Self-Directed IRAs

Let’s talk about something that’s maybe a little different than what we normally talk about, but maybe of something of interest to you, self-directed IRAs. Well simply what is this? It’s an IRA that you basically can hold things other than I’ll call them traditional investments. You know mutual funds, stocks, all that sort of stuff. It’s maybe holding property. Maybe it’s holding rental property, a vacation home, other assets. Maybe there’s gold in there, collectables, artwork, raw land, stuff like that. It’s stuff that traditionally isn’t held in that, but a self-directed IRA allows that to be held in there. So one thing that is really important if you’re getting into stuff like this, is these transactions have to be kept an arm length away. What does that mean? Basically you cannot have any personal benefit from that asset. Let me give you an example. Let’s say I own a home in Florida, okay and I have it in one of these self-directed IRAs. Me and my family could not go vacation and stay in that home even for a day or a week because that would be a personal benefit. So if I own that home in Florida, I have to rent it out, let it sit there and that sort of piece. I just can’t have personal benefit from them. The other thing is all expenses, income and expense have to be withheld inside of that. So let’s use the same example, this home in Florida. Maybe I’m down in Florida for the weekend and I’m not staying there, but I’m maybe going to mow the lawn, okay? I’m mowing the lawn and I say ah, my time is worth something. I’m going to pay myself for that. Nope, it has to stay in that. That would be a personal benefit. I would be getting something. So those expenses have to stay in that and that cannot come back to you as the individual. You can pay somebody else to do it, just can’t pay yourself to do that. Also you want to have a third party custodian holding this and reporting what’s going on. As you can imagine, these things are pretty complex, right? Just this little bit that we’ve talked about here can be pretty overwhelming. There’s very specialize custodians that hold these and report what’s going on in these situations because one mistake can really kind of blow up the whole thing and cause a big problem. So you alone have to make sure you’re not getting the benefit from it, but they have to be reporting everything that’s going on. So whether that’s property, possessions, stuff like that, it’s still considered in that self-directed IRA wrapper and has to stay in that. There’s certain very specific ways that it has to come out down the road. And that’s for another topic. But maybe something of interest to you. If it’s something you want to know more about, give us a call at the number on the screen. Check us out at cen-wealth.com for additional information and see how this may help you plan to retire well.