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Checkbook IRA Trust Overview – FTC

Understanding the IRA Trust Structure

A Checkbook IRA Trust is a tool designed to provide the IRA account holder with maximum flexibility and control over investment decisions, while conforming with IRS requirements surrounding the tax-sheltered status of the IRA.

A checkbook IRA Trust consists of two layers:

  • A self-directed IRA account held by Forge Trust Co. as custodian
  • A specially formed revocable trust that functions as an investment holding vehicle for that IRA account

All IRA events such as contributions, distributions and transfers/rollovers must go through the IRA account at Forge Trust Co.  This ensures proper compliance reporting.

All investment transactions take place within the IRA-owned trust entity.  While the IRA owns the trust, the IRA account holder has controlling authority over the trust in the role of trustee.  Investments are titled in the name of the trust and all expense and income transactions associated with the acquisition, maintenance, or sale of an asset are handled through the trust bank account.

Investing with the IRA Trust

The IRA-owned trust may hold any allowable IRA asset, including but not limited to:

  • Publicly traded stocks, bonds, mutual funds, ETF’s etc.
  • Title to real estate
  • Real estate related paper such as mortgages, trust deeds, tax liens, etc.
  • Promissory notes to businesses or individuals
  • Private placements
  • Specifically listed precious metal coins
    (Bullion, while allowed for an IRA when held by a trustee, is not allowed within an IRA trust.)

Investments not allowed for an IRA trust include:

  • Life Insurance Policies
  • Collectibles (artwork, jewelry, non-listed coins, stamps, antiques)

The trust shall be on title for any such investment.  (Fractional title is allowable).

All expenses associated with such investments must come from funds in an account held by the trust.

All income from trust investment activities are to be deposited to an account held by the trust.

The trust should never transact with the IRA account holder, disqualified parties to the IRA or another retirement plan held by the account holder.

Trust Banking

In order to facilitate investment transactions, the trust may establish one or more accounts with various financial institutions such as a bank or brokerage.  Any such account will be a trust account in the name of the trust and associated with the trust EIN.

The trustee (generally the IRA account holder) will have signing authority on this account.

Account features such as online banking, debit cards, a checkbook, etc. are all allowed.  A checking, savings, money market or other similar account is fine, and interest may be credited to the account.

No debt may be issued to the trust that is collateralized by the IRA or is backed by personal guarantee of the IRA account holder (or a disqualified party to the IRA).  As such, you may not obtain a credit card in the name of the trust.  Any margin or option features on a trading account would be “covered” and not contain a personal guarantee.

If more than one account is established for the trust, funds may be moved between such accounts without special reporting.  This is not an IRA transfer event, but simply reallocation of funds held within the trust.

Funding the Trust Account

The initial funding of the trust will come from the IRA, using funds you have contributed, rolled over or transferred as part of the plan setup.

In the future, you may add or remove capital from the trust.  All capital transactions must occur between the trust and the IRA account at Forge Trust Co.  The IRA is purchasing membership units of the trust when capital is added, and selling units when capital is removed.

You may add funds to the IRA account at Forge Trust Co. via IRA contributions, or a transfer or rollover from another retirement plan in your name having the same tax treatment as the Forge Trust Co. IRA account.

You may distribute funds from the Forge Trust Co. IRA account to yourself (taxable) or to another retirement plan via a rollover or transfer (non-taxable).

Never move funds between the trust account and yourself or another retirement plan account other than the Forge Trust Co. account that owns the trust.  Doing so breaks the proper chain of reporting and could have severe tax consequences.

Always consult with your tax advisor regarding topics such as IRA contributions, rollovers or distributions to ensure your eligibility to enact such transactions while retaining the tax-sheltered status of the account.