Here are the most common Self Directed IRA questions. Have others? Give us a call 888-795-7950
- What is a Self Directed IRA?
A Self Directed Individual Retirement Account allows the IRA owner (you) to select investments that are best for your future. Typically, IRA investments are limited to stocks, bonds and mutual funds. The IRA Club does not place artificial restrictions on your investments, allowing you to have more control and flexibility when it comes to choosing investments.
- What are the benefits of a Self Directed IRA?
- Why haven’t I heard of Self Directed IRAs before?
Self Directed IRAs were created by Congress back in 1974. Alternative IRA investments have always been allowed by the IRS, however, over the years many IRA companies have placed artificial restrictions on IRA owners. Self Directed IRAs are not well known because most banks and brokerage firms prefer traditional investments.
- What is the process?
- Open an account
- Fund the account
- Select the investment
- How do I fund a Self Directed IRA?
- Transfer funds from an existing IRA
- Transfer funds from a 401k, 403b or TSP from a former employer
- Transfer funds from an Inherited IRA
- Fund with a personal contribution
- What are the allowable and prohibited transactions?
Your IRA may transact business with almost anyone; except a “Disqualified Person”. Simply stated, your IRA account may not transact business with or supply goods or services to a disqualified person. A disqualified person may not transact business with or supply goods or services to your IRA. The good news is that there are very few “Disqualified Persons.” For example, your IRA cannot purchase a property for your children to reside in. However, your IRA can make a loan to your sister. The terms partnering and transacting are often misused. Remember that your IRA can partner with any person or any IRA. The IRA Club provides our members with a no cost review to help you avoid making one of the few prohibited transactions.
The above is intended as a guide. For complete Prohibited Transaction information, you may contact the IRA Club.
- Can an IRA partner?
YES it can! Partnering your IRA with another source of funds to make an investment is both an easy and powerful tool.
- What are the steps to buying an asset in an IRA?
It’s easy to make investments with a Self Directed IRA. Once you find your investment and provide money to the seller, you will receive proof that your Self Directed IRA is the new owner. It can be in the form of a Bill of Sale, Title, Deed or simply a statement identifying your Self Directed IRA as the new owner of the asset. The main difference is that the name on the title (or other documents) is the name of your Self Directed IRA and not your name as an individual.
- What is the role of the IRA Club?
You must use a Self Directed IRA company, such as IRA Club, if you choose to invest in alternative assets. This is required by the IRS. The IRS requires extensive recordkeeping, hence the IRA Club is responsible for holding and administering the assets of your account. Investors are solely responsible for assessing the investment’s merits. As the term “Self Directed IRA” implies, you are in control of making all investment decisions.
- Can an IRA borrow money?
Yes. The most common way for an IRA to buy an asset is to pay cash. However, there may be times when an alternative method of payment is practical.
- Can an IRA invest in Life Settlements?
Yes. In fact, the use of Life Settlements as an investment opportunity for IRA owners is a growing trend. When an IRA invests in Life Settlements, 100% of the benefit (the earnings from the Life Settlement contract) goes straight to the IRA account where they enjoy the income tax-free status.
- What happens to my IRA when I divorce?
If you own an IRA and are in the process of divorcing your spouse, you may find that you will be required to “split” your IRA with your spouse. The first thing to do is to obtain a “Divorce Decree.” The reason for this is because if you transfer the money to your ex-spouse without that “Divorce Decree,” it will be considered a distribution and you will be taxed on that distribution; it will be considered a taxable event. Next, change the name of your beneficiary, unless you want to keep your ex-spouse as the beneficiary.
- Can a minor have an IRA?
Yes. There is no minimum age to contribute to an IRA.
- Should I name beneficiaries?
Naming a beneficiary is not a requirement; the decision is yours. However, it is strongly advised that you do name a beneficiary. Your beneficiary will inherit the asset in the form that you left to them; the assets that are inside the IRA, transfer intact. This information is not intended to replace the advice of your legal counsel.
- What are the IRA Club Fees?
It is our goal to keep fees low so you have more funds to invest!
- How do I transfer cash out of my IRA Club account?
- Submit the Distribution Request Form to firstname.lastname@example.org
- Remember that any withdrawal of cash or assets from an IRA account to accountholder or beneficiaries generates a 1099-R tax form.
- Early distributions taken before age 59½ are subject to a 10% early distribution penalty.
- RMD is the minimum amount which must be distributed in any year upon attainment of required beginning date, typically no later than the year the IRA owner reaches the age of 70½, or after the IRA owner’s death. The IRS has established a simplified table to determine the required distribution based on the applicable age and life expectancy. If required payments are not timely made, the IRS may impose an excise (penalty) tax. A Roth IRA is not subject to required minimum distributions until after the Roth IRA owner dies.
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