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Why Establish a Checkbook IRA vs a Self-Directed IRA with a Custodian?

With a “checkbook control” Self Directed IRA LLC you will never have to seek the consent of a custodian to make an investment or be subject to excessive custodian account fees based on account value and per transaction. Unlike a full service IRA custodian which will require you to hold the funds at a bank of their choosing and will require you to seek their consent before making a transaction, making investments with an IRA or 401(k) Plan can prove costly and time consuming.

By having “checkbook IRA” over your IRA funds you will gain the following advantages:

“Checkbook Control”: You will no longer have to get each investment approved by the custodian of your account. Instead, as manager of the IRA LLC, all decisions are truly yours. To make an investment, simply right a check or wire the funds straight from your Self Directed IRA LLC bank account. With a Self-Directed IRA LLC, you will be able to invest in almost any type of investment opportunity that you discover, including: real estate (rentals, foreclosures, raw land, tax liens etc.), private businesses, precious metals, hard money & peer to peer lending as well as stock and mutual funds; you’re only limit is your imagination. The income and gains from these investments will flow back into your IRA tax-free.

Low Custodian Fees: A Self-Directed IRA LLC “Checkbook Control” structure will help you save a significant amount of money on custodian fees. With a checkbook IRA LLC you no longer have to pay excessive custodian fees based on account value and transaction fees. Instead, with a “checkbook control” Self-Directed IRA LLC, an FDIC backed IRS approved passive custodian is used. The custodian in the “checkbook control” Self Directed IRA LLC structure is referred to as a “passive” custodian largely because the custodian is not required to approve any IRA related investment and simply serves the role of satisfying IRS regulations. In other words, once the IRA funds have been invested in the LLC, the IRA passive custodian will not whether the funds were used to buy real estate, gold, stocks, or has remained in cash in the account. The only interaction you would have with a checkbook IRA custodian is each year you will be asked to provide an annual valuation for your IRA LLC so that the custodian can complete the IRS Form 5498. By using a Self Directed IRA LLC with “checkbook control” you can take advantage of all the benefits of self-directing your retirement assets without incurring excessive custodian fees and custodian created delays.

Invest Quickly Without Delay: With a Self-Directed IRA LLC “Checkbook Control” structure, you will have the power to act quickly on a potential investment opportunity. When you find an investment that you want to make with your IRA funds, as manager of the LLC, simply write a check or wire the funds straight from your Self Directed IRA LLC bank account to make the investment. The Self Directed IRA allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

Hold Your Funds at a Local Bank: With a Checkbook Control” IRA structure, you, as manager of the LLC, will be able to hold the IRA funds at a local bank of your choice and make an investment quickly and efficiently. You no longer have to hold your retirement funds at a bank you never heard in a foreign state.

Limited Liability: By using a Self-Directed IRA LLC with “Checkbook Control”, your IRA will benefit from the limited liability protection afforded by using an LLC. By using an LLC, all your IRA assets held outside the LLC will be shielded from attack. Whereas, when making investments directly via an IRA custodian without using the LLC, your IA assets will not have the benefit of limited liability protection. This is especially important in the case of IRA real estate investments where many state statutes impose an extended statute of limitation for claims arising from defects in the design or construction of improvements to real estate.

To learn more about the benefits of the “checkbook IRA”, please contact a tax professional at 800-472-0646.

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Posted in Self-Directed IRA