Checkbook IRA Benefits
GET FULL CONTROL WITH A CHECKBOOK IRA
Get complete control over your retirement investments with a self-directed Checkbook IRA LLC
- Make investments immediately. Simply sign a contact and write a check or wire funds as needed
- Eliminate 3rd party paperwork and processing delays that can cost you opportunities
- There are no per-asset or per-transaction fees when using a checkbook IRA account structure
- Protect yourself and your IRA from lawsuits with protection granted by the IRA LLC structure of your checkbook IRA
- Invest in real estate, private company stock, crowdfunding, private loans, precious metals and more with your self-directed solo 401(k) account
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The Benefits of Checkbook Control in an IRA
When it comes to putting your IRA to work in a truly diversified fashion and investing in non-traditional assets such as real estate, private mortgages, tax liens and the like, having a self-directed IRA that offers checkbook control can be a tremendous advantage.
The benefits go beyond just putting you in control and giving you the potential to react immediately to investment opportunities. The IRA LLC structure can reduce your overall operating costs, provides a layer of asset protection, and makes it easier to keep your capital deployed.
Immediate Access to Funds
Many investment types require a quick reaction time. When opportunity knocks, you need to be able to act by signing a contract and putting down a deposit. If you are participating in tax lien or foreclosure auctions, you need to pay that day if you are the successful bidder. There are also times where maintaining an asset can require quick access to funds, such as emergency repairs for a rental property.
Because the IRA capital is held in a bank account of your choosing, you have the ability to react to opportunity or emergency immediately. You can simply write a check or wire funds as needed, without any need for 3rd party review or processing.
While it is possible to invest in certain non-traditional assets directly from an account held by a 3rd party IRA custodian, there are fees that go along with having that institution process all of your investment transactions. Depending on the custodian, fees can be based on the account value, number of assets, per-transaction for check issuances, or some combination of these factors.
With the IRA LLC model, the IRA makes only one investment, the initial purchase of the LLC. All investment transactions will take place from within the LLC, using the bank account you have established. There are no IRA associated fees when you buy an asset, pay for expenses related to LLC investments, or receive income produced by those investments.
While an IRA LLC structure will cost more to implement than simply opening an account with a custodian, most investors with a diverse portfolio will find that over time, they can save a considerable amount by using the checkbook IRA model.
Keep Your Capital Working
With any self-directed IRA portfolio, you are likely to have two types of potentially idle capital: contingency reserves and new income from investments. Because you have full control over your plan, and the ability to invest in absolutely anything the IRS rules allow, you can easily keep all of the capital in your IRA LLC deployed rather than leave these funds in cash.
You can keep things simple and just have a savings account for the LLC, or perhaps put some portion of the LLC funds in short-term CD’s. When it comes to contingency funds, something that is reasonably safe and easy to liquidate is best.
If you want to get more sophisticated, you can open a brokerage trading account in the name of the LLC, then take the rental income from an IRA-owned property and invest that into shares of your favorite stock or mutual fund. If you have both bank and brokerage accounts within the IRA LLC, you can simply move funds between these accounts without need for special processing or reporting.
Most custodian managed self-directed IRA plans cannot provide this kind of flexibility, or have rather cumbersome and expensive methodologies for keeping idle capital deployed in conventional financial products.
The LLC entity affords limited liability protection to the owner of the LLC. If a lawsuit is filed related to a property held in an IRA LLC, the LLC would be the defendant, and the IRA as well as the IRA account holder would be shielded from claims or liability associated with the LLC.
This same protection does not exist if an IRA account directly holds title to property. In the event of a judgement against an IRA-owned property, not only the property but other assets of the IRA could be awarded to a claimant. Worse, if the IRA assets were not sufficient to satisfy the judgement, the courts have determined that the IRA account holder’s personal assets may be subject to claims.
Access to Quality Guidance
Institutional IRA custodians are prohibited from providing tax, legal or investment advice. As such, if you have a question that goes much beyond how to fill out the processing paperwork you will be directed to consult with your own licensed counsel.
Because Safeguard Advisors is not the custodian holding the IRA, we are not limited in the same manner. Our role extends beyond just implementing the plan. The real value of our services comes with education and ongoing guidance related to your use of the IRA LLC program we have deployed on your behalf.
Not Everyone Needs Checkbook Control
While the self-directed IRA LLC model provides tremendous benefits for many investors, it is not always the right tool for the job. Some investors may only want to make a single, more static investment – such as buying shares of a private stock. In such a situation, the IRA LLC would be far more tool than is required.
As part of the initial consultation we have with each new client, we’ll make sure you will actually benefit from the Checkbook IRA LLC, and will tell you honestly if a simple account with a self-directed IRA custodian will be a better option for your needs.
Answers to Your Questions
A Checkbook IRA is a two layered structure designed to put you in full control of the IRA funds and all investment activities. It starts with a self-directed IRA held by a custodian, as all IRA accounts must have such an institutional administrator. The IRA then invests into a specially formed LLC created by our team at Safeguard Advisors. While the IRA owns the LLC, you can act as the non-owner manager of the LLC and have full signing authority to conduct the affairs of the LLC. You then use the LLC and the LLC held checking account to execute all investment transactions directly. You hold the checkbook… thus the name.
Yes. This type of structure has been around for nearly 30 years and used by thousands and thousands of investors. The IRS is fully aware of such structures and there have been several tax cases involving the IRA LLC format. The IRS does not care about the structure, but rather how the structure is used. If you follow the IRS rules and avoid self-dealing, there will be no issues.
Technically… no. One may simply establish an IRA with a self-directed IRA custodian and direct the custodian to handle all investment and maintenance activities associated with the real estate holdings. While “possible” this plan structure is just not the right tool for the job, however. With a 3rd party custodian having to sign all documents, pay all expenses, and receive all income, you will be frustrated by processing delays and per-transaction fees.
The Checkbook IRA is a much more efficient vehicle for assets such as real estate that are time sensitive in nature and create a lot of transaction activity over time. As such, the Checkbook IRA LLC is the preferred plan format for investing in real estate.
It‘s really quite simple. Government regulators decided the Securities industry was best suited to inform the public and bring these new products to market. From the beginning, brokers and bankers created the misconception that buying stocks, bonds and mutual funds was all that was allowed. It wasn’t true then…and it’s not true now. You can probably guess why they kept it a secret.
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
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