Quest Trust Ranks 1st for Best Self-Directed IRA Custodian for 2021

Estimated reading time: 2 minutes

Our world-famous customer service has set us apart once again as Quest proudly takes the title for Best Self-Directed IRA Company of 2021!

There are always a lot of great self-directed IRA companies in the running for this highly sought-after title and Quest is grateful to be presented with this award. 

Each year, independent surveys are sent out to investors who have experience with various custodians and other companies in the industry. Overall reputation, length of time in business, client testimonials, and professional peer opinions are all factors taken into consideration when casting votes.

Quest may be one of the nation’s fastest growing self-directed IRA custodians, but we’ve never forgotten our most important goal – to always provide the highest level of customer service, alternative investing education and self-directed IRA services. 

Quest Trust Company was able to receive this 1st place ranking thanks to many factors, the two biggest being our exceptional level of education and care for our clients. From our weekly webinars and updated education center to the expert level of understanding you receive from calling in and speaking to a trained representative, Quest always provides exceptional knowledge and training. When it comes to our services, like exceptionally fast funding times and modern online investing systems, Quest beats the competition. 

Our clients have shared that Quest is a “fabulous company that provides a ton of training, seminars, and special events to network and learn… All the employees are well trained and always helpful to answer any questions you might have. They are very prompt at handling all your investment transactions.”

We know a lot of consideration is taken before a winner is chosen, and it is an honor to know that the hard work that came from the Quest team in 2021 has been noticed within the investing community. 

If you’d like to experience the Quest difference for yourself or get more information about Quest, see what sets us apart by giving us a call at 855-FUN-IRAS. At Quest, consultations are always free and live representatives are always available to share options about transferring to a self-directed IRA!

To learn more about how to get started investing with a self-directed IRA, schedule a 1-on-1 consultation with an IRA Specialist by clicking HERE.

Sarah Bio

Checkbook Control IRA-Owned LLCs Just Got Riskier

Estimated reading time: 10 minutes

By: H. Quincy Long
Attorney at Law and 
CEO of Quest Trust Company

A very popular idea in the self-directed IRA industry is to have what some have termed a “checkbook control” IRA.  Basically, this involves the following steps:  1) an IRA is formed with a self-directed IRA custodian; 2) a brand-new LLC or other entity is formed with the IRA owner as the manager or a director and officer; and 3) the IRA custodian is directed to invest the IRA funds in the newly formed entity.  Voila! The IRA owner has checkbook control over his or her IRA funds and can enter transactions quickly without anyone looking over their shoulder to see that the rules are being followed or doing any paperwork required by the IRA custodian.  Admittedly, this sounds like a wonderful idea from the IRA owner’s perspective, but it is fraught with danger and traps for the unwary, as some taxpayers are now discovering.

Most published Tax Court rulings on this topic have resulted in negative tax consequences for the taxpayers who set up a checkbook IRA. The purveyors of checkbook IRAs will point to a few cases that came down in favor of the taxpayers to ‘prove’ the legitimacy of this technique, and they are correct – to a point.  Unfortunately, there is a lot more to the story. The danger is typically not with the initial set-up of the LLC, but what happens after the LLC is funded and the IRA owners begin directing the investments in their position as managers of the LLC. The rules governing IRA investments are somewhat complex, and most IRA owners do not have the knowledge to comply with those rules. An IRA owner considering this type of set-up must have a working knowledge of the prohibited transaction rules, who is a disqualified person to their IRA, the plan asset regulations, the rules regarding Unrelated Business Income and Unrelated Debt-Financed income, and more. If you or your advisor is not familiar with these rules, a checkbook IRA may not be the best idea for you.

Most of the cases in Tax Court rulings deal with prohibited transactions. The effect of doing a prohibited transaction in the IRA for the owner is to disqualify the IRA as of January 1 of the year in which the transaction took place. If that happens, the IRA owner may be subject to premature distribution penalties, income taxes on the distributions that the taxpayer had because of the disqualification of the IRA, and accuracy-related penalties for unreported income that the taxpayer didn’t know he had because he thought his IRA was making the money tax free. Additionally, there are other taxes and penalties due by any other disqualified person who participates or benefits from the prohibited transaction.

Now a new Tax Court ruling has come down with a new, but predictable, attack on the idea of a checkbook IRA. The case of McNulty v. Commissioner involves the purchase and holding of American Eagle coins through a checkbook IRA, which were stored in a safe in the house of the McNultys. Mr. McNulty’s IRA was disqualified and deemed distributed because of certain undisclosed prohibited transactions, but he was appealing the understatement penalties. Mrs. McNulty was not found to have done any prohibited transaction, but she was in receipt of the American Eagle coins, which the Tax Court held was a violation of the Internal Revenue Code section creating IRAs (Section 408).

Generally, IRAs are prohibited from holding certain ‘collectibles’, including coins. To the extent the IRA invests in collectibles, as defined in the statute, they are treated as a taxable distribution equal to the cost of the collectible. Exceptions from the definition of a collectible are made for gold, silver, platinum, and palladium bullion, and for certain gold, silver, or platinum coins issued by the United States or coins issued under the laws of any state. American Eagle coins fit within an exception and were therefore acceptable investments for an IRA. However, the exception for bullion and coins requires them to be “in the physical possession of a trustee” of an IRA. The debate of what “physical possession” means in this context has been debated for some time now. McNulty v. Commissioner has now confirmed that an IRA owner cannot take possession of bullion or permissible coins without triggering a deemed distribution from their IRA.

  Before establishing their self-directed IRAs, the McNultys claimed that they researched the idea of owning American Eagle coins through an LLC owned by their IRAs. They contacted a purveyor of checkbook IRAs through an LLC structure, and established Green Hill Holdings, LLC for that purpose. Green Hill is a single-member LLC that is disregarded for federal tax purposes, and its sole initial member was Mrs. McNulty’s IRA. The McNultys were appointed as managers of Green Hill. 

The checkbook IRA vendor represented on its website that an LLC owned by an IRA could invest in American Eagle coins and IRA owners could hold the coins at their homes without tax consequences or penalties so long as the coins were ‘titled’ to an LLC. The Tax Court noted that there were no certificates of ownership for the American Eagle coins or any other documentation that establishes legal title. Mrs. McNulty argued that the coins were purchased with funds from Green Hills’ bank account, and the invoices from the coin vendor listed Green Hill as the purchaser. However, the recipient on the shipping labels were either Mrs. McNulty individually or Mrs. McNulty along with Green Hill. 

The coins were shipped to the McNultys’ personal residence and stored in a safe, along with coins purchased with Mr. McNulty’s IRA and coins purchased by the McNultys individually. Mrs. McNulty asserted that the coins were labeled separately before being placed in the safe. The Tax Court questioned whether labeling is sufficient to satisfy the Internal Revenue Code’s prohibition against commingling IRA assets “except in a common trust fund or common investment fund.” However, the Court decided that it did not need to resolve the question since Mrs. McNulty’s physical possession of the American Eagle coins was enough to result in taxable distributions.

The IRS argued that Mrs. McNulty should be treated as having possession of the American Eagle coins irrespective of Green Hill’s existence, Mrs. McNulty’s status as Green Hill’s manager, and its purported ownership of the coins. The McNultys countered that the American Eagles coins were assets of Green Hill and Mrs. McNulty’s physical receipt of them did not constitute taxable distributions from her IRA. Despite numerous disagreements between the parties, the Court ultimately decided that it only needed to answer the question of who can have physical possession of the American Eagle coins purchased with IRA funds. Unfortunately for Mrs. McNulty, the Court ruled that she had taxable distributions from her IRA when she received physical possession of the American Eagle coins irrespective of her status as a manager of Green Hill. This is true even though the IRS conceded that Mrs. McNulty did not engage in a prohibited transaction with respect to her IRA, its investment in Green Hill, or the purchase of the American Eagle coins.

The Tax Court cited legal precedents which indicated that the owner of a self-directed IRA is entitled to direct how the investments are invested without forfeiting the tax benefits of an IRA, and that a self-directed IRA is entitled to invest in a single-member LLC. However, the Tax Court ruled that IRA owners cannot have unfettered command over the IRA assets without tax consequences. Mrs. McNulty’s control over the American Eagle coins was the basis for determining that she had taxable IRA distributions. 

The Tax Court stated that a qualified custodian or trustee is “fundamentally important to the statutory scheme of IRAs, which is intended to encourage retirement savings and to protect those savings for retirement…Personal control over the IRA assets by the IRA owner is against the very nature of an IRA.” The Court further stated:

“Mrs. McNulty had complete, unfettered control over the AE coins and was free to use them in any way she chose. This is true irrespective of Green Hill’s purported ownership of the AE coins and her status as Green Hill’s manager. Once she received the AE coins there were no limitations or restrictions on her use of the coins even though she asserts on brief that she did not use them. While an IRA owner may act as a conduit or agent of the custodian, she may only do so as long as she is not in constructive or actual receipt of the IRA assets.”

“An owner of a self-directed IRA may not take actual and unfettered possession of the IRA assets. It is a basic axiom of tax law that taxpayers have income when they exercise complete dominion over it. Constructive receipt occurs where funds are subject to the taxpayer’s unfettered command, and she is free to enjoy them as she sees fit. Accordingly, the value of the coins is includible in her gross income. Petitioners’ arguments to the contrary would make permissible a situation that is ripe for abuse and that would undermine the fiduciary requirements of Section 408.”

Many checkbook IRA providers will argue that this case is not a big deal, since it only applies to US minted coins and gold, silver, platinum, or palladium bullion, which are required by statute to be “in the physical possession of the trustee.” Of course, if you possess those types of assets in your safe at home this case will be of no comfort to you. Only time and new cases will determine whether this case will be of limited applicability or will be used to expand the ways in which you can lose your IRA.

The problem is that the language used by the Tax Court in this case is very broad. A checkbook control IRA-owned LLC all about getting actual and unfettered access to the IRA’s assets. The perceived benefit is that you escape the oversight of the custodian, who the Tax Court said was “fundamentally important to the statutory scheme of IRAs.” If you are the manager of an LLC owned by your IRA, and your IRA contributes money to that LLC, it’s hard to argue that you don’t have unfettered control over the IRA’s assets. The result in this case did not rely on a violation of the requirement in Section 408(m) that precious metals and coins must be in the physical custody of the trustee or custodian of the IRA. Instead, the issue came down to Mrs. McNulty’s unfettered control over the American Eagle coins. Having such control, according to the Tax Court, is against the very nature of an IRA. You cannot just ignore the statutory scheme of IRAs merely by interposing a disregarded entity between you and the custodian. Mrs. McNulty did not enter a prohibited transaction with her IRA. Her only ‘sin’ was taking possession and control of the IRA’s assets. 

It may turn out that this case is limited in its applicability to possession by the IRA owner of permissible coins and bullion in an IRA. For the sake of the thousands of people who have a checkbook IRA I hope so. Regardless of what happens in the future, one thing is certain – checkbook IRAs just got a whole lot riskier, at least until case law limits the applicability of this case.

One other interesting issue in this case bears mentioning. Section 6662(a) and (b)(2) of the Internal Revenue Code imposes an accuracy-related penalty for any portion of an underpayment that is attributable to a substantial understatement of income tax. The Section 6662(a) penalty will not apply where the taxpayers establish that they acted with reasonable cause and in good faith with respect to any understatement. Reasonable reliance on professional advice may constitute reasonable cause. The McNultys argued that they researched the LLC structure and reasonably concluded that they could take custody of the American Eagle coins through an LLC with IRA funds without tax consequences. The parties did not stipulate what research was done by the McNultys but did stipulate three versions of the checkbook IRA provider’s website, as well as screen prints from the website of the IRA custodian. Additionally, Mr. McNulty argued that he did not know that he had engaged in a prohibited transaction when he filed their tax returns.

The Court was unsympathetic. The IRS asserted that the McNulty’s engagement of the checkbook IRA provider to assist in setting up Green Hill did not present a reasonable cause defense. Instead, the McNultys argued in vague terms that they performed research about an IRA investment in American Eagle coins through an LLC structure, without identifying the source or specific results of the research, other than stipulating parts of the checkbook provider’s and the custodian’s websites as exhibits. The Tax Court questioned whether the checkbook provider’s website and/or services could constitute professional advice upon which a reasonable person could rely. The checkbook IRA’s website is an advertisement of its products and services, and a reasonable person would recognize it as such and would understand the difference between professional advice and marketing materials for the sale of products or services. The McNultys were both employed professionals during the years at issue. The McNultys also did not seek or receive any advice from their CPA who prepared their tax returns for the years in question. The point is that you cannot rely on an advisor who participates in structuring the transaction (i.e., a “promoter”) to avoid penalties. This issue comes up regularly in cases where the IRS is asserting accuracy-related penalties. 

It should be noted that this article is not intended to be tax or legal advice. If tax or legal advice is needed, please contact a knowledgeable professional. I have purposely left out the legal references to make it easier to read. No claim is made to materials subject to copyright. This is not intended to be a legal brief, but rather just a summary of an interesting and important case. The McNulty case is titled Andrew McNulty and Donna McNulty vs. Commissioner of Internal Revenue, as was filed in the United States Tax Court on November 18, 2021.

Common Questions IRA Holders Have About Property Taxes

Estimated reading time: 3 minutes

As the year comes to an end, Self-Directed IRA holders using their IRA to invest in assets like real estate or commercial properties have to keep up with expenses. One of those being property taxes. Below are a few of the top questions received towards as the year comes to a close. 

Who can pay my IRAs property taxes?

Investors need to bear in mind is that all expenses related to property owned by your Self-Directed IRA (maintenance, utility bills, upgrades, property taxes, etc.) must be paid from your IRA. These payments cannot come from a personal account and must be submitted on time. 

When are my property taxes due?

The due dates will be different depending on where you live, but most Texas counties will start mailing out tax bills for the property taxes. Come January 1st, property values are determined for the year. At this time, exemption qualifications are set. When this happens, a tax lien is placed on properties to ensure each tax bill is paid. Then on January 31st, you Texas property taxes are due. The delinquency date (if you didn’t pay, you now owe delinquent property taxes) is on February 1st.

If you’re unsure of the due date and don’t have an automatic payment set up, you can find all helpful dates here on the TaxEase website.

What should IRA holders do to make sure that the property taxes get paid? 

Before anything else, you should determine where the bill is mailed. This is really important for clients with new investments, as counties typically do not update the mailing address for property taxes until the next year. Clients should also check their email folders to ensure that any correspondence or needed approval from Quest is addressed. The beginning of December is a perfect time to check this and confirm the correct information we have on file for you. 

Another thing clients can do to make sure property taxes get paid is monitoring the funds in your Quest account. Some situations have occurred where a request was made, but there were no funds in the account to make the payment. In the event a payment request is submitted and there are insufficient funds, a Quest representative will reach out. To ensure you there is no delay, it’s best to check back often to monitor your account balance.

At Quest, we can set up reoccurring payments for property taxes. We would require supporting documentation of the bill. Bills should be forwarded to our office if received at your residence. If you do not have automatic payments set up through your account, you can submit the payment request in your Client Portal or submit a Payment Authorization Letter along with the supporting tax bill to our team. 

What can IRA holders do to make property tax payments an automatic process?

Self-directed IRA holders should understand that many counties will only send property tax bills one time per year. In the past, some clients that have not set up their automatic property tax payment, and when they pay the first half of their taxes at the end of the year, they are penalized for the second half due within the next half year. 

There is an option to select “recurring” when you submit a request in your Client Portal. Here you can choose the frequency, like annual, monthly, etc. As long as the supporting document showing the amount of the bill arrives at our office, Quest will process the payment within 24-48 hours, given there are enough funds in the account to cover the cost.

For more information about managing real estate in a Self-Directed IRA and how they work, please visit our website or talk with a certified Quest representative. To get more education about getting started, sign up for a free consultation with an IRA Specialist HERE.

Women in Business – How to Be Successful

Estimated reading time: 9 minutes

Have you ever wondered if your gender could affect how comfortable you are in retirement? This may not be a question on everyone’s mind, but it’s something women are facing every day. Recent studies have shown that the challenges women face during their working years can affect their lifetime earnings and retirement income. In order to feel comfortable and prepared for retirement, being able to overcome those obstacles is key. Today, I will interview Tracy Rewey, a successful note expert who will share her tips for creating success as a woman I the industry. 

Sarah: Thanks for joining me today, Tracy. This article is going to be about successful women in business. I’ve been doing a lot of research lately that shows women don’t feel like they’re prepared for retirement. They feel lost. I want to talk to you – a successful women – how you were able to build up your nest egg, and tips for how others can create success, whether it be now or for retirement. 

Tracy: I love it. I think that everybody struggles with it. This fits right in with what we do.

Sarah: Can you tell me a little bit about who you are and how you got started?

Tracy:  Absolutely. I was introduced to the world of seller financing in the 80s and worked with real estate attorneys, title companies, and servicers in a very small town. There was quite a bit of seller financing there, so I learned about seller financing, notes, and people investing in notes. Then, I went to work for a company where that was all they did. I worked there for 10 years, then I started my own company called Diversified Investment Services with my husband. We founded and now I get to work for myself. You have so much more freedom of time and location, and you get to reap the rewards of all your efforts. That’s how I got introduced to the whole business.

Sarah: That’s cool. When you find something you’re passionate about, you stick with it. In the midst of all of this, where did you learn about self-directed IRAs?

Tracy: While I was working for the investment company, we had a lot of people that would refer us deals. Some of them would also buy the notes, keeping some of it in the backend in their retirement account. That was my first exposure. Seeing other people do it and going to conventions showed me, but I didn’t get to do my first deal until I left and converted my 401k to a self-directed IRA. 

Sarah: When you were first getting started, did you have any business partners besides your husband or outside help besides learning from the company that you had been with?

Tracy: I was very fortunate when I worked for 10 years there. I learned from some of the best. Marcus was their main guy in charge, and he was always like a mentor to me. He said, “Look, I have two daughters. They are in the business finance world. I want to teach you and to treat you the way I would want somebody to treat my two daughters.” I think that was unusual back then.

Sarah: Wow. What a kind role model. It’s good that you had someone in your life that to help with those steppingstones. What challenges have you experienced throughout your time in this industry as a woman in business?

Tracy: I think there are benefits and I think there are challenges. Some of the challenges for me is not sounding assertive enough. I don’t have that deep voice to sound more assertive. I’ve found that saying less when I’m in certain situations usually helps instead of saying too much. I tend to be a talker. I also think being underestimated can be a challenge, but that can also work to your benefit.

Sarah: And what have some of those benefits been?

Tracy: I struggle with saying it’s a male or female trait, maybe it’s a personality trait, but I do believe that women tend to be natural listeners, natural fixers, and natural empathizers. In the business I’m in, people are often selling their notes, because they’re trying to solve a problem and they need the funds for something else. Maybe they had a health concern, the note’s not paying, they have to send their kid to college, or they’ve lost a job. It’s important to be a good listener and a good empathizer. I don’t use that as a strategy. It’s just something I do naturally, and I think that has been a benefit. I am also an analyzer and I’m very detail oriented. Sometimes women make up for not being sure by trying to be over sure, but in our business, that is also a benefit. I don’t mind going through the documents, taking the time, and making sure that I don’t take everything at face value. 

Sarah: I love that take on it. You don’t often hear those points you made. Has being a female ever stopped you from a successful investment? Have you ever experienced discrimination?

Tracy: Honestly, if it has, it might only be because I was still learning to trust myself. That’s one of the things I always say: wealth doesn’t know you’re a woman, right? This financial calculator doesn’t know I’m a woman, right? The title policy doesn’t know that when I look at a payment history. It doesn’t know the interest rates. I think it’s a good industry on the finance side. Now, I definitely experienced things that were expected, like really proving yourself before someone would move you up. I always joked that I had to do twice the work and make half the mistakes, but I eventually became a vice president at that company. Another female and I were the first vice presidents the company had. 

Sarah: Oh wow! What a big accomplishment!

Tracy: Thank you! I think you have to grow thick skin. I don’t mean that to discount what anybody has gone through, because I know there are people who’ve had serious discrimination and it’s been very wrong, but I’ve been fortunate. 

Sarah:  Well, that’s good! That’s good that you haven’t! That’s what we like to hear. I’m sure that there were probably some tough times that you had to go through still. How did you persevere through those?

Tracy: When I started out, my first job besides babysitting was in high school, I worked for an attorney’s office. I used to do all the routes, picking up and dropping off papers. There was this one real estate office with this one gentleman and I was young. I’d go to pick up papers and he actually swatted me on the backside as I was walking out the door one time. I was in tears. There was a lady who I worked with, the mother hen of the office, and she was not having any of that. Shortly after, that route was no longer on my route, and they had to bring their own documents to our office. I felt validated, which was nice. 

Sarah:  Wow. I’m glad that they took you off that route. That’s good.

Tracy: I know. I commend them. They didn’t pretend it didn’t happen. I’ve been surrounded by good people in my life that were supportive. I had a very strong mother too, so she learned to make me stand up for myself.

Sarah: Always so much to learn from our mothers! Now, you are quite successful. You have your own business, you’re hosting expos, and you’ve got a solid track record behind you. What would you say is your secret to success?

Tracy: I would say perseverance, being a good listener, being a good problem solver, and not trying to squeeze every last dollar. I know it’s cliche, but I really believe that there are ways to make everybody come out of a situation feeling good about it. I think being able to collaborate with other people is key. I’m so very fortunate I’m at a place in my life where I can support and help other people that are learning the business. I get a lot of enjoyment out of that.

Sarah: That’s great! So, what about self-directed IRA investing? Have you used your expertise to invest with a self-directed IRA? 

Tracy: I’ve done some partials in my IRA. Those have turned out well. I try not to mix income. If I’m putting a deal in my IRA, I keep those separate. If I buy all of it in the IRA, I sell all of it through the IRA and hold it for a certain amount of time.

Sarah: That’s smart to keep those two buckets separate.

Tracy: I’m probably more careful than most. I never want to co-mingle funds in any way.

Sarah: Very smart. It sounds like you’ve been able to balance that quite well. How do you handle your work/life balance? 

Tracy: The real answer is that I still struggle with that. I wish I had words of wisdom. I think we tend to put ourselves last because, and then we think we’re doing it because we love and support all the people around us. Really, what happens is that we end up not being the best form of ourselves when we run ourselves thin. Then, nobody really benefits. I have learned over the years that you have to take time for yourself. You have to have balance and understand that everything will not always get done. We have to make time for ourselves and to nurture ourselves, but sometimes we forget to do that. It’s good when you have somebody around you that you can trust. But I’m still working on that. 

Sarah: I think that’s true. I think a lot of people are continuously working towards finding the right balance. To round it here with some of my final questions, what would you like to achieve next? What are your goals? What’s on the horizon for you?

Tracy: I have a goal to help women become more comfortable and secure in investing, and I think there’s some beautiful trends happening where I’m seeing more of that. I’ve been trying to be part of that movement. Last year, we started the Wise Women Investors Group and the Wise Women Expo. It’s about building that community and supporting women to be confident, to invest with confidence, and to gain freedom so they can live more balanced and free lives. 

Sarah: That really is amazing! And I know there are other educational resources you’ve done. Care to mention that?

Tracy: I’ve written a 400-page manual, but it’s not a digestible book. It’s more of a “how-to”, so that’s on my horizon as well.

Sarah: That’s exciting. You’ve definitely done a lot in your career. My last question for is this: for the women looking to get more involved and grow their retirement accounts, what are your tips for growing a self-directed IRA?

Tracy: We actually did a wonderful webinar with Quest on that. It was about my top 10 tips for buy notes in an IRA. I would definitely refer people to that class. If I had to boil it down to a couple of things, I first would say to just do something and to start wherever you are. We are constantly underestimating ourselves or being frustrated by something we didn’t do. I encourage everyone, no matter where you are at in your time, to let that go and to start. If you don’t have an IRA account, then open one. If you have one and you haven’t fully contributed to it, then figure out how to do that. If you’ve done that and you still haven’t fully invested your money and it’s sitting there uninvested on the sidelines, then do something about that. I’ve certainly been guilty of all those things along the way, so I’m not preaching or judging. I’m just saying, take some action. Learn, invest, and make some mistakes because you learn from those. I have. Lastly, solving problems. They don’t go away by ignoring them.

Sarah: That’s great advice. Everything you mentioned is so true. Tracy, thank you again. I really appreciate the time you’ve set aside to participate in this article. Hearing you share how you’ve been successful as a woman in the industry was really inspiring. You’re a wealth of knowledge and have shared some great advice. 

If you would like more information about the Top 10 Tips for Buy Notes in an IRA, you can rewatch the class on our Youtube page! To learn more about how to get started investing with a self-directed IRA, schedule a 1-on-1 consultation with an IRA Specialist by clicking HERE.

Growing Your Retirement by Investing in What You Know Best: Getting Back to the Basics

Estimated reading time: 3 minutes

Building wealth and saving enough for retirement can get overwhelming, but it doesn’t have to be. Most people think that they can only invest in publicly traded investments like stock, bonds, mutual funds, and CDs… but that isn’t true at all. With self-directed IRAs, you can diversify your investment portfolio into private assets like real estate, notes, land, oil and gas, and other private entities. The best part? It’s all on your terms. Self-directed IRAs truly allow people to take back control of their retirement savings and invest in assets that make sense to them. 

What is a Self-Directed IRA?

Self-directed IRA custodians make investing fun while putting the control back in your hands. A self-directed IRA is like any other IRA account; the term “self-directed” is just used to describe the type of account it is. The difference between a regular traditional IRA and a truly “self-directed” IRA is the types of assets they hold. With a self-directed IRA, you have the ability to choose from the broadest possible spectrum of investments, including those not traded on a stock exchange. You get to make all the decisions about your financial future. Most people find that they make more money and feel more confident when they are able to invest into things they know and understand. 

What Can an IRA Invest Into?

A self-directed IRA can be used to purchase almost any private asset. Common investments include single family real estate, rehab properties, commercial and multifamily real estate, private loans, performing and non-performing notes, oil and gas, land, startup companies, LLCs, and other private businesses. The list goes on! The rules say that as long as you do not invest into collectibles, like art or cars, and life insurance you are safe. 

What types of accounts can be self-directed?

Every custodian will offer different accounts. At Quest, we offer seven different types of retirement accounts that can be self-directed:

  • Traditional IRA – With the Traditional IRA, your earnings grow tax-deferred. Only pay taxes on your gains when you make withdrawals in retirement.
  • Roth IRA – The Roth IRA is a special retirement account where you have the ability to grow your profits completely tax-free.
  • SEP IRA – This self-directed tax-deferred account can be great for self-employed individuals, allowing a tax deduction for contributions made to a SEP IRA.
  • Simple IRA – A SIMPLE IRA is an employer-sponsored retirement plan designed specifically for small businesses, giving employees and employers a simple way to contribute and grow this account.
  • HSA – Get the best of both worlds with an HSA, with the ability to get tax-deductions on contributions and tax-free distributions for qualified medical expenses.
  • ESA – Education isn’t cheap, but with a Coverdell ESA you can earn tax-free distributions on countless qualified educational expenses as you self-directed this account.
  • Solo 401k – With the extra benefits that come with this account, like checkbook control and more freedoms, many people are eager to learn how to get started – just make sure you qualify.

Self-direction can be a great option for those looking to take more control of their financial future. If you are interested in learning more about self-directed IRAs or would like to get started, schedule a free consultation with an IRA specialist today by clicking here!

Everything You Need to Know about Excess Contributions

Estimated reading time: 2 minutes

Making contributions to your IRA is one of the most definite ways to ensure your account is growing each year, but with almost all self-directed accounts having different contribution limits, it can be hard to keep up with how much you are putting into your accounts. 

What happens if you accidentally put too much money into your IRA or contribute more than your earned income? As great as it would be to dump as much money as you’d like into your retirement accounts, there are rules surrounding these limits that can penalize you if not followed or corrected. 

What Is an Excess Contribution?

Generally, an excess contribution is a contribution that exceeds the stated IRA contribution limit, though there are many other ways an excess contribution can occur in an IRA. Reasons they can occur include:

  • Making a contribution that exceeds to annual contribution limit
  • Making a contribution to a traditional IRA after age 72
  • Making a contribution to a Roth IRA when your MAGI exceeds the income limit
  • Making a contribution that is more than your earned income
  • Making a contribution on behalf of an individual after date of death
  • Making ineligible or improper rollover contributions
  • Rolling over required minimum distributions 

Understanding when excess contributions occur is important, because contributions that are not corrected are taxed at 6% per year for each year the excess amount stays in the account. That means if you don’t fix the contribution, you’ll owe the penalty each year when you file your yearly income tax return. 

Correcting Excess Contributions to IRAs

The good news is there are solutions if you find you’ve made a mistake! If you discover that you’ve contributed too much, you can remove the contribution and any income it has earned before filing your tax return (including extensions) to avoid the 6% penalty. Or, if you find that you’ve contributed too much after the October 15 extended deadline, you can typically carry the excess contributions forward as an IRA or Roth IRA contribution for that subsequent year. Just be sure to reduce your contribution by the amount you carried forward, or you might exceed the limit again for the next year!

If you think you’ve made a contribution that exceeds your annual limit and need help correcting it, or you’d simply like to get more information about excess contributions, we can help! Schedule your free consultation with an IRA Specialist today by clicking HERE.

Quest CEO is Honored with NoteSchool’s Lifetime Achievement Award

Estimated reading time: 2 minutes

H. Quincy Long, Quest Trust Company Founder and CEO, will be honored tomorrow at NoteSchool’s Note Expo convention for his outstanding and notable contributions to the industry. Note Expo 2021, an educational event taking place tomorrow November 5th-6th, will award our very own Quincy Long with the Lifetime Achievement Award! 

Quincy has a decorated background in the industry. He received his Doctor of Jurisprudence from the University of Houston, and then went on to create Quest Trust Company, which traces its roots back to 2003. Now, Quest has over 35 Certified IRA Service Professionals with American Bankers Association (CISPs), with a large portion of the company mission focusing on education for clients and employees alike. 

“In my position as CEO and founder of Quest Trust Company, I have the privilege of showing people how to take control of their IRAs and other retirement assets and invest in what they know best – real estate,” Long says. “Whether the investment is the direct ownership of real estate, loans secured by real estate, or LLCs, limited partnerships, trusts, and other entities that invest in real estate, it can all be purchased within a self-directed IRA.”

With numerous achievements, like the recent 2021 Think Realty Honors Linda’s Legacy: Industry Impact Award he was just given, it comes as no surprise that he is receiving his honor. In his career, Long sat on the board of directors of the Realty Investment Club of Houston (RICH), and he is the author of numerous articles on SDIRAs and other real estate related topics. His expert education has made him an influential figure in the SDIRA industry, often recognized as a pioneer and leader.

“I am passionate about what I do because I believe in freedom of choice, but I also believe that with great freedom comes great responsibility,” he says. “There are rules which must be followed in order to succeed with a self-directed IRA, so I am also passionate about providing high quality education to our clients about the rules and the various investment techniques.”

It’s no secret that Quincy has a huge impact on the entire Self-Directed IRA industry – just listen to what Eddie Speed, Founder of NoteSchool has to say in this video here:

Receiving this award is a great compliment, and we are honored to share the news with you! To experience what it’s like to self-directed your IRA at a company with Quincy’s values and knowledge, schedule a call to speak with an IRA Specialist HERE about building your wealth at Quest

Does Your Custodian No Longer Hold Private Investments?

Estimated reading time: 3 minutes

New custodian requirements are causing headaches for some retirement investors and are causing them to look elsewhere. Investors that have their retirement accounts at some of the common publicly traded custodians are being told that they can no longer hold private investments under certain thresholds. 

The biggest challenge is that these custodians are no longer holding private investment opportunities for under $1M. For investors with smaller accounts that choose to remain with these certain custodians, they will no longer have the option to put their money into private investments. Assets such as real estate, notes, and private entities could all be eliminated from the list of possible investment options. 

How Can a Self-Directed IRA Help?

Self-directed IRAs could be the answer to the problem. With a self-directed IRA, you have the ability to diversify your investment portfolio by choosing from the broadest possible spectrum of investments, including those not traded on a stock exchange, and you’ll never have to worry about investment minimums or maximums. Self-direction means you get to make all the decisions about your financial future, and your custodian will provide account administration. Remember! Not all custodians are created equal!

You can build wealth faster with the freedom to purchase almost any type of investment. Common investment choices include all types of real estate, newly created and existing promissory notes, LLCs, limited partnerships, private stock, trusts, oil and gas, tax liens, and much more. All types of IRAs, including Traditional, Roth, SEP, and SIMPLE IRAs, as well as Coverdell Education Savings Accounts (CESAs) and Health Savings Accounts (HSAs), can be self-directed. 

Why Self-Directed at Quest?

Quest Trust Company is the nation’s premier self-directed IRA custodian, administering clients all across the U.S. Not only do we provide world famous account administration and customer service, we put a big focus on education and making sure our clients are equipped with all the knowledge and resources they may need. In our Education Center, you can experience live webinars, blogs, recorded videos, and more. In addition, we’re always adding the the latest online features, allowing you to fund investments online within 24-48 hours – one of the fastest funding times in the industry!

Benefits of Self-Directing Your IRA at Quest: 

  • Ability to view and manage accounts & investments online in the Client Portal
  • Submit investments and yearly Fair Market Valuations 100% online
  • Pay expenses with our team or online with the Expense Pay Feature
  • 24-48 hour processing times for almost all request involving accounts
  • Access to 35 Certified IRA Services Professionals and endless continued education

Here’s How We Can Help

For those that have a larger IRA and still want to participate in private assets, Quest can help. If you are looking for a qualified and knowledge custodian to place your private assets or start new private entity investments, call an IRA Specialists to see how we can make your move to Quest.

Schedule your free 1-on-1 call: Schedule A Consultation

Take Action! Proposed Changes to the Laws Governing IRAs that Could Affect You

Estimated reading time: 9 minutes

Your financial security is our priority and the relationship you have with Quest Trust Company is very important to us. That’s why we want to make you aware that the United States House of Representatives has proposed changes to the laws governing individual retirement accounts (IRAs) as part of its $3.5 trillion reconciliation package. These changes, if enacted into law, would have a direct negative impact on you and your ability to save for a secure retirement through an individual retirement account, like the one you have today at Quest Trust Company. 

This doesn’t just affect a few people; this affects everyone! Small business owners, start-ups, housing providers, local businesses, and the average investor like yourself would all be affected if this bill passes. Your retirement money is just that – yours. You should be able to continue putting your money into investments you understand and know and trust, confident that your money is helping not only you but your community, as well. Continue reading below to see how this could affect you.

How Would The Proposed Legislation Affect You?

The proposed legislation would significantly affect Self-Directed IRAs. It would prohibit IRAs from holding privately-placed equity and debt securities and other investments that require IRA owners to meet minimum financial, educational or licensing requirements. For example, the legislation would prohibit IRAs from holding unregistered investments that are offered to accredited investors, like equity or debt investments in small businesses or investments in private funds. You may very well hold investments in your IRA today that would be prohibited by the proposed legislation.

The bill would also prohibit IRA owners from investing in (1) non-publicly traded entities in which the IRA owner and related entities (including the IRA itself) own more than a 10% interest or (2) any entity in which the IRA owner is an officer or director, regardless of ownership percentage. By way of example, single-member limited liability companies or any investment in an entity in which an individual is a director or officer could no longer be held in an IRA. IRAs holding any of the above investments would lose all of the tax advantages previously available to the IRA.

If the proposed legislation is enacted, you will no longer be able to purchase any of the above investment types in your IRA. Further, you will be required to dispose of any such investments that you currently hold in your IRA by no later than December 31, 2023, which could result in significant and previously unforeseen financial and tax consequences, including taxes and penalties associated with any assets that could not be sold or liquidated and must be distributed in-kind from the IRA.

The text below is a more detailed summary of the changes written by CEO and Founder of Quest Trust Company. The following paragraphs outline the seriousness of the proposed changes.   

Summary of Changes Proposed by House Reconciliation Bill

Provisions Only Affecting High-Income Taxpayers with Large Account Balances:

  1. Taxpayers fall into this category if they meet two tests – they must have BOTH aggregate vested balances in the combined total of all retirement accounts (including 401(k)s, 403(b)s, etc.) of over $10,000,000 and have adjusted taxable income of $400,000 for a single taxpayer, $425,000 for a head of household taxpayer, or $450,000 for a married taxpayer filing a joint return (all indexed for inflation).
  1. No more contributions to a traditional or Roth IRA are permitted (Section 138301).
  1. Employer-sponsored defined contribution plans (such as 401(k)s, 403(b)s, etc.) would have to report to the IRS and to the plan participant on aggregate account balances in excess of $2,500,000 (Section 138301).
  1. All qualified retirement plans and eligible deferred compensation plans are counted as one plan for purposes of determining required minimum distributions (Section 138302).
  1. If the combined Roth IRAs, traditional IRAs and employer defined contribution plans exceed $10,000,000 at the end of a taxable year, the required minimum distributions are increased for the following year to 100% of the amount necessary to bring all qualified retirement plans and eligible deferred compensation plans down to $20,000,000, and 50% of the remaining balance over $10,000,000 (indexed for inflation). The RMDs must be allocated first to Roth IRAs and then to designated Roth accounts under the 100% distribution rule, but taxpayers may choose how to satisfy the 50% distribution rule once the 100% distribution rule is satisfied (Section 138302).
  1. These provisions apply to tax years beginning after December 31, 2021.

Provisions Affecting High-Income Taxpayers (Without Regard to Balances):

No more Roth Conversions or Rollovers for High-Income Taxpayers

  1. If a taxpayer is a High-Income Taxpayer (defined as a taxpayer who has adjusted taxable income of $400,000 for a single taxpayer, $425,000 for a head of household taxpayer, or $450,000 for a married taxpayer filing a joint return (all indexed for inflation)), the taxpayer may only do a qualified rollover if it is made from another Roth IRA or from a designated Roth account (Section 138311).
  1. If a taxpayer is a High-Income Taxpayer, Roth conversions of both IRAs and employer-sponsored plans are prohibited (Section 138311).
  1. These provisions apply to distributions, transfers, and contributions made in taxable years beginning after December 31, 2031 (this date may be a typographical error which will be corrected) (Section 138311).

Provisions Affecting All Taxpayers Without Regard to Income or Balances:

Prohibition of Investments Requiring Certifications

  1. A restriction is added to the qualifications for an account to be an IRA by adding an additional paragraph (7) to Section 408(a), which states that no part of the trust funds will be invested in any security if the issuer of such security requires the individual on whose behalf the trust is maintained to make a representation to the issuer that such individual (A) has a specified minimum amount of income or assets (e.g. an accredited investor), (B) has completed a specified minimum level of education, or (C) holds a specific license or credential (Section 138312).
  1. If, during any taxable year of the individual for whose benefit any individual retirement account is maintained, the investment of any part of the funds of such individual retirement account does not comply with Section 408(a)(7), such account ceases to be an individual retirement account as of the first day of such taxable year (Section 138312). In other words, if an IRA holds one of these prohibited investments the entire IRA is disqualified.
  1. These requirements shall apply to tax years beginning after December 31, 2021. However, if an individual retirement account holds any such prohibited investment as of the date of enactment of the act, the amendments will apply to such prohibited investments for taxable years beginning after December 31, 2023. In other words, an IRA holding a prohibited investment must dispose of or distribute the asset by no later than December 31, 2023 or the IRA will cease to qualify as an IRA (Section 138312).

No More “Back Door” Roth Conversions

  1. To slam the door on “back-door” Roth IRA strategies, the bill prohibits all after-tax contributions in both IRAs and employer-sponsored plans from being converted to Roth accounts, regardless of income level. This section applies to distributions, transfers, and contributions made in taxable years beginning after December 31, 2021 (Section 138311).

Extension of Statute of Limitations With Respect to IRA Non-Compliance

  1. The bill expands the statute of limitations for IRA non-compliance from 3 years to 6 years for substantial errors in valuation-related reporting (whether willful or otherwise) and prohibited transactions Section (138313).

Prohibition of Investments in Entities in Which the IRA Owner Has a Substantial Interest

  1. The bill prohibits IRAs from investing in entities not tradable on an established securities market if the entity is owned 10% or more by the IRA owner, either directly or indirectly (down from 50%). Indirect ownership by the IRA owner includes the ownership interests of certain family members of the IRA owner. The bottom line is that if the IRA owner and certain family members of the IRA owner collectively own 10% or more of (1) the combined voting power of all classes of stock entitle to vote or the total value of shares of all classes of stock of such corporation, 2) the capital interest or profits interest of such partnership or enterprise, or 3) the beneficial interest of such trust or estate, then such investment is prohibited and may not be held by the IRA (Section 138314).
  1. The bill also prohibits IRAs from holding investments in which the IRA owner is an officer or director (or an individual having powers or responsibilities similar to officers or directors) of such corporation, partnership, or other unincorporated enterprise. In other words, a “checkbook control IRA-owned entity” is prohibited (Section 138314).
  1. An IRA which holds one of these prohibited investments will cease to be an IRA as of January 1 of the year in which the IRA acquires the asset. However, if an IRA holds such an investment on the date of enactment of the Act, the rules will apply to such investments for taxable years beginning after December 31, 2023 (Section 138314). In other words, the IRA may continue to hold such prohibited investments until December 31, 2023, at which point the asset must be disposed of or distributed.

Clarification That IRA Owners Are Disqualified Persons For Purposes of The Prohibited Transactions Rules

  1. The bill clarifies that the IRA owner is a disqualified person for purposes of the prohibited transactions rules by adding such an individual to the definition of a disqualified person in Section 4975(e)(2) of the Internal Revenue Code (Section 138315).


  • Discussion of the bill’s effects with Troy Eckard –
  • Discussion with Tom Berry Regarding Proposed Tax Law Changes –
  • Discussion with John Hyre Regarding Proposed Tax Law Changes –
  • Discussion with David Phelps Regarding Proposed Tax Law Changes –
  • We’re advocating for you. We want you to know that we are working closely with our third-party advisors in Washington D.C., along with other major industry participants with the goal of having these provisions removed from the reconciliation package. Know that, as always – we will continue to be a strong advocate for investor choice. We also want you to feel secure in knowing that our company is well-positioned to continue to succeed, no matter the outcome of the proposed legislation.

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