0 votes

UPDATED: What do you know about a "Self Directed IRA"?

Anybody here know anything about 'Self Directed IRAs'? I'd like to liquidate my IRA at Morgan Stanley and create one where I control the investments. From what I've researched, you can set up an LLC where you are the manager, and you can write checks from the checking account to invest. You still must have a qualified "custodian".

My plan is to purchase land that is partly planted timber, but also has some open farmable portions, woods, etc. There are rules, such as you can't 'use' the property, work on it yourself, anything you make must go back into the IRA, etc.

Anybody have any experience with or knowledge about these? Any pitfalls? Thanks in advance.

UPDATE: I end up setting this up, and by request am providing the procedure that I followed. Do your own research, I can't be sure I haven't done something wrong here, but things seem to be working out as planned.

Here's what I did:

1. Set up BugMan IRA LLC (not real name)
The "Operating Agreement" is a document that must be filed, is very specific in what it must include, and MUST be submitted by an attorney. My attorney was ignorant on the process – in fact very few attorneys will understand this process. There is a canned agreement that bought from the internet and provided to my attorney.

2. Find a custodian. I used “IRA Services”, a firm in California (I’m in Florida). They require handling fees, of course, and you must maintain a $300 account in their bank. They must file a property value with the IRS each year, and charge a small fee. Their initial fee for the transaction was $120.

3. My IRA was at Morgan Stanley. I had to close the account, and get them to transfer the money to IRA Services. This is important… don’t get the money directly from Morgan Stanley or you will be getting a ‘distribution’ and pay taxes on it. It’s much more seamless to do like this.

4. IRA Services then sends the money to BugMan IRA LLC checking account. I pay for the land, and any services that I use to maintain the land. I use a company to help me with prescribed burns, selling the timber, etc. DO NOT pay for anything out of your pocket, and DO NOT take any profit from this land yourself. It MUST go back into the LLC account!

You cannot live on the land, or use it in any way except for its investment purpose. You cannot rent it to family members, or get any kind of profit from it personally. Learn and follow the rules, else you may get burned.
That’s about it in a nutshell. It was a pain learning how to do this, but in retrospect I’m glad I did. Now I control my investment instead of some near stranger in an office somewhere. DO NOT TRUST ME FOR ADVICE on this, do your own research. I’m and geologist/paleontologist, and a financial/investment dummy!

I look forward to the comments of those who are smarter in finances than me...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

A well-hidden safe

And a bunch of silver, added to weekly. Done. Instant IRA

Just as a cautionary note to those that want to do the same ...

thing.

Do not do this without consulting a tax professional or ...

Do as you wish.

But remember this ...

Every action we execute has consequences.

Some are predicted, good, and even serendipitous.

Others are also predictable, but bad, and gets worse over time.

I completely agree...

don't trust people like me to give you financial advice, get help from a pro. I ran it by accountants and lawyers. They all said they thought it was above board, but didn't know much about it.

'Cause there's a monster on the loose

I just opened one

through Etrade and you can do it all....Stocks, Options, ETF's and NO FEES. You also get 100 free trades for going with them. I am playing with the site today. I had to dump some money into the account on April 15th so I could get MY OWN money back from our government. I did it. Cool site...easy to use...and no fees and you can guide your IRA to whatever you want. Also...you can have "Auto Sweeps" if you want. If you want a certain amount of money to transfer from any account to any account monthly. I am using a monthly sweep of my persoanl bank account to add to my IRA. Set it and forget it...then it dumps the funds into preselected stocks and etfs. Simple.

Can you buy real estate with your etrade IRA?

I'm skeptical... my understanding was that you have to have a custodian... would Etrade be a custodian?

They have great commercials...

'Cause there's a monster on the loose

I will let you

know tomorrow. Great question. I understand what you are going to do....and I would like to copy that! I had to do a quick transfer last week to get some more of my money back....and etrade was the best for a quick no fee IRA that allows me to trade the above mentioned items.

I Have One

I have a self-directed IRA through Wells Fargo. It was easy to open online.

It is a brokerage account, so it's limited to stocks, ETF's, etc., but I was able to buy what I wanted.

My next step is to open a self-directed Roth IRA and roll my 401k into it. Since the Roth will have already been taxed, I plan to buy gold and silver, and perhaps some real estate, and not have a tax on the "increase" in value.

This is the company I'm considering (California and Oregon): http://www.entrustcalifornia.com/

They have many informational materials on their site. You can buy and sell baseball cards, stamps, classic cars, etc. You just have to keep arms' length. That's the service that Entrust provides.

I don't see how the government can, politically, confiscate our savings. They would be out of office in recall elections. Too many people have these accounts. They might end them going-forward, but they can't touch what we have now. Having metals in the account might, in that respect, be even better than having them out of such an account, with tax advantages a bonus.

More here about nationalizing gold:
http://goldsilver.com/player/id/66/cID/2/?ss=79679d69564ed21...

The penalties for early removal from the account are not so bad if you've lost your job and have no income.

What do you think? http://consequeries.com/

Thanks IML!

Will check into Entrust and Wells Fargo. Are you able to buy real estate, assuming you follow the rules (can't live on it, and work on it, can't buy it from yourself or a relative, etc.)?

'Cause there's a monster on the loose

Yes and No

Yes, through Entrust. No through Wells Fargo.

What do you think? http://consequeries.com/

Help me understand

So at the "redemption" of this land invested IRA, you will pay some kind of additional taxes? What happens when you "draw from" this " account"?... You'll be able to safely move onto the property?

by redemption...

you mean cashing out your IRA? My understanding is that if you are retirement age, you don't pay taxes on your IRA. Mine was not a Roth, just a regular IRA.

Like the regular IRA, if you want to move onto the property before you can cash in your IRA at maturity, you'll have to pay pretty dearly, as if you cashed out any other IRA.

Let me know if you think I misunderstand something.

'Cause there's a monster on the loose

Roth?

If it's a Roth account, there is no further tax on the gains when you start taking money out of the account.

You would probably have to sell the property if it did not produce enough income to meet the withdrawal requirements. But, as part of a long-term plan, your Roth could own a house, and the rental income could be used to pay out. Then you leave the remainder to your hiers.

I'm no expert, but this is probably not the way to buy a house for oneself to occupy. This is for investment.

The code is written to encourage saving for retirement, but not meant as a simple tax-dodge, so it prohibits obvious schemes, like buying a house to live in.

What do you think? http://consequeries.com/

Hey Bug... you are correct in

Hey Bug... you are correct in shutting down your ira.. there is an executive order, I think by president Reagan that in times of a national economic emergency the President can confiscate all Ira's and retirement accounts and replace those funds with a 30 year government bond. There is approx. 3 trillion in retirement accounts. when TSHTF.. this is exactly what they will do. Rusty said something about offshore but I'm not to sure that will be good either.
Right now I think I would just pay the tax, take the money and buy silver with it. Or as you stated rural farm land.

Sierra...

Can't disagree with you there. Dammit, that's twice in one week... :)

'Cause there's a monster on the loose

What I know is you should

What I know is you should stick it in an offshore trust after taxes. Assuming you're not permanently stuck in a high tax bracket no matter what you deduct (wouldn't that be nice?), you're sometimes better off to pay the lower tax now rather than pay a much higher tax later.

IRAs and 401(k)'s sound like another scheme for suckers. Put your money in a "retirement" account (instead of your own business, perhaps?) so Wall Street can loot it.

I am out of touch with most Americans precisely because I am not out of touch with reality.

Thing is...

I want this land. I'd rather take my existing retirement IRA $$ out of the control of my Morgan Stanley person, and buy this property with it. To me, this is a better investment than the stock market, it even has timber that can be considered genuine investment.

If you cash in the IRA, you pay very stiff penalties unless you reinvest it, right?

'Cause there's a monster on the loose

Lumber

is a better investment than the stock market .
Check out the figures..Don' know much about the self dirrected ..just get the land.It's the only thing that lasts..Gone with the wind.

Land/lumber better than stocks...

I agree, and even if not, it's a place to retreat to when the SHTF. Otherwise, when the stock market tanks, there goes some of my savings -- again.

Of course, we all know... when you own land, you really don't OWN it, you rent it from your Uncle Sam.

'Cause there's a monster on the loose

RP supporter in Virginia you should talk to

there is an older "gentleman timber farmer" you might want to talk to in Charlottesville...

Jack Faw, of the Virginia blimp "5 seconds of CNN fame"

he will not necessarily be versed in "self-directed," but he does know the timber, land and farm gig

Jack is on Rio Road....just tell him I referred you if you are looking for input...on operations

cee cee

It sounds interesting.

If it is good for you they will try to stick it to you. If it is good for them they will promote it like crazy.

Prepare & Share the Message of Freedom through Positive-Peaceful-Activism.

IRS Looking HARD at these now

I think the IRS is looking at these as tax dodges now.

You have people opening businesses and investing in real estate property. I heard it is so popular now that the IRS is actually looking very hard at these and considering them a tax dodge.

thanks HD, Good to know...

It's hard to get much info, there is nobody in my home city (investment firms or banks) that will set it up for you... I suppose they don't get enough commission to make it worthwhile for them.

It seems like it should be a libertarian issue... getting to invest your retirement money yourself instead of having to trust and investment service?

'Cause there's a monster on the loose

But the whole point of the

But the whole point of the IRA is to get your money out of your hands and into the pockets of Wall Street!

Anybody that's really that goddamn ignorant and braindead as to think these rotten scumsucking parasite bastards would make laws to benefit us deserves to have his retirement looted by rich Wall Street bastards!

I am out of touch with most Americans precisely because I am not out of touch with reality.

Now You Tell Me...

I never thought about that. It seems so obvious now.

It is not a tax but you can voluntarily put 15 pct of your income in my political friends account at IRA-R-Us and we will charge you monthly maint fees and burn through your capital.

HD, not with the Self Directed IRA

Once you set it up, you pay no fees other than $100/year custodian fee. No monthly fees, unless you have a bank that charges checking account fees, which would be minimal.

If your capital gets burned through, it's because YOU made poor investments. And I'd rather make my own poor investments than have my Morgan Stanley person make them!

Still seems like a good way to go, though I'm hoping to learn more. Seems too good to be true, probably is.

'Cause there's a monster on the loose

is there not a Libertarian minded CFP in your area

if not....there is in my neck of the woods...

happy to provide contact info...

my personal concern is always: no matter what we do, THEY can always change the rules when they want or think they need to do so

cee cee

cee cee, sent you an emial off-DP

will take you up on that contact info. thx!

'Cause there's a monster on the loose

LBT minded CFP...

Not that I can find! Aside from my buddy Zak, libertarians are few & far between here in the capitol city of Florida... too many state government workers here. The rest are more the Fox News types of good ol' southerner pro war rednecks.

I do have a very active CFP friend in south florida, but his firm doesn't handle them... firms that do are rare because there's no profit for them once the thing is set up.

So far I've just found internet based companies that do it, and they make their profit from the volume of people that run through them... they charge a one time charge of from $1500-$3000, to properly set up your LLC, then they turn it over to the fed-approved custodian. Some companies charge a lot more. We'll see.

And yes, unfortunately you're right, no matter what they can change the rules midstream! thanks.

'Cause there's a monster on the loose

There's a possibility of

There's a possibility of putting it in a self-managed IRA and investing it in precious metals or other commodities. The problems I see are do you have to keep it in the US, where it's subject to US regulated crooks and pension fund managers, and how do you get out from under this "custodian" nonsense?

I am out of touch with most Americans precisely because I am not out of touch with reality.

Thanks Rusty. Custodian nonsense? not so bad.

For the couple of plans I've looked at, you pay the custodian $100/year just to file the annual paperwork with the feds, but you have the checkbook and manage the investments completely yourself. No commissions to Morgan Stanley. Just whatever profit you make must go back into IRA, and you can't get any kind of salary from the IRA.

So in this case, I'd get my Morgan Stanley rep to liquidate my IRA stocks, transfer them into the "BugMan IRA, LLC" checking account, buy the timber property from that account, pay the mowing, timber management, property taxes, etc. out of that account. When the timber is sold, it goes back into that account. If I have a little income that I can contribute to the IRA at the end of the year, I will rather put it into this account instead of paying (as much?)tax on it. Then I retire, and get more of my income back than I would have just taking it all when I earned it. Ideally, no income tax! But until then, you gotta work the system to you benefit as best you can while staying out of jail.

This seems like a good setup, just worried about legalities. Was hoping some of the wise, industrious DP'ers had heard of or even done something like this and would share their experience.

'Cause there's a monster on the loose