IRA Investing: Trustee, Self-directed IRA, Self-dealing

How to find a Trustee for your IRA, Rules
governing self-dealing your IRA

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IRA Investing: Trustee & Self-Directed IRA

Powerpoint slides on a superior retirement planning strategy called Roth IRA on Roids which allows for tax-free distributions, tax-free growth, guaranteed principal and guarateed death benefits.If you have a trustee for your IRA retirement account, be aware that many of them will not act as the trustee if there are unconventional investments involved. This includes self directed IRA for real estate. In this case, the IRA account owner will have to find their own trustee that will provide the services needed. It is possible to find a trustee online, but you should start by asking your CPA to see if there is someone they recommend. If you do look online, begin by searching for "self-directed IRAs." This search will return a list of qualified trustees that can handle you account and any unconventional investments. Nonbank organizations are approved by the IRS and can act as a trustee for your account. Trustees that do handle real estate investments will also oversee all other investments, including stocks, mutual funds and bond. The fact that they also deal with real estate gives them an edge when competing for business. Most often, trustees will not handle an account that involves any unorthodox investments.

When you locate a trustee, consult with your CPA before taking any further steps. In addition to advising you on what is the best IRA, your CPA can perform a credibility check which will determine if your selected trustee is professional and financially stable. It is very important to have the right trustee handling your investments. The wrong trustee can place all of your assets at risk.

Self-dealing IRA

There are strict rules enforced regarding any acts of self-dealing. Self-dealing occurs when the IRA account holder uses the funds in the account to satisfy personal financial objectives. If your transactions do not meet the IRS guidelines, the transaction will be scrutinized. The IRS and Department of Labor (DOL) will work together to determine if the transaction is allowed and legal.

There are many instances in which the IRS will consider a transaction self-dealing. If you purchase any stock in a corporation that is closely held, especially if the owner of the IRA account is an officer, the IRS will deem the transaction as self-dealing. Another example is using the funds in IRA accounts to purchase a vacation home that will be used by the account owner. There are other situations that can be deemed self-dealing, so it is always best to consult with your CPA if you intent to invest in something other than the typical stocks, bonds and mutual funds. If you are found to have violated any rules pertaining to prohibited transactions, your IRA tax-free status could be jeopardized. You may also face penalties. Also keep in mind if your trustee engaged in prohibited transactions, that individual will face a 15% excise tax on the amount that is involved in the transaction.

It is best to steer clear of any investments that seem untraditional. If you would like to expand your IRA investments, talk with a financial advisor or your CPA to determine what types of transactions are allowed. You do not want to take the chance of losing your tax status or incurring any penalties.

IRA account owners can face many risks with certain IRA investments. It is possible for those investments to lose their tax-free status, which could result in a large penalty. It is important to follow Traditional and Roth IRA rules to avoid any issues pertaining to other investments. Real estate investment is permissible as long as the rules are followed. It is possible to but rental property with the funds in your IRA. Remember that any rent collected will be considered another source of income, and this amount will be subject to taxes.

Learning all the rules and regulations of the IRA will help a great deal. While all things are not explained, many questions can be answered simply by reviewing the rules of the IRA account. If you have further questions, do not hesitate to ask your CPA. You do not want to place your assets at risk.

Rocco Beatrice, CPA, MST (Master of Science in Taxation), MBA (Master of Business Administration), BSBA (Management/Accounting), CWPP (Certified Wealth Preservation Planner), CMMB (Certified Mortgage Broker), CAPP (Certified Asset Protection Planner), Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an asset protection, award-winning trust, estate planning and tax expert.

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