Ask the Self-Directed IRA and Solo 401k Experts

With a self-directed IRA LLC, are my IRA funds FDIC insured?

Tommy H., MT

Hi Tommy,

When establishing a self-directed IRA LLC with “checkbook control”, the retirement funds must be deposited first with an IRA custodian/administrator before they are sent to the LLC. In general, the IRA administrator would be the trust company that would be in charge of performing all IRA administrative functions, i.e. recordkeeping, IRS reporting, filing IRS Form 5498, etc., whereas, the IRA custodian would be the bank or financial institution where the IEA funds are deposited. In other words, the IRA administrator would perform all recordkeeping functions but would never touch the IRA funds. The IRA custodian, which is an FDIC insured bank, would be the financial institution where the funds are deposited before they are wired to the IRA LLC. FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. For example, if you wanted to fund a self-directed IRA LLC with an IRA at Fidelity worth $100,000 to buy real estate, the flow of funds would be as follows: The IRA administrator you select would request the $100,000 in IRA funds from Fidelity in an IRA custodian-to-custodian transfer. This transfer is a tax-free and penalty free transfer of IREA funds as the funds are going from one IRA custodian to another. The IRA administrator would process the paperwork and the funds would be deposited in an FDIC insured account at a bank associated with the IRA administrator. Once the funds have been deposited at the FDIC insured bank, you can request that the IRA funds be invested into the LLC account by filing a n investment authorization form with the IRA Administrator. The IRA Administrator would process the form and then send the $100,000 of funds from the IRA custodian’s FDIC insured account to the LLC bank account at the local bank of your choice. In a typical self-directed IRA LLC structure, the IRA will own the LLC 100%. Once the funds are deposited in the IRA owned LLC account, which would also be FDIC insured, the funds could then be invested.

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