Self-Directed IRAs

An IRA, or individual retirement plan, allows individuals to contribute money into an account set up at a financial institution in order to save for retirement. There are two forms of IRAs: traditional and Roth. Contributions to a traditional IRA are tax-deductible, but the distributions are taxed. Contributions to a Roth IRA are made after-tax, but the distributions are tax free.

Money in an IRA is typically invested by its account manager (or “custodian”) in approved stocks, bonds, mutual funds and CD. A self-directed IRA custodian will allow those types of investments in addition to tax liens, tax deeds, real estate, LLCs, partnerships, mortgage notes, international property and more.

There are prohibited transactions, including purchasing, leasing or exchanging real estate that you or your business own; using a property purchased by your IRA for personal benefit, such as a vacation home, residence or office; and investing in an S corporation.

A self-directed IRA is a separate entity with its own tax I.D. number, and you are its beneficiary. The account, and its funds, are managed by a custodian. Any documents related to the investment will be titled in the IRA’s name, not yours. For example, if you invest in real estate, the title will appear as [Custodian’s Name] FBO [Your Name] IRA. All records for the investment are held by the custodian.

All expenses (e.g., repairs and taxes) and profits (including distributions and capital gains) related to the investment must come from and return to the IRA. When it is time to sell the investment, your custodian will have a form for you to complete that removes the asset from your IRA. Funds from the sale of the investment return to your self-directed IRA tax-free.

If you want to have checkbook control of your self-directed IRA, you will need to set up an LLC. The LLC must be manager-based and 100 percent owned by the IRA. The business checking account will be linked to the self-directed IRA funds. You can be the manager, or designate someone like an accountant or lawyer. Checkbook control allows the manager direct and faster access to funds and helps you avoid custodian administrative and transaction fees.


Learn More About the Tax Liens Unleashed Course!


Don't have an account yet? Register Now!

Sign in to your account