Self Directed IRA With Checkbook ControlGranting You The Freedom To Manage and Grow Your Retirement Fund
Setting up a Self-Directed IRA with Checkbook control provides you with the ultimate power and control to choose and invest the funds into any or all of the broad range of qualified investments, thereby creating a diversified portfolio. Traditional employer managed retirement accounts provide you with a rather narrow range of investments, limited primarily to stocks, bonds and mutual funds, all of which are subject to the volatility and restrictions of the stock market. A self-directed IRA frees you up from such restrictions and lack of direct control over your investments.
Most definitely you can choose to invest a portion of the funds in your self-directed IRA in the traditional stock market securities and / or diversify into a portfolio of investments on variety of options such as real estate (including commercial property, apartment complexes, industrial property, single family rental homes, deeds of trust), Subchapter C businesses, investment partnerships, IPOs (for Subchapter C corporations), tax liens, all kinds of loans, CDs, investment joint ventures, foreign investments, precious metals such as physical Gold/Silver Eagles, Canadian Gold/Silver coins, minerals such as oil and gas and many others. How's that for flexibility?
Such a self-directed IRA comes with a checkbook for you to write out checks to invest and include such qualified investments in your account. This can be of great advantage wen it comes to time sensitive investments that require prompt availability of funds. Once invested, you assume responsibility to manage and monitor the performance of your investment including the freedom to divest particular investments, deposit the funds back into your IRA account and choose to invest in other qualified investments when you are ready.
Of course with such great power and control over your retirement funds through a Checkbook IRA or in other words, a self-directed IRA with checkbook control, comes great responsibility when it comes to an in-depth knowledge of the market for the qualified investment you are considering, choosing specific investments prudently, deciding on amounts to invest, when to invest and when to divest, literally staying on top of the self-directed portfolio at all times to not only preserve your capital but also to grow it further for a more secure retirement
Another important component of the self-directed IRA in order for you to get control of the checkbook is to establish a legal entity such as an LLC or a Business Trust with you as the managing member or trustee respectively, so that the IRA funds can be placed in that entity. Once formed you would open a bank account in the name of the entity and direct the IRA custodian to transfer the funds to that bank account. The bank will issue your entity full rights to write checks from and make deposits into that bank account which is how you assume control of the funds in the self-directed Checkbook IRA.
When you retain our services to set up such an account, you can enjoy the following benefits:
We provide objective expert recommendations on your particular situation - we believe in empowerment with knowledge, tools and techniques to set you up with the most robust structure for managing your self directed IRA with checkbook control.
Efficient and comprehensive preparatory and maintenance services for such self-directed IRA that grants you the ability to write a check anytime you want to make an investment from your retirement funds..
We are not salespeople by any stretch of imagination, and we have nothing to sell. We are seasoned advisors on this very unique mode of managing your retirement portfolio - we succeed when you succeed.
We believe in your autonomy and freedom to choose, so we work to maximize your freedom and show you the most versatile set of investment options of your self-directed IRA funds - you hold all the controls.
Legally, as a service provider setting up your self-directed IRA and the business trust, we are not allowed to provide you with investment advice as well, since we are not licensed to do so. However we educate you on a variety of qualified investments for you to consider once you are ready to invest the funds.
Connect with us for a no-obligation consultation to find out more about this exciting strategy by establishing your checkbook IRA. We will provide you with a reputable IRS-approved custodian to assist in the creation of the self directed IRA. We will help you establish the Business Trust. We can also help you establish a suitable bank account, and prepare the necessary documentation to transfer the funds from your checkbook IRA into the bank account held in the name of the Business Trust. If you have funds in another IRA or 401K account and have the desire to roll them over to your newly established self-directed IRA with checkbook control, we can assist you in that process as well.
Benefits Of Setting Up A Business Trust For Your Checkbook IRA
The most exciting aspect for owners of a self-directed IRA with checkbook control is to have more direct authority and oversight over the investment and management decisions regarding the funds and investments held in the retirement account. The driving factor is to avoid having to submit documentation for each investment transaction or transfer of funds to the IRA custodian for their review and approval. This review process can take up to 2-3 days and moreover, the custodian usually charges a fee for (1) this review and approval process and (2) the transfer of funds to the investment. Ouch! Why waste your retirement funds on such administrative overheads?
One way to achieve greater discretionary and more immediate control over the funds in your self-directed IRA is to form an IRS-approved legal entity into which the funds of the IRA are invested and you as the IRA owner and the manager/trustee of that legal entity, can assume direct control over those funds by your management role with that entity. Business trusts and limited liability companies (“LLCs”) are the two types of entities typically selected for this purpose for which the self-directed IRA would transfer the funds for investment. With a Business Trust the IRA owner will serve as the Trustee. With a LLC, the IRA owner will serve as the Manager.
With a Business Trust the Checkbook IRA account makes an investment in the trust by acquiring 100% of the “beneficial interests” of the business trust. Acquiring the beneficial interests of the business trust is similar to an IRA account acquiring the “membership interests” of a limited liability company or shares of a corporation. Essentially, the term “beneficial interests” is the title for the “equity interests” in the business trust that are acquired when the investment is made in a business trust.
By acquiring 100% of the “beneficial interests” of the business Trust, the IRA account has now become both (i) the “trustor,” or “settlor,” of the business trust (i.e. the party that has transferred assets into the business trust) and (ii) the “beneficiary” (i.e. the party that holds the “beneficial interests” of the business trust).
We believe that the Business Trust is a better type of entity to choose for your self directed IRA with checkbook control for the following reasons and as illustrated here.
No Public Filing - Hence Full Confidentiality.  When an LLC is formed, it must (1) Name and Agent for Service Of Process in the Articles Of Organization and (2) File the Articles Of Organization with the Secretary of State in the state of organization. The IRA owner is typically going to list himself or herself as the Agent. Once the filing is complete, the LLC and all details of the owner become public record and there goes the confidentiality of the owner. If there are substantial funds in the LLC transferred from the self-directed IRA, this transparency could compromise the privacy for the owner.
In contrast, there is no public filing requirement when forming a business trust. The Declaration of Trust, or Trust Agreement, remains a private and confidential document. Moreover, while the IRA owner will typically serve as the trustee of the business trust, there is no automatic publication of the name of trustee. Thus there is a higher level of privacy and confidentiality available with a business trust.
A “True” Disregarded Entity.  Both a business trust and an LLC will be classified for tax purposes as a partnership under federal and state income tax regulations. If classified as a partnership, then the business trust and LLC must file income tax returns with the IRS and the respective state agency. However, an entity classified as a partnership that has only one owner will be “disregarded as an entity separate from its owner.” Once classified as a “disregarded entity” then that entity will not have to file federal income tax returns.
A limited liability company with just one member will be classified for federal and state income tax purposes as a “disregarded entity.” With this classification, the LLC will avoid having to prepare and file a federal income tax return. But not so at the state level, at least not in California. Despite being a “disregarded entity” for California state income tax purposes, the LLC must still comply with California return filing requirements because this is method for the LLC to pay the California minimum franchise tax imposed on LLCs.
In contrast, if a business trust has only a single holder of its “beneficial interests,” it will then be classified as a “disregarded entity” and, as a result, not have to file either a federal or state income tax return. Thus the fees and costs of preparing a state income tax return, as well as a federal income tax return, are avoided.
No Registered Agent Needed In A “Foreign Jurisdiction”.  Making investments in commercial and residential real estate is quite common by owners of a Self-Directed IRA with checkbook control. If that real estate investment is in a property in a state that is different than the state where the LLC is formed, then the LLC would have to file appropriate documents in that foreign state in order to "qualify to do business" in that state. For this purpose, unless the IRA owner/LLC manager has someone they know in that state, who is willing to serve as the registered agent for the LLC in that state, the LLC owner would need to hire an independent registered agent in that state just to remain compliant. Although the fees for such registered agents are in the low $100s it is an annual expense nonetheless from your retirement funds - unnecessary overhead which can legally be avoided.
But if a Business Trust as the holding entity for the Checkbook IRA is used to make these real estate investments in states other than the IRA owner’s state of residence, there is no requirement or need to hire an agent in that “foreign” state. This is because the business trust does not have to file any documentation to “qualify to do business” in that state in order to purchase real estate for investment purposes. Thus you as the IRA owner can avoid having to pay the fees typically required with such filing as well as avoiding having to pay any annual fees to an agent in that state. These all add up in the long run as hard money that go directly to increase your account balance.
No Franchise Tax.  As Wikipedia states so correctly, "Franchise tax is a tax charged by some US states to corporations with a nexus (aka a filing obligation) with those states. The common feature of a state's franchise tax is that it is not based on income."This is a mandatory requirement for any LLC that wants to be "qualified to do business" in that state. Depending on the state, these fees can be quite high, which erodes the funds in your Checkbook IRA account year after year or as long as your LLC wants to remain “qualified to do business” in that other state.
There is no such franchise tax requirement for Business Trusts.
As you can understand when a Business Trust is used as the holding entity for a self directed IRA with checkbook control, you as the Trustee and Owner can enjoy the best of both worlds - freedom to invest, divest, manage any qualified investments at any time from your retirement funds and also be able to prevent unnecessary overheads from fees, taxes and expenses with full confidentiality.
Get To Know Some Qualified Investments For Your Checkbook IRA
Since we provide you with the services to set you up with a self-directed IRA account with checkbook control, we are legally disallowed to also offer you any investment advice. However as a Solutions Provider, we can provide you with important information about the different qualified investments for your Checkbook IRA, thereby empowering you with the right knowledge while you choose to decide on how to prudently invest your retirement funds.
One popular investing option with self-directed IRAs with checkbook control is investing in Precious Metals. Unlike brokerage houses and insurance companies who offer different types of stocks, mutual funds, ETFs that have gold or other metals in them, self-directed IRAs provide another option. These self-directed IRA custodians will let the accounts hold the physical metals themselves though there are some caveats to that.
When an IRA holds metals in an IRA it’s limited to bullion or certain coins. The gold has to have a fineness of .9950. For silver it is .9990 and for palladium and platinum it is .9995. The bullion must also be made from a COMEX or NYMEX approved refiner. This can all be found in IRC 408(m)(3)(B). The code goes further in section 408(m)(3)(A) and discusses the types of coins an IRA is allowed to hold which is essentially a handful of different types of gold, silver, and platinum respectively.
The issue that comes up for a lot of people is the storage of those coins. Most custodians will require that you hold them at a depository in a place like the Delaware Depository in Delaware. Custodians have to be very careful about whom they use to hold the funds. So, the Delaware Depository, which has been an exchange approved facility usually gets the metals from custodians. It’s not in the custodian’s interest to spend money searching and vetting multiple depositories. The problem here is people want to hold the gold themselves and feel that by the custodian holding them, personally or in a third party depository, the IRA holder sometimes feels they don’t have enough ease of access to the metals. A lot of people are pessimistic that if something went wrong in the economy or something to that effect that they would want to be able to access the metals themselves and not worry about the custodian or other far off third party ship them.
Owning Commercial or Residential Real Estate not for the personal or immediate family member's use is another popular investment option for many Checkbook IRA owners. Upon investing the owner's expectation may be to receive rental income from the acquired property and/or buy in a down market, hold for a while and sell when the prices come up to earn a nice profit in the self-directed IRA. With the onset of short sales and foreclosures a lot of self directed IRA owners have chosen this route in invest part of their portfolio in real estate following this buy-hold-sell strategy.
During the last five years since the housing market crash last decade, investors have been buying property via a “short sale”. A short sale is when a property owner sells their property for less than what they owe on it to their bank. In this situation the bank, or private mortgage or deed holder, has to approve this transaction as they have to agree to sell their interest in the property for less than what is owed. There are a lot of variables here with a lot of waiting, especially with the bank making a decision. Then when the bank finally makes a decision they want everything done extremely quickly. This is where issues sometimes arise when investing directly through an IRA custodian.
The banks and the seller need things signed, and resigned and funds at specific times which may not be suitable when there is a need for speed as far as fast availability of funds to move into the investment is concerned. This where a self directed IRA with checkbook control through a Business Trust can prove to be very useful by being able to access the available funds right away with the ease of just writing a check to secure your position.
Another popular investment option for owners of self directed IRAs with checkbook control is in Trust Deeds.Trust Deeds, in most states and mortgages in others, are the security instrument for a loan on a piece of real estate. Generally this is done by a bank and they supply a loan and then there’s a trust deed that secures it. The trust deed is what would hold up as ownership interest in the property in case of the borrower defaulting on the note. The positions of the trust deed are based on who recorded first and who would be paid off first in case of a foreclosure.
An investor could buy a property at a low value due to its low demand as a result of any damage or repair needed. They could fix the property up and then sell it for a profit.
For the fix and flipper they generally need a loan to initially buy the real estate and help fix it up. Banking guidelines make it very difficult for these fix and flip borrowers to obtain loans. The solutions here are private lenders or hard money lenders. Private lenders and/or private money lenders are bringing in money in a variety of ways. They are using their own money, other people’s money, their retirement funds, and other people’s retirement or IRA funds.
The IRA needs to be vested as the lender, which is generally something like: IRA Custodian fbo Client Name IRA. This involves providing a copy of the recorded deed and note to the IRA custodian along with a variety of other supporting documents. Each IRA custodian is going to have their own rules and these rules can change at any given time. Some of these custodians can fund these investments in a couple days and others take up to a couple of weeks. The fix and flipper is looking to get their funds as soon as possible so the thought of waiting a couple of weeks can push them to find a different investor.
If you are such an investor with funds in your self-directed IRA with checkbook control and if the terms of the loan to the fix-and-flip borrower interests you, you can write them a check, thereby investing in that Trust Deed and be eligible to make a profit when the borrower flips the property for a profit. When done right, this can be quite a profitable strategy to build up the reserves in your retirement account.
One almost overlooked asset class for investing funds from a Checkbook IRA, is unsecured Promissory Notes.
There are all kinds of businesses out there that need an infusion of capital. One way that investors are working with these various businesses is loaning them money. Sometimes these businesses are not as formal as others and do not have a Private Placement Memorandum or Stock Purchase agreement to invest in to, so the way to invest is to set up a promissory note. Since there might not be a security instrument in place, like a trust deed for instance this can become a real possibility for a business to work with investors. If the “borrower” is somebody or some company that you trust you have the ability to loan them those funds. One way to loan them funds is out of a self-directed IRA.
There are two prevailing options when loaning the funds out of your self-directed IRA. One of them is to go through your IRA custodian and their processes, which will likely take 2-5 business days depending on the custodian, or using your Checkbook IRA via the Business Trust. Sometimes these investments come up with a small window of opportunity to invest for what can be a very positive rate of return. If you have already set up your checkbook IRA, you’ll have access to those funds that day and be able to create the note and direct the funds to the borrower.
What Our Clients Say About Our Services And Team
We are veterans on setting up self directed IRA with check book control and have served several happy clients in the past in their retirement planning. Here's what some of our clients have to say ...
Thank you for everything! I would not even be close to having this account opened if it wasn’t for your excellent and beyond expected service!.
J. Ashley. W - Retirement Checkbook Client
I was in escrow and needed to close under 10 days. I used Retirement Checkbook to set up my retirement checkbook account for my self- directed IRA. Brian was very helpful in explaining how it worked and gave great communication returning calls quickly every time.
Jack. S - Retirement Checkbook Client
Frequently Asked Questions
Q. How do I set up a Business Trust?
A. The initial step in forming and structuring a business trust is to prepare a “Declaration of Trust” which is often commonly referred to as the “trust agreement.” The Declaration of Trust sets forth the primary purposes and objectives of the business trust. The primary purpose of the business trust is, of course, to make appropriate investments using the funds that were transferred to it from the IRA account. Consequently, all the activities and operations of the business trust that are done in connection with the investments must be for the sole and exclusive benefit of the IRA account.
The Declaration of Trust will set out the rights and duties of the beneficiary. Typically the rights and powers of the beneficiary are going to be very broad. For example, the beneficiary will have the right to make investment decisions and amendments to the Declaration of Trust. But these broad powers will not be exclusive. Rather, the trustee will also be given similar broad powers. And, very importantly, the trustee will not be required to obtain the consent and approval of the beneficiary for any investment or management decisions the trustee makes regarding the assets and investments owned by the business trust.
Q. Why is a Business Trust required in order to direct my investments on my self-directed IRA?
A. The rational for this structure is straightforward. Since the beneficiary is the IRA account, then, if the trustee had no independent authority, all requests for approvals would have to go through the custodian of the IRA account. But the business trust was created in order to minimize the number of decisions or transactions that would have to go through the custodian’s review and administrative process.
Consequently, while it is advisable to reserve these broad powers with the beneficiary in the event a situation arises where obtaining the direction and approval of the beneficiary would be appropriate, granting the trustee the power and authority to independently make investment and other asset management decisions achieves the “checkbook” control typically desired by the IRA owner.
As the owner of the Checkbook IRA account you will typically appoint yourself as the “trustee” of the business trust. Pursuant to the terms of the Declaration of Trust, you as the trustee will have the authority to make all the decisions regarding (1) the purchase of ultimately (2) the sale of each of the investments.
Q. Why do I need to open a bank account for my business trust?
A. This is what enables you as the Trustee of the Business Trust and Owner of the Checkbook IRA to get access to a check book in the name of the Business Trust, pending wire transfer of funds into the account from the IRA custodian. Once funds are available in your bank account, you are free to write checks to purchase your positions on the qualified investments of your choice.
Q. What documentation do I need in order to open a bank account in the name of my Business Trust?
A. Once the Declaration of Trust has been finalized, the trustee will then want to open a bank account in the name of the business trust. The trustee will typically be the “signator” on the bank account. However, prior to contacting a bank regarding the account, the trustee will apply for an EIN or “tax identification number” from the IRS. This is generally a straight forward process that can be done on-line by filling out the Form SS-4. All banks require an EIN with respect to the entity opening the account.
One of the documents that the trustee will be required to fill out in connection with opening the account is a “Certification of Trust.” While each bank will have its own form for the Certification of Trust, the terms and information required are pretty standard. Essentially the trustee will be certifying that:
You are the trustee.
The Declaration of Trust is in force.
The IRA account is the “trustor” and “beneficiary” and is the party - you, in this case, with the right to revoke or amend the Declaration of Trust
The trustee has the authority to open the bank account in the name of the trust.
Importantly, the Certification of Trust is being provided to the bank in lieu of providing a full copy of the Declaration of Trust. Thus the privacy and confidentiality of the provisions of the Declaration of Trust are maintained.
Providing the Certification of Trust can be compared to providing the bank with a copy of the Articles of Incorporation if an account for a corporation was being opened or with the Articles of Organization if an account for a limited liability company was being opened. Thus the Certification of Trust provides the bank with the evidence and assurance that the entity, the business trust, does exist and the Trustee has the power and authority to open the bank account on behalf of the business trust.
The IRA owner, upon submitting his or her direction to the custodian to make the investment in the business trust, will provide the custodian with instructions and information necessary to have the funds in the IRA account wired directly into the bank account of the business trust. Wiring the funds into the new bank account is the preferred method for transferring the funds.
Q. How is a Business Trust classified for Federal and State Income Tax purposes?
A. Since the business trust is an entity separate and apart from the IRA account (i.e. the IRA account is simply investing in, and holding, the “beneficial interests” of the business trust), the tax classification of the business trust becomes important to understand.
Under Treas. Reg. 301.7701-4(b) a “business trust” is treated as a “business entity” that will be classified for federal tax purposes under Treas. Reg. 301.7701-2. Under this regulation, a “business entity” with two or more members is classified for federal tax purposes as either a “corporation” or a “partnership.” A “corporation” is then defined to mean a business entity organized under a state statute which refers to the entity as “incorporated” or as a “corporation.”5 Since a “business trust” is not organized under such a state statute, then it will not be classified as a “corporation.” With it not being a “corporation,” the business trust will likely then be classified as a “partnership.” The term “partnership” means a business entity that is not a “corporation,” as defined above, and has at least two members.6 Thus, if the “business trust” has at least two “beneficial owners,” it will be taxed as a “partnership.”
But often the IRA account will own 100% of the “beneficial interests” of the business trust resulting in the business trust only having a single owner. When a business entity has a single owner, and is not a corporation, then it is “disregarded as an entity separate from its owner.
It is probably worth briefly noting that a “business trust” is an “eligible entity” and thus has the ability to elect out of the default classification. The default classification is as noted above. An “eligible entity” will be classified as a partnership if it has two or more members; or it will be “disregarded” as an entity separate from its owner if it has a single owner.
If a business trust is classified as a “disregarded entity” because it has only one owner of the “beneficial interests,” then the business trust will not have to prepare and file either federal or state income tax returns.
Q. Are precious metals and real estate investments beneficial for my Checkbook IRA?
A. We are not licensed to provide you with investment advice as that would be a conflict of interest. We can only provide you with information and educational content about what investments you could make. There are restrictions on what type of precious metals you could consider as a qualified investment and the same goes for the real estate that you can invest in. Get in touch with us with your specific question and we will be able to provide guidance.
Q. Can I use funds from my Checkbook IRA to pay the mortgage on my primary and/or second home?
A. This would be considered as a non-qualified investment and if you did write a check for this, it would be considered a withdrawl from your retirement account and you would be subject to income taxes and even early-withdrawl penalties. You cannot make any investments with the funds from your self-directed IRA that could directly benefit you or your immediate family members. You can also not invest in collectibles or life insurance.
Q. How do the various retirement plans differ from one another?
A. This is quite a common question and here's where you can find a comparative analysis of what's available in the market. We have the one of the lowest cost and most comprehensive service-packed plans to offer. Get in touch with us and we can discuss the details.
We Deliver Complete Solutions For Your Self Directed IRA With Checkbook Control
Self-directed IRA with checkbook control places you, the owner in the spotlight to manage your retirement investment portfolio with substantial freedom to invest the available funds in non-traditional investments, including and beyond the stocks and bonds of typical employer sponsored retirement plans.
The IRS quite liberally defines a whole range of qualified investments that you may consider writing a check for to secure positions in them, to grow your retirement account in a less volatile market when compared to stocks and bonds. When invested in these qualified investments, you can enjoy the benefits of tax deferred growth of your retirement funds without any penalties or tax implications on your capital gains, as you invest, hold or divest your positions in those investments.
Setting up a Business Trust as the entity that the self directed IRA "acquires" to manage its funds with you as the IRA owner and the Trustee of the Business Trust, enables you to enjoy full confidentiality, reduced fees and expenses and even be considered as disregarded entity of tax purposes. when this Business Trust opens a bank account, the self-directed IRA transfers its funds into the bank account and you as the Trustee is given a checkbook to invest in your chosen qualified investments. This is a very unique and innovative approach that we at Retirement Checkbook promote and recommend to all our clients due to the far reaching benefits from a retirement planning and investing strategy perspective.
As you can understand the setup of such a structure for managing your retirement funds has several tax implications, over and above the financial growth of your assets in a tax deferred manner. At Retirement Checkbook, we are specialists in this area with over 20 years of average experience in financial services and investments, retirement planning, tax planning and estate planning.
Our recommendation to you in to invest in a market that you have an interest on and have in-depth knowledge on, so that you preserve your capital at all times and it grows over time. Our staff has collectively opened over one thousand self-directed IRA accounts and have handled thousands of financial transactions. While we cannot legally provide you financial advice, we can provide you with education on the different types of qualified investments from the common to the exotic and at your discretion and request, we can make referrals and introductions to qualified financial advisors in your chosen area of investments.
Having a tax and estate planning attorney with 30 years of hands-on experience, as an integral part of our team at Retirement Checkbook ensures that when you engage us to set up your self-directed IRA with checkbook control you are set up correctly right from the beginning with the best asset protection strategy, tax savings, and confidentiality possible for your retirement funds.
Checkbook IRAs can create generational wealth and that is always our objective for you as our client. We consider ourselves as solution providers for your retirement investment objectives and we are here for you with customized solutions for your specific needs.
Get in touch with us today for a free consultation about your particular situation and how we can provide creative solutions to not only put you in control of your retirement funds through a self-directed IRA with checkbook control, through our experience in a variety of related matters we will be able to provide you with the right information to empower you to make the right choices to decide how to grow your retirement portfolio.