Self Directed IRA Custodians
You are required by the Internal Revenue Service to have a third party custodian for your retirement funds. However, by using a Self Directed IRA LLC the custodian will only hold a few hundred dollars in your custodial account. The bulk of your funds will be held in an account you will establish at a local bank of your choice under the name of your LLC.
Custodians must be approved by the IRS to act as custodians.
Banks and brokerage companies are the most common IRA account custodians. Though they will advertise Self Directed IRA’s, they will limit your investment choices to certificates of deposit, stocks, mutual funds, annuities, and similar financial instruments. It is in their own self interest to do so because they make additional fees from the sale of these types of investments. They will generally offer only their own captive products as investments to their Self-Directed IRA account holders. This severely limits the investment choices you have available.
If the option of using tax-deferred funds to purchase investments, property, mortgages, tax liens and other alternative investments in your retirement planning sounds appealing, you will need to use an independent IRA Custodian that permits truly self-directed IRA investments.
By using an independent IRA custodian that does not offer affiliated investment products, you will have the ability to direct your retirement funds invested to any qualified investment that meets your investment requirements without institutionally imposed arbitrary restrictions… including your own Self Directed IRA LLC.
The IRA account holder cannot serve as the custodian of his or her own account. It’s important that you select a custodian that will allow truly self directed IRA’s or you will need to start the process again with one that does.
The custodian will hold the membership units in your Self Directed IRA LLC on behalf of your IRA. Your LLC will be owned by your IRA. For example: the ownership of the LLC will be “XYZ Trust Company FBO John Doe IRA Account# XXXXXXX. (FBO means “For the Benefit Of”).
Fees can vary widely among custodians, as can the flexibility of the services provided to account holders. Not all Custodians will allow investments in Self Directed IRA LLC’s. Why? Simply Self Directed IRA LLC’s do not generate sufficient transaction fees for the Custodian
With an ordinary self directed IRA the custodian directly holds title to the real estate on your IRA’s behalf, but does not service it (collect the rent, etc.), you will have to additionally contract with other providers such as a property management company. However, be sure that all rents are paid to the IRA and that all taxes are paid by the IRA.
It should be noted that the above only applies when the IRA directly owns the investment property in the custodial account – it does not apply when using a Self Directed IRA LLC to make your investment.
When using a Self Directed IRA LLC the LLC will hold title to the property and you as Manager of the LLC can manage the property, collect the rents and pay expenses.
IMPORTANT NOTE: Custodians will not set up your LLC. They will only set up your Self Directed IRA custodial account.
Tom helped me set up my IRA LLC three years ago when there was very little info available on it and no one I knew had ever heard of it. Not my accountant, not my banker, or my realtor had ever heard about a self directed IRA where YOU control the checkbook and you can invest in real estate. Tom literally held my hand every step of the way.
Everyone else I called who knew about it (companies I found on line) acted like it was privileged information which they would only share if I signed up with them—and they were expensive and permanently on the payroll. They made me feel like I was walking a tightrope over shark infested waters. One tiny miscalculation and my retirement fund was fish food for the IRS. They used intimidation tactics to literally “scare up” business and led me to believe I couldn’t realistically manage my IRA myself, despite the name “self directed”.
I was terrified, but I knew investing in real estate was the right thing, so I said a prayer and then found Tom Walker.
I must have called him 10 times. He never blew me off or acted like I was a pain in the you know what. He was not shy about advising me, had tons of experience and he referred me to a no-frills custodian which has turned out to be the bargain of the century. And when the custodian couldn’t answer my 10 thousand other questions, I just called Tom and he answered them.
In short he did his job expertly and everyone else’s job too! This is not as complicated as people try to make it out to be. Once it’s done the stress is off. I feel lucky to have found this company.
he information contained on this website has been supplied as general information. We do not provide investment, legal or accounting advice. We recommend that you seek advice from a qualified local investment, accounting or legal counsel.