoor” Roth IRA strategy, there are a number of important items to consider.  The first is the concept of the IRA pro rata aggregation rules.  Under Internal Revenue Code Section 408(d)(2), the aggregation rules hold that when an individual has multiple pre-tax IRAs, they will all be treated as one account when determining the tax consequences of any distributions (including a distribution out of the account for a Roth conversion). In other words, the aggregation rules can cause issues for individuals looking to take advantage of the ‘backdoor’ Roth IRA strategy that have multiple IRA accounts.

For example, Amy has $100,000 of existing pre-tax IRA assets across multiple IRA accounts. Amy now makes over $200,000 so is not eligible to make a Roth IRA contribution for this year. Amy wishes to make a $5,500 Roth IRA contribution by taking advantage of the ‘backdoor’ Roth IRA strategy, which involves making a non-deductible IRA contribution and then converting those funds into a Roth IRA.  However, since Amy has $100,000 of pre-tax IRA funds prior to the Roth IRA conversion, the aggregation rules will limit how much Amy can convert to a Roth IRA.

If Amy attempted to do a $5,500 Roth conversion (from combined IRA funds that now total $100,000 plus new $5,500 contribution equals $105,500), the return-of-after-tax portion will be only $5,500 / 105,500 = 5.2%. Which means the net result of his $5,500 Roth conversion will be $286 of after-tax funds that are converted, $5,214 of the conversion will be taxable, and she will end out with a $5,500 Roth IRA and $100,000 of pre-tax IRAs that still have $5,214 of related after-tax contributions. Hence, the net result of the IRA pro rata attribution rules is that a large portion of the after-tax funds linked with the new after-tax IRA contribution will not end up in the Roth IRA and will instead be connected with the existing pre-tax IRA funds.

Based on the example, the IRA attribution rules significantly limited the tax benefit of the ‘backdoor” Roth strategy for Amy as only a very small amount of the $5,500 after-tax funds were able to be converted tax-free to the Roth IRA. In addition, the IRA attribution rules only apply to pre-tax IRAs of the taxpayer, not his or her spouse, inherited IRAs, or any employer retirement plans (i.e. 401(k)), which can offer some interesting tax planning opportunities.

In addition to being mindful of the IRA attribution rules when considering a ‘backdoor’ Roth IRA conversion, one must also consider the step-transaction-doctrine. The step-transaction doctrine, which arose from a Supreme Court case, holds that a court can invalidate a transaction if the separate steps involved in the transaction have no independent substantial business purpose. In the context of the ‘backdoor’ Roth IRA strategy, the thinking goes that if the separate steps of the non-deductible IRA contribution and subsequent Roth conversion are done too quickly or simultaneously there is some risk the IRS could attempt to invoke the step-transaction doctrine in order to invalidate the Roth conversion.

There is no court precedent for this position, but many tax experts believe it would be wise to wait some time in between the nondeductible IRA contribution and the subsequent Roth conversion. There is also no firm rule for how long one should wait after the nondeductible contribution is made before making the Roth IRA conversion, but waiting a few months and having the IRA funds invested during the waiting period is thought to be sufficient.

Since 2010, the ‘backdoor’ Roth IRA strategy has been viewed as an attractive way for many high income earners to take advantage of the power of the Roth IRA.  Below are some tips to consider before doing a ‘backdoor’ Roth IRA:

  • Understand the Roth IRA contribution income limits for the taxable year in question
  • Determine whether you have any existing pre-tax IRA funds. If so, understanding the IRA attribution rules under Internal Revenue Code Section 408(d) is crucial
  • Are you currently participating in an employer retirement plan? If so, rolling over existing pre-tax IRA funds to an employer plan may help you circumvent the IRA attribution rules.
  • Be mindful of the step-transaction doctrine and consider waiting at least several months between the non-deductible contribution and the Roth IRA conversion
  • Consider not documenting that you are doing a ‘backdoor’ Roth IRA strategy.

It is unclear how long the ‘backdoor’ Roth IRA strategy will continue to be permitted. President Obama’s 2016 budget recommendations did attempt to end it, but the recommendation did not become law.  It is unclear what the Trump Administration’s position is with respect to it.  However, for now, the ‘backdoor’ IRA strategy continues to be a very popular way for high income earners to make Roth IRA contributions.

For more information about the ‘Backdoor’ Roth IRA, please contact us @ 800.472.0646.

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Oct 17

What are the minimum distribution requirements of an IRA?

The terms of an independent retirement account or annuity must include several minimum distribution rules, which Congress imposed to ensure that IRAs are primarily used as retirement savings media, not as vehicles to build wealth for transmission to heirs. As discussed below, these rules provide separately for distributions to IRA owners and distributions to beneficiaries after the death of an IRA owner. An IRA owner is an individual who establishes and contributes to an IRA for the benefit of himself or herself and his or her beneficiaries.

What are the minimum distribution requirements of an IRA?Minimum distributions to IRA owners

An IRA must, by its terms, require the account or annuity to be fully distributed not later than April 1 of the year following the calendar year during which the IRA owner attains age 70 and 1/2 or be distributed by annual or more frequent payments over a period beginning by that date and continuing not longer than for the owner’s life, the lives of the owner and his or her beneficiary, or a period not longer than the life expectancy of the owner or the owner and beneficiary. April 1 of the year following the calendar year during which the owner reaches age 70 and 1/2 is the required beginning date.

Note: there are no required minimum distributions for a Roth IRA

Please contact one of our IRA Experts at 800-472-0646 for more information.

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