A true self-directed IRA allows you to invest in anything that is not prohibited specifically by the IRS rules. For example, you can invest in real estate but not collectibles like old coins. You also must ensure that none of the investments you make includes a disqualified party, such as your parents, spouse or children or your custodian. Apart from that, you are pretty free to invest as you like. You are responsible for ensuring that the investment is a good one – the Custodian will not do due diligence to ensure the investment will pay out as promised – and on your instructions, the Custodian will send the funds to the required place.
For each transaction a fee will be billed to your account. There is also a time delay from the point at which you decide to make the investment and when the investment is funded.
A Checkbook IRA LLC can be attached to your self-directed IRA accounts to give you the following advantages:
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Money from all your IRAs could be used to fund the LLC, giving you a bigger pool of money available for each investment. Investments would be owned by the members of the LLC – the IRA accounts – in proportion to how the LLC was funded.
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The transaction fees for your Custodian should be lower. Since the transactions would be going through the LLC, you should only have a holding fee for your accounts and few other charges from the Custodian.
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You could write checks for investments immediately. This is particularly important when you wish to purchase land with IRA funds and a deposit is required. Writing the deposit check from your own funds and reimbursing yourself from your IRA is not permitted.
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Since we use a Nevada Series LLC for our Checkbook IRA LLCs, you can add funds without fear of comingling. Initially you fund Series 1. When you want to add funds, you repatriate your assets in Series 1 back to the Custodian. Your Custodian adds in the new funds, and you fund the entire amount to Series 2.
Whether or not to set up a Checkbook IRA LLC is a function of how you plan to invest. If you will need to pay bills or fees several times a year, the Checkbook LLC could save you money. The entire amount of the set up cost must be paid by the IRA, not by you personally, and you must give an annual accounting of the value of the assets held in the LLC to your Custodian.
Click here to listen to our panel with an IRA custodian, an attorney and a tax strategist CPA. This webinar with Wendy Byford, Michael McNair, David Adkins and Warren Taryle discusses details about the benefits of writing checks directly out of your IRA LLC as well as your responsibility to follow the IRS rules. If you'd like to speak with us about this strategy, please use this form to contact us [click here].
Some custodians that we have worked with who support the CheckBook IRA LLC strategy are
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IRA Services Trust Custodian Michael McNair 650.593.2221 [ michael.mcnair@iraservices.com ]
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Provident Group, LLC Custodian Sue Archer 702 434 0023 [ sue@providentira.com ]
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Entrust Carolinas [ sean@entrustcarolinasllc.com].
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Entrust is a franchise with offices across the USA. Entrust has also implemented IRA Card CheckingSM which is a demand deposit account that allows instant access to your IRA funds with an IRA CardSM (debit card) or IRA Card CheckSM. You still have to obtain custodian consent, although this can happen up to 30 days after the event. If consent is not forthcoming, the payment is treated as a withdrawal from the IRA and penalties and taxes will be due.
Among the custodians who don't provide support are Fidelity, Schwab, A.G. Edwards, Equity Trust, Trust Administration Services (TASC). Fees vary widely, so be sure that you understand the services provided.
If you have a single IRA (either Traditional or Roth) click here to open the form to get started. We will work with your custodian to determine what their specific requirements are as it relates to the IRA LLC.
If you have both a Roth IRA and a Traditional IRA, you may want to have both of them use the same LLC for checkbook control. If that is the case, please click here for the multi-IRA LLC form. We will work with your custodian to determine what their specific requirements are as it relates to the multi-IRA LLC. If your plans are with different custodians, we will work with both of them.
If you and your spouse want your individual IRAs to use the same LLC for checkbook control, please click here for the multi-IRA LLC form. We will work with your custodian to determine what their specific requirements are as it relates to the multi-IRA LLC. If your plans are with different custodians, we will work with both of them.
We sometimes receive email from people who have been misled through no fault of their own. Usually, an "expert" provides the mis-information and you are caught in the middle. Here is an example. "Comments from my broker..."what this link does not tell you about is the IRS penalties and IRS taxes that occur on every single withdrawal from IRA. Check writing from IRA will cost the check writer about 30%...of every withdrawal: Example: write a check for $1000 withdrawal pay the IRS penalty $300...you lose $300 forever....""
If you were to withdraw funds from your IRA, then you would have to pay taxes and possibly penalties as well. For this reason, we do not recommend withdrawing funds from your IRA.
Having your IRA establish its own LLC and transferring IRA funds to the LLC bank account does NOT expose the IRA (or you) to taxes or penalties. The money is still under the IRA umbrella and when the IRA's LLC makes an investment, the result is EXACTLY the same as if a broker used some IRA funds to invest in a stock, bond or mutual fund.
The only difference is that your IRA can now also invest in OTHER areas that your broker doesn't get paid commission on. Real Estate, mobile homes, Prom notes, cattle... the list goes on.
Since most brokers don't actually understand the law surrounding IRAs, it's not unusual for them to pass out incorrect information. As always, it is up to you to lead your team of advisors.