Self Directed IRAs

How to Hire Richard Keyt to Form an IRA LLC

In forming 4,300+ Arizona limited liability companies, including many that have a member that is an IRA or retirement plan, IRA LLC attorney Richard Keyt has learned how to make the IRA LLC formation process very easy.  Here’s the 6 easy steps the IRA owner must accomplish to hire Richard to form an IRA LLC for $997 and get check book control over the IRA’s funds:

Step 1Research:  Spend some time on this website and learn about IRA LLCs.

Step 2Get Answers to Your Questions:  Contact me (602-906-4953, ext. 1 or rickkeyt@keytlaw.com) if you have any questions about forming or operating an IRA LLC.  I don’t charge to answer questions about IRA LLCs.

Step 3Get a Custodian that Allows Directed-Investments:  If you cannot make self-directed investments where your funds are currently located, you must open an account with a custodian that will allow for the self-directed investments.  On the left column of this website under “Article Topics” click on the “Custodians” link to see a list of custodians that my clients have used to form an IRA LLC.  All of these custodians allow for self-directed investments, including investments through an IRA LLC.  When you open the account the custodian will give you the account’s name and its account number.  I need this information to form the LLC because it will be owned by the custodian for the benefit of the IRA.

Step 4Complete my online IRA LLC Formation Questionnaire:  This is an online form that collects the information I need to form the IRA LLC.

Step 5Transfer Funds to New Custodian:  Arrange for a direct custodian (old) to custodian (new) transfer of the funds you want in the new custodian’s IRA account.

Step 6Cause the Custodian to Pay My Fee by Sending Our Invoice to the Custodian:  The IRA owner must do two things before I can be paid:

A.  Prepare a KEYTLaw, LLC, invoice and send it to the custodian.  Click on this KEYTLaw Invoice link and fill out our simple Adobe pdf fillable form.  Print the completed invoice then send it to me (fax: 602-297-6890 or email: rickkeyt@keytlaw.com with a copy to gia@keytlaw.com) and the custodian.

B.  Prepare the custodian’s disbursement request form (see the custodian’s website) and send the disbursement request to the custodian along with our invoice.

FYI:  You can be working on steps 4, 5 and 6 as soon as you have an account with a custodian that will allow self-directed funds.

When Will Your IRA LLC Be Formed?

I will form the IRA LLC on the last business day of the week in which I receive the completed IRA LLC Formation Questionnaire and our fee.  If you need it formed earlier in the week, call me or my legal  assistant Gia Goodman (602-906-4953, ext. 7).

Are self-directed IRAs too good to be true?

USA Today:  “A self-directed IRA allows you to invest in things other than securities registered with state or federal authorities. For example, you can use the assets in a self-directed IRA to buy a rental property, or even as the down payment for a mortgage on a rental property.  There are restrictions, however, on self-dealing: You can’t rent the place to yourself, for example. And you must have a qualified third-party custodian for the IRA.  Self-dealing restrictions on investing in small businesses — especially sole proprietorships — are also complex, and you should see a tax lawyer before you put IRA money into a small business. ‘Self-directed IRAs have helped fund thousands of small businesses that otherwise wouldn’t be there, says Tom Anderson, president of the Retirement Industry Trust Association, a trade group.”

The Self Directed IRA – The Basics all Estate Planners Should Know

Warren Baker’s post on the WealthCounsel blog states: “Let’s assume for a moment that your client’s goal is to invest into a piece of residential rental real estate. Your client can either:  (1) request that the new custodian purchase the property directly on behalf of the IRA; or (2) direct the custodian to first invest the IRA into a Limited Liability Company (“LLC”) that is thereafter 100% owned by the IRA and purchase the property using the LL (note: your client will act as the Manager of this LLC).  The latter option gives your client the flexibility to purchase the property using a check from the LLC’s checking account, which depending on the custodian’s ability to move quickly, will be quicker than option number one.”

By |August 18th, 2010|Self Directed IRAs|

Can My IRA Invest in Any Type of Asset?

Question:  Can I cause my self-directed IRA to invest in any type of asset I desire?

Answer:  No.  Section 408(a)(3) of the Internal Revenue Code says that an IRA may not invest in life insurance contracts (life insurance).  The IRS also restriction investments in “collectibles.”  Here is what IRS Publication 590 says about IRAs investing in collectibles:

“If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early distributions, discussed later.

Collectibles.  These include:

  • Artworks,
  • Rugs,
  • Antiques,
  • Metals,
  • Gems,
  • Stamps,
  • Coins,
  • Alcoholic beverages, and
  • Certain other tangible personal property.

Exception.  Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.”

The Individual 401(k)

The following article was posted by Ryan Rippy, the Business Development Manager of The Entrust Group.

Save more with an Individual 401(k) plan and expand your investment options with a self-directed account.  An Entrust self-directed Individual (k) Retirement Account gives you the maximum flexibility and financial ability in investing for your future. The Individual (k) is similar to a 401(k) but for businesses that employ only the owners, their spouses, and partners.

An Individual (k) plan has two components based on your employer and employee roles:

  • (Employee) Salary deferral, based on earned income, up to the allowed limit
  • (Employer) Profit-sharing contribution, maximum 25% of compensation, up to the allowed limit

With Entrust, you can establish the salary deferral component as either a Roth or traditional tax-deferred plan, which reduces your taxes now and offers tax-deferred savings. With the Roth, you make after-tax contributions to the account, and like a Roth IRA, future withdrawals are tax free.

If you currently have an Individual (k) and want to self-direct your funds into nontraditional investments, you can transfer or rollover the funds to Entrust without penalty.

Consider an Individual (k) retirement account if:

  • You are a sole proprietor with no employees other than your spouse or partners.
  • You are looking for the largest potential contribution for a business without employees.
  • You want the flexibility to invest beyond stocks and  mutual funds.
  • You want the capability of borrowing from your plan.
  • You want to purchase leveraged real estate in your plan and avoid UBIT (Unrelated Business Income Tax).

Consult with your CPA or investment adviser to determine whether an Individual(k) works for you.

Entrust Offer These Administrative Options:

With Entrust, you can choose from various service options. Entrust provides the following, depending on the service model.

  • Traditional Service

Required plan documents

Recordkeeping on your self-directed investments

  • Do Your Own (DYO)

Required plan documents

  • Outsourced Service (you must have your own plan documents)

Recordkeeping on your self-directed investments

Individual 401(k) Contribution Limits

The employee salary deferral can be up to 100% of your earned income, up to the maximum annual contribution limit. The employer portion can be up to 25% of compensation. The maximum compensation amount that can be used for calculating your contribution is $250,000 for 2012.

Ryan Rippy, Business Development Manager
The Entrust Group
7700 Irvine Center Drive, Suite 800
Irvine, CA 92618
t
949.788.2970  |   f 866.815.5168
rrippy@theentrustgroup.com

By |July 10th, 2010|Self Directed IRAs|

Investors Tap Into 401(k) Money Tax-Free for Business Startups

From the using your IRA or retirement account to self-direct investments department.  Bloomberg:  “Here’s how it typically works: An investor sets up a corporation, establishes a new 401(k) plan there, rolls over his or her existing 401(k) or Individual Retirement Account, and then uses part or all of the plan’s assets to buy shares of the new company. This funds the new business, while keeping the tax- advantages of the retirement plan.”

By |June 21st, 2010|Self Directed IRAs|

Decoding Unrelated Taxable Income (UBTI) within an IRA

Equity Trust Company:  “If your . . . IRA owns an asset or interest that produces unrelated business taxable income (UBTI), their IRA may be subject to an unrelated business income tax (UBIT) pursuant to Section 511-514 of the Internal Revenue Code.  However, before we can address the tax, we must first identify situations when unrelated business taxable income is generated.

By |June 6th, 2010|Self Directed IRAs|

Precious Metals for Your IRA

Ann Siford, Manager of Professional Network at Equity Trust Company writes:  “Precious metals have long been considered one of the few ways to protect assets from high inflation and economic uncertainty. Clients are investing their IRAs in gold, silver and more. . . . The only thing certain about today’s market is its uncertainty. To mitigate this questionable time, more clients and their advisors are seeking precious metals as an asset class to further diversify their retirement portfolio. Precious metals are often attractive to investors because of their liquidity.  A self-directed IRA can hold gold, silver, platinum and palladium bullion which meet minimum fineness requirements.”

By |June 6th, 2010|Self Directed IRAs|

Passive Real Estate Investment with a Self Directed IRA

Gene Fox, President of Triple Net Houses writes:  “The key to this unique strategy is utilizing the long-used triple net lease, which is used commonly by real estate investors on commercial properties, such as Dollar General Stores and fast food restaurants. Triple Net Houses takes that same leasing principle, but transfers it to single-family homes. Investors can now get all the benefits of owning rental properties, without the hassles of managing or maintaining them.”

Simple Commercial Real Estate Investments for Your Self-Directed IRA

Ned Coyle, Commercial RE Investment Specialist, writes:  “Have you considered investing in a commercial real estate property only to back-off because you didn’t want the management hassles? OK, fair enough. Did you then invest those funds in the stock market, perhaps a Real Estate Investment Trust (REIT) because it was the easy thing to do?  No one has to tell you the direction your stock portfolio has taken, right? It probably has about the same value today as it did in 2002. Where would your net worth be today if you had taken a portion of those funds and invested it in real estate? We are not talking a REIT stock here but a purchase, in a fee simple manner, of a commercial office, retail or light industrial distribution property.”