Every year, we get questions from clients about Self-Directing their IRAs – Basically owning non-publically tradable assets in their IRAs. There are many promoters out there touting that you can even own your lake house in your IRA. Before you go down that path, I have created the attached piece that discusses the income tax benefits of Self-Directed IRAs and possible landmines to consider before you move forward.

Bottom line, a self-directed IRA isn’t a different type of IRA, but rather it refers to an IRA that you direct the investments of your IRA Assets into non-traditional investments. Although many of the benefits sound attractive, especially for those of you that have most of your money in IRAs, there are a lot of costly tax mistakes that can be made when establishing a self-directed IRA. If you fail to follow the rules (both tax rules and the chosen IRA custodian’s rules), the IRS can disqualify the IRA and deem it a distribution subject to taxes and possible penalties.

The linked article on Self-Directed IRAs walks you through the process. Bottom line:

  1. Do your due diligence as to the investment and the custodian to make sure that the investment is prudent (not a prohibited transaction) and that the IRA Custodian is OK with the investment. At Avidian Wealth, we typically recommend Millennium Trust for these types of transactions.
  2. Understand that even appropriate investments may have some adverse tax consequences such as the UBIT/UBTI tax on unrelated business income.
  3. The self-directed IRA may have additional custodial fees and/or needs to have the assets appraised each year (it can be expensive).
  4. Discuss this with your financial team, including your CFP®, CPA and Attorney to make sure that you are not setting yourself up for a big tax problem.

Bottom line, Self-Directed IRAs are completely legal and may be a good deal for you – if you know and follow the rules.

IMPORTANT DISCLOSURE
Financial Planning and Investment Advice offered through Avidian Wealth Management (STA), a registered investment advisor.STA does not provide tax or legal advice and the information presented here is not specific to any individual’s personal circumstances.  To the extent that this material concerns tax matters or legal issues, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Additional Articles

Every year, we get questions from clients about Self-Directing their IRAs – Basically owning non-publically…

Every year, we get questions from clients about Self-Directing their IRAs – Basically owning non-publically…

Disclaimer:

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Avidian Wealth Solutions, LLC), or any non-investment related content, referred to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Avidian Wealth Solutions, LLC. Please remember to contact Avidian Wealth Solutions, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives to review/evaluating/revising our previous recommendations and/or services. Avidian Wealth Solutions, LLC is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Avidian Wealth Solutions, LLC’s current written disclosure statement discussing our advisory services and fees continues to remain available upon request.

Financial Planning and Investment Advice offered through Avidian Wealth Solutions (Avidian), a registered investment advisor. Avidian does not provide tax or legal advice and the information presented here is not specific to any individual’s circumstances. To the extent that this material concerns tax matters or legal issues, it is not intended or written to be used, and cannot be used, by a taxpayer to avoid penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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