Self-directing assets into a Self Directed Roth IRA, Self Directed IRA, and Self Directed IRA Real Estate “Checkbook Control” Structure is a valid form of funds management. These have been in place for 35 years and are not prohibited by Code 4975. An advisory memo sent out by the Internal Revenue Service confirms an entity’s right to invest IRA funds without fear of violating transaction rules set forth in the IRS Code 4875.
These investments have grown in popularity because of the control the investor has over his or her own “checkbook.” The investor is free to make investment decisions tax-free. The IRA account sets up a limited liability company, also called an LLC. The account holder of the IRA manages the LLC. The Custodian of the funds from the IRA is transferred to the bank account of note on the IRA LLC. This system or method provides the investor with the checkbook type of control over his or her own funds.
Self Directed Roth IRA, Self Directed IRA LLC, and Self Directed IRA with Real Estate “Checkbook Control” configurations provide the option to use retirement funds for other investments without the consent of the custodian. This could end the cycle of having funds forced into mutual funds or stocks. Because these configurations offer optimum control and flexibility, the owner can invest in real estate or business opportunities. These options of self directing IRA allows the investor to act quickly on new opportunities without the requirement of gaining custodian consent. Additionally, the traditional IRA benefits of tax deductions, estate planning, tax-free increases and asset protections remain in place.
There are some areas that are prohibited under the IRS Code 4975 and cannot be invested in lawfully using a Self Directed IRA or similar funds. These include collectible investments and life insurance plans. People who choose self directing their own funds often opt to invest in public stocks, commercial paper, private stocks, business entities operating as privately held and real estate.
Attorneys or financial professionals can help set up the account and determine which investments are lawful and which are not. Clients report a feeling of personal satisfaction when they watch their portfolios evolve under self control and flexibility to act on their own knowledge of the market.