Articles

Articles about IRAs, Roth IRAs, self-directed iras and IRA LLCs.

How to Hire Richard Keyt to Form an IRA LLC

In forming 5,900+ 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 (480-664-7478 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.  See “Custodians” that my clients have used for their IRA LLCs.  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 4.  Transfer 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 5Complete Our Formation Questionnaire:  Go to our IRA LLC formation questionnaire and give us the information we need to form the IRA LLC.  When you click on the submit button we will send you an email message with the questions and answers you submit in your Formation Questionnaire.

Step 6Cause the Custodian to Pay Our Fee by Sending Our Invoice to the Custodian:  The IRA owner must do the following two things to pay our fee:

A.  Prepare a KEYTLaw, LLC, invoice and send it to the custodian.  Go to our online do-it-yourself invoice. Enter your information then click on the submit button to and we will email an invoice to you that you can give to your custodian.

B.  Get a copy of the custodian’s disbursement request form (see the custodian’s website).  Complete the disbursement request form and send it to the custodian along with our invoice you generated in the prior step.

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?

We will form your IRA LLC on the first Friday after we receive your completed IRA LLC Formation Questionnaire and our fee.

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

How to Hire Richard Keyt to Form an IRA LLC 2018-05-14T07:21:05+00:00

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.”

Are self-directed IRAs too good to be true? 2017-09-10T16:32:19+00:00

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.”

The Self Directed IRA – The Basics all Estate Planners Should Know 2018-05-13T13:58:52+00:00

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.”

Can My IRA Invest in Any Type of Asset? 2018-05-13T13:58:52+00:00

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

The Individual 401(k) 2018-05-13T13:58:52+00:00

In Pictures: 12 Tips For IRA And 401(k) Heirs

Forbes:  “An inherited retirement account is more than a simple pot of cash. Often, an heir can stretch out withdrawals from an individual retirement account over his or her life expectancy, gaining decades of tax-deferred or (in the case of a Roth IRA) tax-free investment growth. But the IRS rules for doing this can be tricky. If you’re inheriting an IRA or 401(k), here’s what you need to know.”

In Pictures: 12 Tips For IRA And 401(k) Heirs 2018-05-13T13:58:53+00:00

Articles on Converting to a Roth IRA

Here are a number of articles that I found on the net that discuss the pros and cons of converting a traditional IRA to a Roth IRA.

  • April 4, 2010.  “The Debate Goes On: To Roth or Not to Roth?” – InvestmentNews:  “For the superwealthy, conversion is a slam-dunk; others should be more careful.  The following is an edited transcript of an InvestmentNews.com webcast held in New York on March 9.  . . . To listen to the archive of the webcast, visit Investmentnews.com/rothtranscript and click ‘View archive’.”  One of the panelists was Ed Slott, the renowned IRA expert.
  • January 16, 2010.  “Ready to Roth: How You Fund an IRA Conversion Through the ‘Back Door’” – Wall St. Journal:  “Individual retirement accounts funded with 401(k) assets count among your traditional IRA assets during a Roth IRA conversion.  The language is confusing, since many custodians refer to such accounts as rollover IRAs.  But they are technically traditional IRAs. Any IRA labeled as a SEP, SIMPLE or contributory is included, as well. . . . Here is where the ‘back-door’ method comes into play:”
  • December 10, 2010.  “Beware the Roth IRA Conversion Trap” – The Wandering Tax Pro:  “For several years now tax professionals, myself included, and personal finance and tax bloggers, again myself included, and financial writers have been talking about 2010 being the year to convert to a ROTH IRA. . . . What we all have forgotten to remind you when discussing this issue is the way one calculates the taxable portion of a ROTH conversion.”
  • November 23, 2009.  “2010 Roth Conversion: Factors to Consider Before Making a Decision” – FreeMoneyFinance:  “For more than a decade, Roth IRAs have been offering investors a number of benefits generally including tax free growth in earnings, tax free withdrawals assuming you begin your withdrawals after the age of 59 1/2 and have held the Roth account for the minimum five-year holding period, and no required minimum distributions as is the case with traditional IRAs.  Through the end of 2009, conversion to a Roth IRA from other retirement accounts including a traditional IRA or 401(k) plan is limited to people with a modified adjusted gross income of $100,000 or less.  But as of January 1, 2010, all investors will be eligible to convert funds from a traditional IRA or 401(k) to a Roth IRA, regardless of income level.  While this change will present some attractive options for certain investors, people should weigh the costs and the benefits unique to their own specific financial plans and tax situation before deciding if a Roth IRA conversion is right for them.”
  • November 8, 2009.  “Roth IRA Conversion has Perks” – Arizona Republic:  “By now, word has gotten out that 2010 will be a big year for converting traditional individual retirement accounts into Roth IRAs.  That’s when tough eligibility rules, which have prevented higher-income people from making the switch, will be repealed.  Plus, traditional-to-Roth conversions done in 2010 come with a special sweetener: Normally, you must pay any taxes due in the year you make the switch, but in 2010 only, investors can elect to defer the tax bite and spread it over the following two years, 2011 and 2012.”
  • September 22, 2009.  “To Roth or Not to Roth: Analyzing the Conversion Opportunity for 2010 and Beyond” – University of Illinois Professor of Law Richard L. Kaplan wrote a popular article on whether to convert a traditional IRA to a Roth IRA (click on the download link then click on the link to one of the download sites).

“Beginning in 2010, all taxpayers will be able to convert their existing Individual Retirement Accounts (IRA) to Roth IRAs, without regard to their level of income or marital status. In effect, taxpayers will be able to lock in current income tax rates on account values that have been eroded by recent investment market declines. This article analyzes who should take advantage of this opportunity, using the barest minimum of arithmetic (and no calculus).”

  • September 6, 2009.  “Is a Roth conversion right for you?” – Arizona Republic business reporter Russ Wiles says in his article:

“Roth individual retirement accounts have emerged as a popular tax-sheltered way to invest, and they’ll only get better next year.  Starting in January, Congress will drop the eligibility barriers so that any investor, regardless of income, will be able to transfer money from traditional, deductible IRAs to a Roth.”

Articles on Converting to a Roth IRA 2018-05-13T13:58:53+00:00

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

From the using your IRA or retirement account to self-direct investments department. An article in Investment News states, “Hal Mottet, a Lake Oswego, Oregon, businessman bought a family-owned packaging company for $3.5 million in late 2007, and he and a partner financed 40 percent of the sales price with their retirement money. Mottet and his partner used a loophole in U.S. tax law to roll over $1.4 million from their existing 401(k) retirement plans to finance the purchase of Carson, California-based Empire Container Corp. . . . 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.”

Investors Tap Into 401(k) Money Tax-Free for Business Startups 2018-05-13T13:58:53+00:00

Five Rules for Inherited IRAs

We create IRAs and retirement plans to provide income during our retirement years, but we also expect that on our deaths our loved ones will inherit a sizable sum of money from the IRA or the retirement plan. Everyone knows or should know that the proper way to transfer IRA and retirement plan assets on the death of the IRA owner or plan participant is by a beneficiary designation.

I believe that IRA owners and retirement plan participants should do more than simply complete a beneficiary designation form.  They should also educate their adult beneficiaries about fundamental IRA concepts to prevent them from immediately cash out the inherited IRA or plan and blow the money on an expensive car or other foolish expenditures.

Forbes has a great article called “Five Rules For Inherited IRAs” that is a must read article for anybody whose IRA or retirement plan may leave substantial assets to loved ones.  The article begins:

“Before they inherited $3 million in retirement accounts from their father last year, the three middle-aged siblings didn’t know it was possible for heirs to stretch out the tax benefits of such accounts for decades. But what they also discovered after his death is that doing this is tricky–and in some cases impossible–if the original owner of the accounts didn’t fill out his beneficiary forms just so. Although their 78-year-old dad was a lawyer, “He may never have realized that it made any difference,” says a daughter, who has spent days trying to sort it all out.”

The five rules are:

  1. Do no harm
  2. Beneficiary forms rule
  3. Employer plans are different
  4. Spouses have more options
  5. Watch for distribution traps

I recommend you read the article, make a copy of it for your records, give a copy of the article to all of your adult beneficiaries and keep a copy in the file where you keep your estate plan documents or your IRA or retirement plan documents.

See my article called “How Your Family Can Become IRA Millionaires Using an IRA Inheritance Trust® that Protects the Funds from Ex-Spouses, Creditors & Bankruptcy Court.”

Five Rules for Inherited IRAs 2017-09-10T15:47:30+00:00