Understanding the definition of a self-directed IRA and the main issues in retirement accounts will empower you as an investor. David Moore of IRA Advantage shares insight and advice about investing for retirement and reveals the major problem as it relates to transactions with disqualified parties.
Watch or Read
Is My IRA Self-Directed?
The Wall Street world’s definition of a self-directed IRA would allow you to buy what’s on the investment menu. Our definition of a self-directed IRA, a truly self-directed IRA, is an IRA account that allows you to buy anything the law allows-meaning anything other than collectibles, life insurance contracts, or stock in a sub S corporation. Assuming you’re buying something the law allows, rarely would the investment be a problem. It’s really just a question of who you’re going to transact between or for the benefit of. That’s what triggers problems.
There are two basic issues when it comes to retirement accounts. First, what does the person want to invest in? Second, who are they transacting between or for the benefit of? Remember that to transact between or for the benefit of disqualified parties is considered a prohibited transaction. That’s a big no-no, but you can transact along with a disqualified party.
For example, let’s say you have $250,000 in an IRA and you need $300,000 to go buy that property. Here are a few options to make that happen: You could go out and get an IRA-specific non-recourse loan for that $50,000 difference; or if you wanted to be a co-owner of the property, you could do that, and you could be that co-owner of that property via a limited liability company with you as an additional member; or you could have a tenancy in common agreement that spelled out the operation of the property, and you would just be a tenancy in common owner along with your retirement account.
To put it simply, you can buy along with a disqualified party. You just can’t transact between or for the benefit of it. As far as whether your IRA is actually a self- directed IRA, it really comes down to the definition.
Many can call themselves IRA experts. Be sure you’re dealing with true professionals when it comes to your retirement planning. Give the IRA experts at IRA Advantage a call today! 503-619-0223
