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Double Feature IRA Asset Protection Blueprint

IRA
Learn the Checkbook IRA Strategy

Why on earth do so few people know about this double feature IRA strategy? An even better question is why so few people even know how a typical self-directed IRA really works?

The main answer to that IRA question is simple.

Your traditional IRA house like Fidelity or Vanguard doesn’t make any money by telling you this information. In fact, they stand to lose your business because they can’t do it.

In short, a traditional IRA is limited to directing investment to benefit institutions like that of the government, Wall Street and the big banks.

Don’t believe us?

Call your traditional IRA or 401K plan administrator and tell them you want to invest in a cash flow apartment unit within your retirement account. See what they say.

Yet another reason for failed knowing about the self-directed IRA is that many attorneys and accountants do not fully know how these are used…let alone the IRA rules outlined in IRS publication 590.

Before we explain how to set up this self-directed IRA strategy, let us first clarify a couple things.

One…

We are talking about a self-directed IRA and the, what many people call, “checkbook” IRA here. Both are self-directed IRA strategies.

Two…

The structural difference between the typical self-directed IRA and the “checkbook” self-directed IRA is one extra step that you will learn about here.

Three…

Not only can you invest in all of the things that the traditional IRA, Roth, 401K and SEP can invest in, but you can invest in many other assets that these outdated retirement vehicles cannot invest in.

Four…

This is all done using your self-directed IRA and the contributions and capital gains are similarly tax free.

Amazingly, this IRA product has been available to the general public since the mid 1970’s…this is nothing new.

In a nutshell, the only difference between your typical IRA and a self-directed IRA is the types of assets they can hold. The self-directed IRA can hold all of the traditional assets like stocks and bonds plus things like real estate, notes, LLC’s and more.

Traditional IRA Self-Directed IRA
Stocks, Bonds, CD’s and Mutual Funds Stocks, Bonds, CD’s, Mutual Funds, Rental Property, Notes and Mortgages, LLC’s, Private Placements, Tax Liens, Gold and Silver, Private Stock, Raw Land & Foreign Property


If you notice, most of the items in the traditional IRA box are there to benefit your advisor…not you.

There are two categories that a self-directed IRA cannot invest in: (I) Life Insurance and (ii) Collectibles.

Where to start if you currently do not have a self-directed IRA?

For starters, it is very important to note that if you have an existing IRA, you will likely be able to open a new self-directed IRA account and simply “transfer” money from your existing IRA into a self-directed IRA.

401K Caution…

However, if you have a 401K with a current employer, it remains unlikely that you will be able to simply “rollover” money into a new IRA. In other words, your employer will likely not allow release of funds until you leave or retire from that company.

Check it out to be sure. You can go to your 401K “plan administrator” and ask for an “in-service” transfer. If the plan documents allow it…you can roll the money over. Otherwise, you pretty much have to wait until you leave the company to “rollover” money.

If you plan to change employers, make sure to self-direct first before you actually put money into a new employer’s 401K program…you’ll be stuck again.

One way or another, you will want to check with your current plan administrator and make sure money is available for transfer or rollover; then follow these steps.

Self-Directed IRA Step 1…Open a Self-Directed IRA Account

Step 2…Transfer money from current account into the new self-directed IRA account.

Step 3…Shop for property

With this format, it is important to remember that your IRA is the buyer of the property or assets…not you. The IRS is very strict about how money is handled in an IRA. In a nutshell, you will not be able to take personal possession of any money.

Another formality to consider is the IRA custodian has to sign off any real estate purchase contracts, wire transfers, or earnest money deposits required in a transaction.

In order for this to occur, you will submit what’s called a “buy direction letter” to the IRA custodian each time you wish to initiate the allocation of funds for any transaction.

Moreover, future due tenant rents are made payable to your IRA. In other words, your rental tenant will make a check payable every month to your IRA.

The reality is that many self-directed IRA providers charge fees based on number of assets, total account value and/or may charge a fee per transaction. Therefore, if you are buying and selling multiple assets throughout the year within your IRA, or collecting many rent checks, these fees can add up.

The Double Feature Way…

This may be a more cost effective way.

For our Inner Circle Members, we can use what many might call a “checkbook” IRA. Can you still set this up if you are not planning on being one of our Inner Circle Members?

The answer is…Yes.

The set-up is simple. It is one extra step.

But before we show you the fourth step…let’s explain why you might need it.

If you recall a moment ago we stated that all the investment transactions for the purchase and sale of assets within your IRA must go through your self-directed IRA custodian via a “buy direction letter.”

We also stated that much of the time there are fees associated with wire transfers, contract signings and the like. In addition, we noted that in some instances the IRA custodian will charge an annual fee per asset (or sometimes an asset holding fee based on total account value).

Not to mention that passing every document through the IRA custodian can be a drag…it just slows things down.

These can all affect your return on investment.

The Fourth Step…

The solution is to set up LLC asset protection where your self-directed IRA account is the “Member” of the LLC (investors in an LLC are called “Members”).

What does this accomplish? It simply creates an LLC that is “wholly owned” by your IRA and when you shop for property and assets…the LLC is making the purchase.

IRA

This blueprint provides you added asset protection plus the ability to avoid paying extra transactional fees associated with purchasing multiple assets or fees based on total IRA account value.

Why? The reason is because when you set up the LLC (with your IRA as the member of the LLC), your IRA custodian recognizes the LLC as one asset.

This is huge because should the self-directed IRA provider charge $295 per asset per year…your fee is $295 x 1 asset (the LLC). The LLC can purchase as many assets as you want. As far as the IRA custodian is concerned…it’s one asset.

The other advantage is that now all the transactions are handled by the Manager of the LLC (not the IRA custodian). No more time spent back and forth with requests and “buy direction letters” to the IRA custodian to get things completed.

In the “checkbook” IRA approach you have even more control because you choose who the Manager of your LLC is.

The manager of an LLC is considered an “agent.” An “agent” to a corporation can speak on behalf of the business and bind the LLC to contracts and other business deals.

In the “checkbook” IRA scenario, the LLC operating agreement will identify you as a Manager while your IRA account will be identified as the Member.

Here’s the reality.

Whether you are planning to self-direct your IRA with or without the “checkbook” control of an LLC and LLC Manager, either way HK Creative Investments can help you grow your wealth…buy property here.

Some readers may already have established a self-directed IRA. In that case, you can shop for real estate and private notes here.

Likewise, you can choose to hire us for direct buyer representation services if you wish to purchase other real estate investments outside our current inventory. Really it’s up to you.

For the beginner, we can recommend a qualified self-direct IRA custodian if you need one.

A self-managed IRA has strict rules regarding prohibited transactions…specifically, dealings involving family members.

Be careful…

The IRS will tax your IRA on personal “sweat equity” you contribute to property owned inside your IRA (called over-contribution of sweat equity). In fact, you performing any work on a property owned inside your IRA would be considered a prohibited transaction.

Your real estate consultant needs to be aware of the advantages, disadvantages and limitations regarding these self-managed IRA solutions. In addition, we always recommend that you seek the appropriate tax advice before starting.

Contact us today to learn more about how you can use your self-directed IRA to shop for quality real estate investment and possibly be considered for our Inner Circle Membership.