The Department of Labor (“DOL”) Plan Asset Rules were generally enacted to limit an investment fund participant from using his retirement funds to transact with the investment fund or its assets. The Plan Asset Rules set forth the circumstances that can cause assets owned by an entity to be deemed to be assets of an ERISA qualified plan (i.e. 401(k) Plan) or an IRA unless an exemption applies.  Under the Plan Assets Rules, if an IRA Plan owns greater than 25% of an investment entity that is neither a “publicly-offered security” nor a mutual fund, the equity interests and assets of the “investment company” will be deemed assets of the IRA. This is sometimes referred to as the “Look- Through Rule”. Under the “Look-Through Rules, if a retirement plan owns 25% or more of any class of equity interests in an “investment company”, the Plan Asset Rules state that the assets of the entire “investment company” are deemed to be assets of the IRA.  In other words, if your IRA owns 25% or more of the membership interests of a LLC engaged in passive investments (i.e. private equity fund, hedge fund, or real estate fund), the assets of the LLC are deemed to be assets of the IRA. If the Plan Asset Rules cause the assets of an “investment company” to be deemed to be assets of the IRA, any transaction involving the “investment company” and a disqualified person will be a prohibited transaction. 

The advantage of contributing to a self-directed Roth IRA is that income and gains generated by the Roth IRA investment can be tax-free and penalty-free so long as certain requirements are satisfied. Unlike with a traditional self-directed IRA, contributions to a self-directed Roth IRA are not tax deductible.

Unlike the self-directed Traditional IRA, there is no 70 1/2 age limit on making contributions. Individuals of any age with compensation are eligible to contribute to a self-directed Roth IRA. The total amount you may contribute to a self-directed Roth IRA for 2016 cannot exceed the lesser of $5,500 ($6500 if over the age of 50) or 100% of compensation ($11,000 for married couples - $13,000 if over the age of 50).

If you maintain a Traditional self-directed IRA, the maximum contribution to your self-directed Roth IRA is reduced by any contributions made to your Traditional self-directed IRAs.

Individual retirement accounts are designed to help people set money aside to increase financial security later in life, but IRA owners don't always live long enough to use all of their savings. If an IRA owner passes away before withdrawing all of the funds from the account, the remaining assets pass on to the account's beneficiary. IRA beneficiaries have a few different options when it comes to taking cash from an inherited account.

In general, most Americans have an enormous amount of financial exposure to the financial markets. Whether it is through retirement investments such as IRAs or 401(k) plans, or personal savings, many of us have most of our savings connected in some way to the stock market. In fact, over 90 percent of retirement assets are invested in the financial markets. With what is believed to be approximately $25 trillion in retirement assets as of 2014, you can see the scope of that exposure. Investing in nontraditional assets such as real estate offers a form of investment diversification from the equity markets.

In general, the more diversified your portfolio, the greater the chance that your assets will offer lower correlation, meaning they are less likely to move in the same direction. However, diversification does not assure profit or protect against loss. The use of nontraditional asset classes can help protect your portfolio when the market is down and help protect you from losing more than the market.

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 tax-free! The IRS only describes the type of investments that are prohibited, which are very few.

To permit tax-free transfers of retirement savings from one type of investment to another, as well as to increase the portability of qualified plan rights for employees moving from one job to another, Congress included a complicated web of rollover provisions in ERISA. These provisions cover transfers from one IRA to another, transfers from qualified pension, profit-sharing, stock bonus, and annuity plans to IRAs, and transfers from IRAs to qualified plans. An IRA may also, under limited circumstances, make a rollover distribution to a health savings account (HSA). In other words, if you receive a distribution from a qualified plan, you might decide to put some or all of the distribution amount into an IRA. The IRA that receives the qualified plan distribution is called a rollover IRA.

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.

Individuals may generally transfer IRA or rollover eligible qualified retirement plan assets into a self-directed IRA LLC structure. Individuals may also roll over after-tax retirement funds to a Self-Directed SIMPLE IRA.

Average self-directed IRA client with IRA Financial Trust pays less than 0.10% in annual IRA custodian fees

IRA Financial Trust Company, the market’s prominent self-directed IRA custodian for checkbook IRA and full service IRA custodian accounts announces the findings of an internal report which showed that the average self-directed IRA client pays account fees of less than 0.10% of their IRA account value. With checkbook IRA annual account fees of $180 flat per year and with the average client having around $200,000 in IRA funds, IRA Financial Trust’s self-directed IRA clients are paying less than 0.10% in account value fees.

The Self-Directed IRA Structure has been in use for some 35 years, however, the concept of using an entity owned by an IRA to make an investment was first reviewed by the Tax Court in Swanson V. Commissioner 106 T.C. 76 (1996). In Swanson, the Tax Court, in ruling against the IRS, held that the funding of a new entity by an IRA for self-directing assets was a permitted transaction and not prohibited pursuant to Code Section 4975. The Swanson Case was later affirmed by the IRS in Field Service Advice Memorandum (FSA) 200128011. In FSA 200128011, the IRS, in providing guidance to IRS agents for purposes of conducting audits, confirmed the Tax Court’s holding in Swanson and held that a newly established entity owned by an IRA and managed by the IRA owner may make investments using IRA funds without violating the prohibited transaction rules under Internal Revenue Code Section 4975. In October 2013, the Tax Court in T.L. Ellis, TC Memo. 2013-245, Dec. 59,674(M) held that establishing a special purpose limited liability company (“LLC”) to make an investment did not trigger a prohibited transaction, as a newly established LLC cannot be deemed a disqualified person pursuant to Internal Revenue Code Section 4975. The impact of the impact of this ruling is enormous because it directly supports the position that a retirement account can fund a newly established LLC without triggering a prohibited transaction. The Ellis case is decisive because it will silence anyone who claims that using a special purpose LLC to make IRA investments would trigger a prohibited transaction.

Yes. The mortgage would need to be a non-recourse type of loan. With a nonrecourse loan, if your IRA fails to make the payments, the only recourse the lender has is the property itself. Also, note that if your IRA obtains a loan, unrelated debt financing income tax (UDFI) will apply, which will subject the portion of the income or gains that are debt financed to Unrelated Business Taxable Income (UBTI).

IRA Financial Trust has developed a business relationship with Northern Trust Company to serve as the banking custodian for all its Self-Directed IRA client accounts.  IRA Financial Trust clients will benefit from the experience and security of knowing that all rollover and IRA contributions made to a Self-Directed IRA account with IRA Financial Trust will be held at Northern Trust Company before the client then directs them for investment.

IRA Financial Trust is a non banking IRA Trust Company that is responsible for administering your Self-Directed IRA account.  IRA Financial Trust’s client’s IRA assets will be held with Northern Trust, providing it with FDIC protection up to $250,000.

Northern Trust first opened its doors for business in 1889. Northern Trust (Nasdaq:NTRS) is a global leader in delivering innovative investment management, asset and fund administration, fiduciary and banking solutions to corporations, institutions and affluent individuals. For over 125 years, the bank has evolved with the changing needs of their clients and our world.

Individuals may generally transfer Roth IRA or rollover eligible qualified retirement plan assets into a self-directed Roth IRA LLC structure. Individuals may not rollover Roth IRA funds into a qualified retirement plan, such as a Solo 401(k) Plan or a pre-tax IRA account, such as a Traditional IRA or SEP IRA.

The Self-Directed IRA is a retirement solution that will unlock a world of investment opportunities. The Self-Directed IRA is a retirement investment vehicle that allows one to use their retirement funds to make traditional as well as non-traditional investments, such as real estate tax-free and without custodian consent. In most instances, investors using retirement funds to make an investment will use cash to make the investment. Whether the investment is in the form of stocks, precious metals, or real estate most investors using retirement funds to make the investment will not borrow any funds to make the investment. In other words, most investors using retirement funds will use cash to make the investment. One significant reason why retirement account investors will generally not borrow money (also called debt or leverage) as part of an investment of real estate acquisition is the Internal Revenue Code Section 4975 prohibits the IRA holder (you) from personally guaranteeing a loan made to the IRA. Pursuant to Internal Revenue Code Section 4975(c)(1)(B), a disqualified person (i.e. the IRA holder) cannot lend money or use any other extension of credit with respect to an IRA. In other words, the IRA holder cannot personally guarantee a loan made to his or her IRA.

The tax advantage of an IRA is that income is tax-free until distributed. In general, an exempt organization is not taxed on its income from an activity that is substantially related to the charitable, educational, or other purpose that is the basis for the organization's exemption. Such income is exempt even if the activity is a trade or business. However, to prevent tax-exempt entities from competing unfairly with taxable entities, tax-exempt entities are subject to unrelated business taxable income (UBTI) when their income is derived from any trade or business that is unrelated to its tax-exempt status.

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. 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 Roth 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 Roth 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 Roth IRA holder, any ancestors or lineal descendants of the Roth IRA holder, and entities in which the Roth IRA holder holds a controlling equity or management interest.

The maximum contribution limit for a self-directed IRA for 2016 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.

Making an investment through a Self-Directed IRA LLC can be done in a few easy steps:

1. Set up a Self-Directed IRA LLC

With IRA Financial Trust, you no longer have to spend $2,000 to $5,000 or more to set up your Self-Directed IRA LLC.

We provide the following all for one low price

  • Free tax consultation with our in-house retirement tax professionals
  • Setup your LLC in the State of your choice
  • Prepare and file the Articles of Organization with the State
  • Generate a special purpose, attorney-reviewed Self-Directed IRA LLC Operating Agreement
  • Generate a special purpose, attorney-reviewed Subscription Agreement, as required by the Custodian
  • Obtain the EIN from the IRS
  • Co-ordinate setup with the Custodian of your Choice
  • Free tax and IRA support regarding the Self-Directed IRA LLC Structure
  • Expedited Service Guarantee!
  • Satisfaction Guaranteed!

An IRA trustee, also called a custodian, is the institution that administers your plan. By law, every qualified retirement plan must have a custodian or trustee. A trustee may be a bank, credit union or a large brokerage firm that is licensed by the IRS. IRS regulations require that either a qualified trustee or custodian hold the IRA assets on behalf of the IRA owner. A Self-Directed IRA custodian, also called a passive custodian, allows IRA holders to engage in non-traditional investments (i.e. real estate), but generally does not offer investment advice.

Self-Directed IRAs are generally permitted to engage in most types of investments, however, if a Self Directed IRA engages in certain types of "prohibited transactions" or invests in life insurance or collectibles you may jeopardize the tax-deferred status of your IRA account. This could lead to the disqualification of the IRA and severe tax consequences. Therefore, it is important that you familiarize yourself with the IRA rules.

A SEP is a simplified employee pension plan. Any employer can establish a SEP. An employer can maintain both a SEP and another plan. Annual contributions an employer makes to an employee's SEP-IRA cannot exceed the lesser of (i) 25% of compensation, or $53,000 for 2016. However, special rules apply when figuring out the maximum deductible contribution for a self-employed individual (typically 20% of compensation).

Individual retirement accounts, or IRAs, exist in many forms. In general, if you have income from working for yourself or someone else, you may set up and contribute to an IRA. The major advantage of using a traditional IRA is that contributions are tax-deductible. Furthermore, IRA funds can be used for any purpose, including investing in real estate, tax liens, stock, bonds, and gold.

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 commission and fees for them.

A taxpayer's contributions to Roth IRAs during any year may not exceed a dollar ceiling (or, if less, the taxpayer's compensation income), reduced by deductible contributions for the year to traditional IRAs. For years after 2012, the dollar ceiling will be $5,500. For years after 2002, the ceiling is raised by $1,000 for individuals who are at least 50 years old at year-end.

IRA Financial Trust, the leading provider of Self-Directed IRA LLC solutions, announces a specially designed Self-Directed IRA LLC solution for hard money lenders looking to generate tax-deferred or tax-free returns. Because most financial institutions continue to require solid credit scores and spend weeks reviewing financial statements, tax returns and business plans, there is a growing need for quick financing for many individuals, small business and investors, especially real estate developers and builders for their real estate projects. As a result, IRA Financial Trust Company has designed a special Checkbook Control Self-Directed IRA LLC program designed specifically for hard money lenders.

It’s a little-known fact that Real Estate can be purchased with retirement account funds. When using a Self-Directed IRA LLC for investments in real estate, your profits are tax-deferred back into your retirement account. More important, if you have full checkbook control over your Self-Directed IRA LLC, the purchases can be made on the spot as fast as you can write a check. In the case of a Self-Directed Roth IRA LLC, your gains are tax-free and you can take personal ownership of the property tax-free at the age of 59 1/2.

Once an IRA account owner dies, his or her IRA will be passed on to the beneficiary.  Typically, this will be a spouse or child, but can be anyone the account owner has named.  If there is no beneficiary, then the account will usually go through probate.  Contributions, in addition to taxes, will depend on who the beneficiary is.

The Substantial Equal Period Payments (SEPP) provide an exception to the early distribution tax. Under the Substantial Equal Periodic Payments method, you do not have to pay the early distribution tax on money that you take out of your plan in regular payments over either your life expectancy or the joint life expectancy of you and your beneficiary even if you are younger than 59 and 1/2.

The following are some basic rules about the exception:

  • There are no age restrictions.
  • The payments must be substantially equal, which means you cannot alter the payments each year.
  • You must compute the payments as though you intend to distribute the retirement plan over your entire life or over the joint life of you and your spouse.
  • You may not discontinue payments or alter the computation method for at least 5 years and if you have not reached age 59 and 1/2 at the end of the 5 year period, you must wait until you reach that age before making a change.

Please contact one of our IRA Experts at 800-472-1043 for more information.

In general, most passive investments that your Self-Directed IRA LLC might invest in are exempt from UBTI. Some examples of exempt type of income include: interest from loans, dividends, annuities, royalties, most rentals from real estate, and gains/losses from the sale of real estate.

When an exempt organization such as an IRA undertakes any development activities in connection with selling real estate, beyond passively placing the property for sale either directly or through a broker, the issue arises under Internal Revenue code 512(b)(5)(A) whether the real estate is “property held primarily for sale to customers on the ordinary course of the trade or business.” An organization that engages in the sale of property to customers in the ordinary course of the trade or business is characterized as acting as a “dealer.”

If you fund an IRA and are in the envious position of not needing it for your own retirement, you can pass it on to your loved ones.  They can then use it for whatever reason, including their own retirement.  This is what's known as a Stretch IRA where the account is "stretched out" for multiple generations.  There are several key factors to consider when setting up this wonderful gift.

First and foremost you need to speak with your loved ones about your intentions.  You don't want them inheriting your hard earned IRA and have them cash it out right away.  They end up paying all the taxes while losing out on years of tax-deferred savings.  Make your intentions fully known and explain how the IRA works and the benefits of it.

Making an investment through a Self-Directed Roth IRA LLC can be done in a few easy steps:

1. Set up a Self-Directed Roth IRA LLC.

With IRA Financial Trust, you no longer have to spend $2000 to $5,000 or more to set up your Self-Directed Roth IRA LLC.

We provide the following all for one low price

  • Free tax consultation with our in-house retirement tax professionals
  • Setup your LLC in the State of your choice
  • Prepare and file the Articles of Organization with the State
  • Generate a special purpose, attorney-reviewed Self-Directed Roth IRA LLC Operating Agreement
  • Generate a special purpose, attorney-reviewed Subscription Agreement, as required by the Custodian
  • Obtain the EIN from the IRS
  • Co-ordinate setup with the Custodian of your Choice
  • Free tax and IRA support regarding the Self-Directed Roth IRA LLC Structure
  • Expedited Service Guarantee!
  • Satisfaction Guaranteed!

Bitcoin is usually described as virtual currency. That’s useful shorthand, but is it really money? And should it be taxed as if it is? Or is it a capital asset? How about a commodity? Or what about a collectible? Most commentators have viewed bitcoins either as a virtual type of currency or capital asset. However, the potential still exists that the IRS could argue that bitcoins do not satisfy the main functions of money and acts more like a stamp or other collectible than a currency.

IRA Financial Trust Company is one of the few IRA custodians in the country that specializes in establishing Self-Directed IRA with Checkbook Control accounts.

IRA Financial Trust Company was founded by tax attorneys who worked at some of the largest law form in the world, including White & Case LLP and Dewey and LeBoeuf LLP, and have helped over 12,000 clients self-direct their retirement funds through their ownership in the IRA Financial Group LLC.

A Self-Directed IRA 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 only describes the type of investments that are prohibited, which are very few.

No – not with a Self Directed IRA LLC. All investment decisions are made by you, as manager of the Self Directed IRA LLC. It’s simple - when you want to make an investment, you write a check, use your debit card, wire funds, etc. All documents can be signed by you, as manager of the LLC.

The term “Disqualified Person” includes virtually anyone having a direct or indirect relationship to the plan other than as a participant or beneficiary.

IRA Financial Trust, the leading provider of self-directed IRA LLC solutions has designed a cost effective solution for peer-to-peer lenders looking to generate tax-deferred or tax-free returns without high annual IRA custodian costs.

As a result of the very strong demand from peer-to-peer IRA investors looking to have more control over the loan process without the high transaction fees, we have developed a special self-directed IRA LLC solution specifically tailored for peer-to-peer investors. Because of the attractive returns that many peer-to-peer investors have generated over the last several years, a growing number of peer-to-peer lenders are eager to use their IRA funds to make loans and generate tax-deferred income or gains.

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).

IRA Financial Trust Company, a self-directed IRA custodian, will begin offering self-directed solo 401(k) plans beginning in May 2016.

IRA Financial Trust – a self-directed IRA custodian – is proud to announce that beginning in May 2016, it will begin offering self-directed solo 401(k) plan to its clients. IRA Financial Trust clients will have the opportunity to hold their retirement funds held at Northern Trust, one of the most respected banks in the world, offering our self-directed IRA clients with a safe and secure way to make alternative asset investments, such as real estate, precious metals, tax liens, and much more though a self-directed IRA or solo 401(k) plan.

The LLC Operating Agreement is the core document that is referred to when issues concerning the LLC need to be resolved. The LLC Operating Agreement is the most important document for your Self Directed IRA. It is extremely important that you create an Operating Agreement for your Self Directed IRA LLC.

Individuals may generally rollover their retirement savings between eligible defined contribution plans, defined benefit plans and pre-tax IRAs, including SEP IRAs and SIMPLE IRAs to a Self-Directed IRA. Eligible defined contribution plans include qualified 401(k) retirement plans under Internal Revenue Code Section 401(a), 403(a), 403(b), and governmental 457(b) plans. Individuals may also roll over after-tax retirement funds to a Roth Self-Directed IRA.

A Self-Directed IRA 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 only describes the type of investments that are prohibited, which are very few.

Gross income “derived…from or on account of” debt-financed property is unrelated business income in an amount equal to the income multiplied by the following fraction (the “debt/basis percentage”):

A Limited Liability Company (LLC) is a company that has option to be taxed as a partnership, this is beneficial because the LLC won’t pay any taxes on gains, and instead it will be the owner of the LLC who is liable for any taxes just as if they earned the money themselves. Because the owner of the LLC is your IRA (the IRA owner is the manager), there are no taxes unless you are running a business that is unrelated to the purpose of an IRA (making investments), using debt financing or taking a distribution from your IRA. In addition, the LLC offers limited liability and asset protection with respect to the assets of the IRA.

Please contact one of our Self Directed IRA Experts at 800-472-1043 for more information.

Using a Self-Directed Roth IRA LLC presents a number of exciting tax planning opportunities. Whether you currently have a Traditional IRA or a Roth IRA, the IRA Financial Trust’s in-house tax and ERISA professionals have significant experience helping clients use a Self-Directed Roth IRA LLC to maximize their tax benefits and investment returns.

Categories of Prohibited Transactions

In general, the type of transactions that could fall under the prohibited transaction rules pursuant to Code Section 4975 can be viewed in the context of three unofficial categories:

Bitcoin is usually described as virtual currency. That’s useful shorthand, but is it really money? And should it be taxed as if it is? Or is it a capital asset? How about a commodity? Or what about a collectible? Most commentators have viewed bitcoins either as a virtual type of currency or capital asset. However, the potential still exists that the IRS could argue that bitcoins do not satisfy the main functions of money and acts more like a stamp or other collectible than a currency.

Most self-directed IRA accounts average less account fees than expected 1% flat asset fees from new fiduciary retirement rules

IRA Financial Trust Company, the market’s prominent self-directed IRA custodian for checkbook IRA and full service IRA custodian accounts, announces that the average self-directed IRA client pays account fees of less than 0.10% of their IRA account value. With checkbook IRA annual account fees of $180 flat per year and with the average client having around $200,000 in IRA funds, IRA Financial Trust’s self-directed IRA clients are paying less than 0.10% in account value fees. The U.S. DOL is expected to finalize new rules that would change the way financial advisors are allowed to give advice to their clients. The new rules are meant to reduce the conflict of interest among broker-dealers and financial advisors who advise consumers on how to invest their savings. Under the new rules, broker-dealers would be required to act in their clients’ best interest rather than encouraging money moves that directly benefit the broker’s bottom line. “We believe that our flat low cost annual self-directed IRA fee, which averages out to less than 0.10% of the average client’s account value, has been extremely attractive to clients moving from robo investment advisory products,” stated Adam Bergman, a partner with the IRA Financial Group.

An Individual Retirement Account (IRA) is a tax-deferred retirement account for an individual that permits individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with a 10% penalty).

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.”

Individuals may generally transfer IRA or rollover eligible qualified retirement plan assets into a self-directed IRA LLC structure. Individuals may also roll over after-tax retirement funds to a Roth Self-Directed IRA.

Yes. Under Internal Revenue Code Section 408, the acquisition by an IRA or an individually-directed account under a qualified retirement plan of any collectible is treated as a distribution from the IRA or account in an amount equal to the cost to the IRA or account of the collectible (Code Sec. 408(m)(1)). A collectible is any work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage, or any other tangible personal property specified by IRS for this purpose (Code Sec. 408(m)(2)). However, the following are not considered collectibles for this purpose:

IRA Financial Trust Company is committed to helping our clients make safe and financially rewarding investments with their Self-Directed retirement accounts. While Self-Directed IRAs can be a safe way to invest retirement funds, investors should be mindful of potential fraudulent schemes when using a Self-Directed retirement structure.

Recently the Securities and Exchange Commission (“SEC”) issued an Investor Alert to warn investors of the potential risks of fraud associated with investing through Self-Directed Individual Retirement Accounts (Self-Directed IRAs and solo 401(k) plans). The SEC notes that there has been a recent increase in reports or complaints of fraudulent investment schemes that utilized a Self-Directed IRA or solo 401(k) plan as a key feature.

In Mauldin v. Comr. 195 F.2d 714 (10th Cir. 1952), the court explained that there is no fixed formula or rule of thumb for determining whether property sold by a taxpayer was held by him primarily for sale to customers in the ordinary course of his trade or business. Each case must rest upon its own facts. The court identified a number of helpful factors to point the way, among which are the purposes for which the property was acquired, whether for sale or investment; and, continuity and frequency of sales as opposed to isolated transactions. However, in Adam v. Comr. 60 T.C. 996 (1973), acq., 1974-1 C.B. 1., the Tax Court analyzed the following factors in determining whether the taxpayer was engaged in the operation of a trade or business:

No, you don't not need to ask permission for your investing – not with a Self Directed IRA LLC. All investment decisions are made by you, as manager of the Self Directed IRA LLC. It’s simple - when you want to make an investment, you write a check, use your debit card, wire funds, etc. All documents can be signed by you, as manager of the LLC.

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.

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.

The Self-Directed IRA is a retirement solution that will unlock a world of investment opportunities. The Self-Directed IRA is a retirement investment vehicle that allows one to use their retirement funds to make traditional as well as non-traditional investments, such as real estate tax-free and without custodian consent. In most instances, investors using retirement funds to make an investment will use cash to make the investment.

In general, the penalty under Internal Revenue Code Section 4975 generally starts out at 15% for most type of retirement plans; however, the penalty is harsher for self-directed IRAs.

In addition to the significant tax benefits in using a Self-Directed Roth IRA LLC to make investments, the Roth IRA also offers a number of very exciting estate planning opportunities.

In general, a self-directed Roth IRA is an after-tax account that allows the Roth IRA holder to benefit from tax-free investment growth, so long as a Roth IRA distribution is not taken prior to a five year holding period and the Roth IRA holder is not under the age of 59½ ( a “qualified distribution”). In addition, a Roth IRA holder would not be subject to the required minimum distribution rules (“RMD”).

With IRA Financial Trust’s Self-Directed Roth IRA LLC Estate Planning Solution, your family could receive tax-free use of your Roth IRA funds. Converting a pre-tax IRA to a Roth IRA could be used as a very valuable estate-planning tool for estate owner’s that would be subject to the estate tax (For 2015 - estates over $5,430,000) as the Roth conversion funds would be paid out of funds subject to estate tax.

A Self-Directed IRA 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 only describes the type of investments that are prohibited, which are very few.

The maximum contribution limit for a self-directed IRA for 2016 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.

With a Self-Directed IRA with checkbook control, flipping homes or engaging in a real estate transaction is as simple as writing a check. As manager of your Self-Directed IRA LLC, you will have the authority to make real estate investment decisions on behalf of your IRA on your own without needing the consent of an IRA custodian. One of the true advantages of a checkbook control IRA is that when you want to purchase a home with your self-directed IRA, you can make the purchase, pay for the improvements, and even sell or flip the property on your own without involving the IRA custodian.  And the best part is that all gains generated from the house flipping transaction will flow back to the IRA LLC tax-free!

When it comes to using retirement funds to invest in a hedge fund, it is important to be mindful of the IRS prohibited transaction rules under Internal Revenue Code Section 4975. In general, the IRS has restricted certain transactions between the IRA and a “disqualified person”. 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 (i.e. parents, children, spouse, daughter-in-law, or son-in-law), and entities in which the IRA holder or a disqualified person holds a controlling or management interest. Furthermore, Internal Revenue Code Section 4975(c)(1)(D) and (E) outlines rules that relate to self-dealing or conflict of interest transactions that involves an investment that could directly or indirectly personally benefit a disqualified person. The self-dealing or conflict of interest prohibited transaction rules have the broadest application especially when it comes to hedge fund type investments.

With IRA Financial Trust’s Self-Directed IRA, you are permitted to purchase an interest in a privately held business that is engaged in any type of business activity. The business can be established as any entity other than an S corporation (i.e., LLC, C corporation, or partnership) When investing in a private business using Self-Directed IRA funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512. It is a good idea to consult a retirement tax professional to develop the most tax-efficient structure for using your Self-Directed IRA.

The main advantage of a Roth IRA over a Traditional IRA is that if you qualify to make contributions, all distributions from the IRA are tax-free. Furthermore, unlike traditional IRAs, you may contribute to a Roth IRA for as long as you continue to have earned income (for a traditional IRA - you can't make any contributions after you reach age 70 1/2).

In general, a Self-directed IRA LLC may be funded by a transfer from another IRA account or through a rollover from an eligible defined contribution plans, defined benefit plans eligible defined contribution plans include qualified 401(k) retirement plans under Internal Revenue Code Section 401(a), 403(a), 403(b), and governmental 457(b) plans.

In general, most Americans have an enormous amount of financial exposure to the financial markets. Whether it is through retirement investments such as IRAs or 401(k) plans, or personal savings, many of us have most of our savings connected in some way to the stock market. In fact, over 90 percent of retirement assets are invested in the financial markets. With what is believed to be approximately $25 trillion in retirement assets as of 2014, you can see the scope of that exposure. Investing in nontraditional assets such as real estate offers a form of investment diversification from the equity markets.

Many traditional IRA custodians advertise themselves as offering a Self-Directed IRA, but what that really means is that you will need approval from your custodian before making an investment. Whereas, in the case of a truly Self-Directed IRA, a limited liability company (“LLC”) is established that is owned by the IRA account and managed by the IRA account holder providing the IRA holder with “checkbook control” over his or her funds.

It’s a little-known fact that tax liens can be purchased with retirement account funds. By using a Self-Directing IRA to purchase tax liens, your profits are tax-deferred back into your retirement account.

Tax lien and tax deed investments have become popular investment choices for many Self-Directed IRA plan participants. Beginning in 2009, as foreclosures continued to pile up, many properties were saddled with unpaid property taxes. For some investors, this created a great investment opportunity.

IRA Financial Trust Company, founded by Adam Bergman, to begin offering self-directed IRA and checkbook IRA accounts in 2016

IRA Financial Trust Company will begin allowing its clients to establish self-directed IRA or checkbook control IRA accounts beginning in February 2016.

IRA Financial Trust clients will have the opportunity to hold their retirement funds held at Northern Trust, one of the most respected banks in the world, offering our self-directed IRA clients with a safe and secure way to make alternative asset investments, such as real estate, precious metals, tax liens, and much more.

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 ability to invest retirement funds in a newly established special purpose entity owned 100% by an IRA and managed by the IRA holder has been deemed legal by the Tax Court and IRS for over 18 years. However, only until recently, did the Tax Court confirm that the use of a newly established Limited Liability Company (“LLC”) wholly owned by an IRA and managed by the IRA holder would not trigger a prohibited transaction. On October 2013, the Tax Court in T.L. Ellis, TC Memo. 2013-245, Dec. 59,674(M) (“TC Memo 2013-245”) held that establishing a special purpose Limited Liability Company (“LLC”) to make an investment did not trigger a prohibited transaction, as a newly established LLC cannot be deemed a disqualified person pursuant to Internal Revenue Code Section 4975.

The IRS permits using retirement funds to make loans or purchase notes from third parties. By using a Self-Directed IRA to make loans or purchase notes from third parties, all interest payments received are tax deferred until a distribution is taken. In the case of a Self-Directed Roth IRA, all gains are tax-free. When engaging in private lending transaction or purchasing notes, it is important to make note of the IRS prohibited transaction and disqualified person rules, which are found in IRC 4975.

There’s no right or wrong answer. The decision usually depends on a variety of factors and circumstances.

If you are not eligible to take advantage of tax-deductible contributions to a traditional IRA but qualify for after-tax contributions to a Roth IRA, then the Roth IRA is the better choice. Roth IRA contributions are made in after-tax dollars, while earnings are usually not taxable.

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.

Since the creation of IRAs back in the early 1970s, the IRS has always permitted an IRA to purchase, hold, or flip real estate.   In fact, it states it right on the IRS website. By using a Self-Directed IRA to buy real estate, you will be able to purchase raw land, domestic or foreign real estate, residential or commercial property, flip homes, and much more tax-free and without requiring custodian consent!