Self Directed IRA LLC

At the last azrei meeting I met a representative from entrustgroup. They (and other companies) offer a self directed IRA that allows investing in RE (very restricted, but workable).

I then found one that allows for a self directed IRA LLC (through a custodian) where you are the manager and actually have checkbook control. This would make tax lien investing possible (you could pay at the courthouse with your IRA LLC checkbook) Also, it might be possible to do REITs (gotta check) I hadn’t planned on getting into tax liens until a few years from now when I could have some money tied up. But this way, it’s only tied up in the IRA which you can’t touch anyway (or be heavily penalized)

I thought the IRA custodian was manditory to keep you from “touching” the money. Doesn’t the checkbook void that? Seems too good to be true. Anyone have experience with this?

I think your intuition is right on. Having direct control of the IRA funds is contrary to the whole custodian requirement.

It’s easiest to just transfer all the money to your LLC then you have checkbook contol from there. Now you can’t mix IRA and non-IRA funds in the LLC.

71tr… yeah, we all know the saying about too good to be ture but dang! It sure would be great!

Oh, no, the LLC doesn’t even exist yet. It would have to be created for the sole purpose of the IRA and would only be used to make money for the IRA. I know, no mixing funds. I’m already bummed I can’t use it to help in the fix/flips I’m trying to start doing. No disbursements either but that’s ok.

Any more experiences with the IRA LLC or even just a self directed LLC (checkbook NOT under my control) I’m particularly interested in tax liens for the IRA account.

It’s pretty quick and easy to setup a LLC. Now moving your IRA funds to a trust company is the slow part. Most institutions don’t want to give up your money and will take their time. I think they are allowed 45 days by law. I can’t remember the exact amount of time.

I have a C-corp that is partially owned by my IRA. That was pretty easy and let me mix IRA and non-IRA funds. You just buy shares of your own company and then the company can use the proceeds to do whatever it wants. You have to make sure that if you pay dividends they are properly distributed. Of course, if you only want dividends going to yourself or the IRA, then you can do two different classes of stock as well.

The checkbook LLC isn’t too good to be true, like 1031 exchanges aren’t. It’s just a matter of using what’s available to us.

From what I learned, the regular operating agreements for LLCs will void your self-directed IRA benefits. There’s some kind of common way of structuring or terms that you need to avoid. A few companies created some stiff articles of organization so the IRS can’t penetrate the setup. A few of them offer guarantees if you are audited and lose.

Thanks guys! I called the IRS and they don’t get involved in day to day operations of the IRA and how its set up. They only care that they are informed of distributions etc.

I called 3 companies that set up the IRA LLCs. Apparently, you pay one company to set up the IRA LLC and then you pay the custodian their yearly fee. The only thing the custodian does is file a yearly statement with the IRS about your funds. The custodian being present is how they can do the IRA without problems from the IRS.

The fees I from the 3 companies are
Co 1) 3500 LLC setup & 190/year custodian
Co 2) 2500 LLC setup & 78/mo custodian
Co 3) 1500 LLC setup & .25% of balance/year (min 250) for custodian.

Obviously that’s a HUGE spread so I need to call more companies before I pick one. But, I hear there is a kit to do it yourself. I did my regular LLC myself (pretty easy) but I may want to pay someone to do this so I can be sure it is done right. Did you guys set yours up yourself of hire someone. If you hired someone, can you tell me who?

Marcus, Do you own less than 50% of the company? It isn’t an S corp is it? I hear that both of those are requirements for you investing in your own company with the IRA?

I own <50% in the IRA. The rest I own outside the IRA. I’ve never heard of the 50% rule though. Once you have a self-directed IRA, then you can invest in a whole bunch of businesses. Your custodian just needs the paperwork of the business on file.

You can invest in businesses, butff you own greater than 50% of a company, it’s considered self-dealing and would be one of the prohibited transactions.

Thanks dee, self dealing was what I was thinking of with the 50% thing

Self Directed IRAs via a LLC are very legitimate and legal. You can have checkbook control and you can invest in real estate. There is also a Self Directed 401(k) which has some additional features and benefits over the IRA.

I help people setup Self Directed IRAs and 401(k)s everyday. Most of my clients set them up specifically for real estate investing.

There are specific rules regarding related parties, prohibited transactions (i.e. self dealing rules). It sounds worse than it really is.

You can learn more about the concept at :