Self Directed IRA Frequently Asked Questions

1. Why haven’t I heard about flexible IRA investing before?

   Brokerage companies earn commissions when you buy and sell stocks, bonds, and mutual funds. They don’t make money when you buy real estate. Further, very few custodians are interested in holding "non-traditional" assets they don’t understand. Finally, the industry is small. Only Security Trust provides "full service" to self-directed retirement plan beneficiaries.

    

2. Can I really invest my retirement assets in real estate?

   Absolutely! In 1974, the Employee Retirement Income Security Act (ERISA) gave all self-directed retirement plans this option. In addition to real estate, you can direct your IRA investments into, among other things, mortgages, notes, tax liens, and private businesses. There are, of course, restrictions on some investments, but Security Trust will help you navigate around them.

    

3. What are "IRA transfers" and "IRA rollovers"?

   A "rollover" occurs when an individual requests a distribution from an IRA/QRP (Qualified Retirement Plan) and then "rolls" the assets into another IRA. An individual is limited to one rollover per year. A "transfer" is when IRA assets are moved directly from one financial institution to another without the IRA owner taking possession of the assets. Unlike rollovers, there is no limit on how many transfers can be executed in a year.

    

4. How can I leverage the assets in my IRA to buy more expensive properties?

   You can use the equity in the property that you expect to purchase to borrow funds on a non-recourse basis, and you can also pool your IRA’s funds with those of other people, other IRAs, or even your personal funds to buy large properties.

    

5. Are there any investments that I can’t make with my self-directed IRA?

   You cannot invest in Life Insurance Contracts or Collectibles (as defined by the IRS). Also, you may not participate in prohibited transactions.

    

6. What exactly is a "prohibited transaction"?

   IRA transactions must be for the exclusive benefit of the retirement plan and must not directly or indirectly benefit the IRA owner. For example, the owner cannot:
   a. Borrow money from his IRA
   b. Buy property for personal use with his IRA funds
   c. Use IRA assets to secure a loan
   d. Sell property to his IRA
   

7. How fast can STC respond to an investment opportunity?

   Security Trust will send checks overnight or wire funds to you within hours of your call.

    

8. When an investment is sold by my IRA, can I keep the profit that is above my initial investment?

   All money generated from an investment owned in an IRA must be deposited back into the IRA. Of course there is no income tax on this profit until the IRA begins its annual distributions.

    

9. Are there any pitfalls to self-directed IRA plans?

   There are many potential pitfalls with respect to both prohibited transactions and timely reporting at the state and federal levels. Security Trust’s specialty is structuring transactions in "safe harbors" to avoid such problems and ensure statutory compliance.

    

10. Who makes the IRA’s investment decisions?

    You do. Your account is truly "self-directed," which means that you make the investment decisions for your retirement assets in much the same way as you invest outside of your retirement plan. But you don’t invest alone. Security Trust will help you navigate the complex rules that govern prohibited transactions so you can focus on making the best investment decisions.

     

11. How are my assets managed?

    Your assets are co-managed by you and Security Trust Company. You make all investment decisions, and we take care of all of the paperwork and reporting details. Once you make an investment, Security Trust will keep your books and records, coordinate the custodianship of your assets, oversee the annual asset valuation, and file all required annual reports.

     

12. What are the benefits of having a Limited Liability Company (LLC) own my IRA’s assets?

    There are many advantages of using an LLC to own your IRA’s assets. The LLC structure offers maximum investment flexibility, provides asset protection, allows for “checkbook control”, simplifies asset titling, eases pooling of assets, and allows for immediate response to investment opportunities.

     

13. Can I combine personal money with my IRA money to make an investment?

    Yes. You and your IRA can purchase an investment together. However, since you cannot sell property to your IRA, transactions between you and your IRA involving an asset after that asset is purchased are prohibited.

     

14. How much support can I expect from Security Trust?

    Security Trust is proud of its superior customer service. We have several full-time CPAs and attorneys on our staff who are available to answer your technical questions at any time. Security Trust also provides quarterly networking and educational events for our clients and their other professional advisors.

     

15. What is Security Trust’s fee structure?

    Security Trust has an initial fee that covers the setup of your self directed IRA’s LLC and all associated transactions and documentation, and we have an all inclusive yearly administrative fee.

     

16. Are there restrictions on where my IRA can purchase real estate?

    No. Your IRA can purchase real estate anywhere.

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