Legal Issues

Can My IRA Invest in Any Type of Asset?

Question:  Can I cause my self-directed IRA to invest in any type of asset I desire?

Answer:  No.  Section 408(a)(3) of the Internal Revenue Code says that an IRA may not invest in life insurance contracts (life insurance).  The IRS also restriction investments in “collectibles.”  Here is what IRS Publication 590 says about IRAs investing in collectibles:

“If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early distributions, discussed later.

Collectibles.  These include:

  • Artworks,
  • Rugs,
  • Antiques,
  • Metals,
  • Gems,
  • Stamps,
  • Coins,
  • Alcoholic beverages, and
  • Certain other tangible personal property.

Exception.  Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.”

Can My IRA Invest in Any Type of Asset?2018-05-13T13:58:52-07:00

The Essentials of Self-directing Retirement Accounts

Ann Siford, Manager of Professional Network at Equity Trust Company writes:  “A self-directed IRA allows investors to directly manage their retirement portfolio, diversifying beyond the traditional mutual funds, stocks and bonds to include assets such as real estate, promissory notes, tax liens, private placements and oil/gas.”

The Essentials of Self-directing Retirement Accounts2017-09-10T15:58:44-07:00

You Inherited An IRA. Can Creditors Grab It?

Forbes:  “More Americans will be handing down IRAs to their kids. A new decision suggests it might be a creditor proof inheritance.  But nothing is certain yet.   In what estate planners and bankruptcy lawyers are saying could be a significant case, a federal bankruptcy judge in Minnesota has allowed a bankrupt woman to keep a $63,000 individual retirement account inherited from her father.  IRAs inherited from someone other than your spouse have traditionally not been protected in bankruptcy under either federal or state laws, and thus have been available for creditors to grab.”

The case is In re Nessa, a federal bankruptcy case out of Minnesota.

You Inherited An IRA. Can Creditors Grab It?2019-03-17T14:14:14-07:00

The Dog Ate My IRA Rollover

Forbes:  “If you miss the 60-day rollover deadline, will the IRS be sympathetic?  You can move wealth from a company pension plan, a 401(k) or traditional Individual Retirement Account into a traditional IRA without owing any taxes in what’s known as a ‘rollover.’ . . . a surprising number of taxpayers make mistakes when doing a simple rollover and end up either paying taxes prematurely or paying an expert like me to help them clear up the mess.”

This article was written by Robert S. Keebler, CPA, MST, AEP (Distinguished) is a partner with Baker Tilly Virchow Krause, LLP and chair of the Baker Tilly Financial and Estate Planning Group. He is the author of The Rebirth of Roth, A CPA’s Ultimate Guide for Client Care. Mr. Keebler was named by CPA Magazine as one of the Top 100 Most Influential Practitioners in the United States and one of the Top 40 Tax Advisors to Know During a Recession.

I known that Mr. Keebler is one of the leading experts in the area of IRA law because of his close relationship with WealthCounsel, a fabulous company that produces the best estate planning software that a lot of money can buy.  I have been a member of WealthCounsel and have used its software since September of 2005.  If you are an estate planning lawyer who does more than a few estate plans a year, you owe it to yourself and your clients to purchase the WealthCounsel software.  Call me if you would like to get my two cents on why I love the company and the software.

The Dog Ate My IRA Rollover2018-05-13T13:58:55-07:00

What is the Plan Asset Rule?

All IRA owners who have made self-directed investments into an IRA LLC and anybody considering do so should read Jeff Nabers’ article called “What is the Plan Asset Rule?”  This rule turns assets owned by an entity into assets that are deemed to be assets of the IRA with the consequence that any transaction between a disqualified person and the entity is a prohibited transaction.

“The plan asset rule, among other things, is used to determine whether or not a retirement plan is involved in a prohibited transaction.”

See my post called “Department of Labor Regulation 29 CFR 2510.3-101 – the Plan Asset Rules.”

What is the Plan Asset Rule?2018-05-13T13:58:56-07:00

When Can an IRA Invest in a Business Partly Owned the IRA Owner the IRA Owner’s Family?

Texas attorney Noel C. Ice wrote a very detailed law review type article called “Under What Circumstances Can an IRA Invest in a Business Owned in Part by the IRA Owner and Members of The IRA Owner’s Family?”  If you want to get into the nuts and bolts of the law, this article is for you.  Here’s some text from the introduction:

“Can an IRA form or invest in a partnership (or other entity) in which the IRA and other disqualified persons have more than a 50% interest in capital or profits without violating the prohibited transaction rules? Maybe, if Swanson

[1] is followed.”

“Can an IRA form or invest in a partnership (or other entity) in which the IRA and other disqualified persons have less than a 50% interest in capital or profits prior to formation, but who have more than a 50% interest in capital or profits after formation, without violating the prohibited transaction rules? Theoretically yes, according to PWBOpL 2000-10A and FSA 200128011.”

“Can an IRA form or invest in a partnership (or other entity) in which the IRA and other disqualified persons have less than a 50% interest in capital or profits without violating the prohibited transaction rules? Probably, but great caution is called for.”

“Is a partnership (or other entity) that is controlled by family members of the IRA owner a disqualified person? Yes, if the IRA is self-directed.”

“Is an IRA trustee or custodian always a fiduciary? Yes”

“Is an IRA owner always a disqualified person? Probably. However, if there is no power to self-direct investments, it is arguable that the IRA owner is not a fiduciary with respect to the IRA, and hence, is not a disqualified person.”

When Can an IRA Invest in a Business Partly Owned the IRA Owner the IRA Owner’s Family?2018-09-28T09:54:59-07:00