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What is a Truly Self-Directed IRA and how is it any different from a typical IRA?
For years, the typical self-directed IRA meant signing up for a bank or an online brokerage account to choose from among investments like stocks, CDs, bonds, or mutual funds.  These kinds of accounts may be right for some, however, they don’t offer the kind of freedom that a truly Self-Directed IRA plan can offer.  Many custodians claim they allow you to self-direct your IRA investments, but then turn around and restrict what you can invest in. A truly Self-Directed IRA allows you to make the decisions without restriction.

What is the difference between a typical Self Directed IRA and a Self Directed IRA LLC?
The Self Directed IRA LLC is the only true self-directed account.  You do not have to go to anyone for investment approvals- you have the checkbook, you control the investing!

Why haven’t I heard of this before?
For years, large investment companies have controlled almost all retirement saving plans.  These types of corporations are only going to allow you to invest in things that will benefit them.  As long as they have the control, they can stack up all kinds of fees, and limit you to the kinds of investments that will produce a profit for them.  For example, a bank will limit you to CD investments, a brokerage firm will limit you to investments with stocks and bonds.  97% of retirement accounts are invested in these traditional investment options.  It has been a great benefit to them to keep the Truly Self-Directed IRA a "well kept secret".
What can I invest my Self-Directed IRA LLC in?
You are allowed to use your creativity, interests, and knowledge as you formulate your diverse investment portfolio.  If you understand stocks, then you can invest in the stock market. If you understand real estate, then you can use that knowledge to make money.  This diversification is one of the main advantages of a Self-Directed IRA.  What are the possibilities?

  • Commercial Real Estate
  • Trust Deeds/Mortgages
  • Intellectual Property
  • Annuities
  • Limited Partnerships
  • Stocks
  • Bonds
  • Mutual Funds
  • Business Loans
  • Personal Loans ("disqualified persons" are not allowed)
  • Foreign Properties
  • Professional Sports Team
  • Health plans
  • Educational Costs
  • And many, many more!

What is "absolute checkbook control"?
Checkbook control gives you the freedom to control your own investments. With the structure of the LLC, you are given your own checkbook.  You write and sign the checks! No longer will you need to go to your custodian for approval.  You can write the check as soon as the investment opportunity presents itself.  This is extremely beneficial when dealing with time sensitive investments like real estate.
 
Why do I want Checkbook Control?
Checkbook control puts you in control over your retirement.  It will allow you to gain interest from your uninvested funds, eliminate delays on time sensitive investments,  and eliminate unnecessary fees.

What is LLC?
The IRA LLC is the key that makes the Self-Directed IRA so powerful.  The LLC (limited liability company) is a legal entity that gives you both power and protection.  The LLC is created and owned by your IRA. 

How does the IRA-LLC work?
Your IRA will make an initial investment into the LLC allowing the IRA to own the LLC. 
From then on, the LLC makes all the investments, with the tax liability being a responsibility of the owner, which is the IRA.  As a result, no taxes will be owed on the profits generated in the LLC  (the one exception to this is if you use leverage in a real estate investment).

What are the benefits of having an LLC?
The structure of the LLC will provide you with asset protection, checkbook control, maximum investment flexibility, and ultimate decision making power!

What are Prohibited Investments?
The Internal Revenue Code list the the following as Prohibited Investments:
Artwork, Rugs, Antiques, Metals, Gems, Stamps, Coins, Beverages, Stock in a S-Corporation, And certain other tangible personal property

What type of accounts can be moved into the Self-Directed LLC?

  • Traditional IRAs
  • Roth IRAs
  • 401(k)s
  • 403(b)s
  • Profit Sharing Plans
  • Money Purchase Plans
  • Government Eligible Deferred Compensation Plans       
  • Keoghs
  • Coverdell Education Savings (ESA)
  • Health Saving Accounts (HSA)
  • Qualified Annuities
  • And More Retirement Saving Accounts!

           
What are the penalties for moving my IRA into a Self-Directed IRA LLC?
None!  Unless you move your IRA into a Roth account.

I have a 401K with my current employer. Can I move it into the IRA LLC?Most companies will not allow you to move a 401k with a current employer into your self-directed IRA.  To be sure, you will want to check with the specifics of the 401k.

I have several old 401ks. Can I combine them?
Yes.  In today’s world, the employment trend seems to be to change jobs often.  If you have a 401k from several different past jobs, you can use the rollover options to combine them into one Self-Directed IRA in which you control.

Can my Self-Directed IRA LLC purchase real estate?
Yes! This is one of the most exciting opportunities available. Section 408 of the Internal Revenue Code permits individuals to purchase land, commercial property, condominiums, residential property, trust deeds, or real estate contracts with funds held in many common forms of IRAs.  This includes a traditional IRA, a Roth IRA, and a Simplified Employee Pension plan, or SEP-IRA.

What kind of real estate will I be able to purchase?
It is exciting to know that when purchasing real estate in your retirement plan you can buy virtually any type of property.  This includes…

  • Raw land
  • Single family homes
  • Apartments
  • Mobile Homes
  • Commercial Real Estate
  • Mortgages
  • Tax Liens
  • Real Estate Notes
  • Foreign Real Estate
  • Vacation Properties
  • And various other Real Estate options!

 

Where can my Self-Directed IRA LLC purchase real estate?
Anywhere! You can even invest in foreign real estate deals!

What does the IRS think of investing your IRA in Real Estate?
The IRS does not prohibit real estate investing.  On the IRS website it states, “…..because of administrative burdens, many IRA trustees do not allow IRA owners to invest IRA funds in Real Estate. IRA law does not prohibit investing in Real Estate but trustees are not required to offer Real Estate as an option.”

May I use my IRA funds to make improvements or renovations?
Yes.  IRA funds can be used for any type of rental expense.  All profits from these improvements are returned to the IRA.  The property is not your investment, it is an investment of your IRA.

If I buy an income producing rental property, what happens to the rental income?
The rental income goes back into the IRA, which allows you to keep the tax-deferred status of the account.  In the case of a Roth IRA, it will allow you to keep your tax-free status.

Can my IRA purchase Real Estate I already own?
No. This is a prohibited transaction.  Also, you may not purchase real estate owned by a disqualified person. See below

Can I buy a business with my Self-Direct IRA LLC?
Yes.  The structure of the LLC allows you the freedom to buy a business.  Consult MY WAY IRA for details.

What is "Self-Dealing"?
Self-dealing is using your IRA to benefit you, not your retirement.  It is also considered self-dealing to make transactions that benefit you or a disqualified person.  The purpose of the IRA is to plan for your retirement, not to benefit you today.

Who is a disqualified person?
The Internal Revenue Code specifies that any "lineal descendant" is a disqualified person.  This  includes your spouse, your parents, or your children.  You will want to note that a sibling is not considered a disqualified person. 

What types of real estate transactions are prohibited?
As you consider investing your IRA in real estate, keep in mind that any investments your IRA makes cannot be for your benefit today. Your investments must be for your future benefit. 

  • Your IRA cannot directly or indirectly purchase real estate from a "disqualified person".   This includes you, your spouse, your parents, and your children.
  • Neither you nor your family members (other than siblings) may live in or lease the property while it's in your plan.
  • Your business may not lease or be located in or on any part of the property while it's in your plan.
  • You cannot place a real estate property that you, your spouse, your parents, or your children already own into your IRA.
  • You cannot include a time share type property.

 

Can I get a loan for real estate owned by my Self-Directed IRA LLC?
Your IRA can finance or leverage any income-producing property. The property is used as collateral for the loan. The underlying property itself must be the only collateral for the loan. You may not pledge the assets of your IRA as the collateral for the loan.   A loan may only be in the form of a non-recourse promissory note and the IRA holder is not allowed to personally guarantee the non-recourse note.

What is Leveraging?  Is it legal?
Does it still make sense to use leverage? Absolutely. Because of your increased buying power when you use leverage, the profits you make from the ability to use leverage can greatly outweigh the tax associated. Leveraging is legal, but you must follow the regulations. 

 

My IRA is small. Can I personally co-invest with my IRA?
Yes.  This is not considered a prohibited transaction.  You will want to consult with MY WAY IRA to be sure certain formalities are followed.  Be aware to avoid "self-dealing".

 

Can my Self Directed IRA LLC make loans to businesses or companies?
Yes. Your IRA can make a loan to almost any type of business. However, you will want to be sure that you or any "disqualified person" does not have any ownership in this business.  This can be considered "self dealing".

Can my Self Directed IRA LLC make loans to a friend?
Yes. A friend is not "disqualified person".  You will want to make sure that friend follows the proper regulations and sets up reasonable loan terms.

How do I ensure that my Self-Directed IRA keeps it's tax-deferred status?
All spending and earning must flow through the tax-free or tax-deferred retirement account. The escrow must be opened by the account, not in your name. Investing is always in the name of the account. The funds in your IRA may be used as good faith deposits, down payments, or purchase money.

What is "Intellectual Property"?
Intellectual Property are intangible assets.   They may include copyrights, patents, logos, Web URLs, trademarks, books, music, art, film.  They can be found almost everywhere - in creative works like books, films, records, music, art and software.  Much of what we see and use on the Internet includes or represents some form of intellectual property.

Why would I want to invest in "Intellectual Property"?
This unique strategy allows inventors, small business people, artists, musicians, crafters, engineers, film makers, Internet business owners, writers, etc. to place ideas, web URLs and other intellectual property inside of their Self-Directed IRA.  Placing your Intellectual Property inside the IRA may give you asset protection, and tax-deferral of at least some of the income generated from these ideas.

Why is Roth IRA better?
A Self-Directed Roth IRA will allow you even greater tax savings benefits.  A Roth IRA is tax-deferred while growing, and tax-free upon distribution (a traditional IRA is taxed at the time of distribution). Also, a Roth IRA has no minimum distribution.  It is up to you (after 59½), when and how to take a distribution.  The Roth IRA may also be passed on to heirs without taxation.

 

Can I contribute to both a traditional IRA and a Roth IRA?
Yes. You can contribute to both a traditional IRA and a Roth IRA at the same time.  The total amount contributed to all can be no more than $4000 for 2007 and $5000 for 2008.

What are "IRA transfers" and "IRA rollovers"?
A "rollover" is when you request a distribution from your IRA and then "roll" the assets into a seperate IRA account. You are limited to one "rollover" per year.  A transfer is moving the assets in an IRA from one financial institution to another.  In a transfer, the owner does not take possession of the assets.  There is no limit to how many transfers you can make per year.

Can I transfer funds from a 401k, IRA, Sep IRA, Roth IRA, or 403b and direct investments myself? Yes. You can self direct all of these types of accounts. They can all be invested into the Self Directed IRA LLC for truly self-directed investing.

Is the Truly Self-Directed IRA LLC for me?
Would you like to use your own creativity and freedom to invest in what you know?  What about more investment choices for your retirement funds? Would you like to take charge of your own future?  If yes any of these questions, than a Self-Directed Individual Retirement Account (IRA) is right for you!
 
How do I setup a Self-Directed IRA LLC?

Just Contact Us!