How to Effectively Plan for the Future – Probate Discussion with Attorney Emily Bohls

Estimated reading time: 11 minutes

How soon is too soon to start planning for the future? Never! When it comes to making future plans and arrangements, most people seem to forget about potential probate scenarios that may arise. Although, your retirement account might have the potential to bypass probate, it’s important to understand how this process could affect your self-directed retirement plan.

Attorney, Emily Bohls, joins me in this article to help define and explain some of the basic Texas probate laws, which can be difficult to navigate for the common investor. 

Sarah: 

Thank you for joining me today. Can you give me a bit of your background? Tell us who you are, what you do, etc.

Emily:

I am an attorney, and I’ve been practicing for 14 years now. I went to law school in Houston – South Texas College of Law. My first seven years I was actually working for South Texas College of Law as a staff attorney at their legal aid clinic, primarily doing family law and probate. The model of the clinic was evolving, and I eventually became the manager of the clinic and an adjunct professor. In 2013, I decided that it was now or never to start my own practice, and that is what I’ve been focused on since then.

Sarah: 

So, that’s what you did next?

Emily:

I remained an adjunct, teaching the probate clinic. It was a practical course where the students got actual cases, and they were legal aid cases. I think I gave that up in about 2018, because I needed to concentrate fully on my practice. Now, I’ve been focusing on my practice and growing that. I’m primarily a probate practice. I also do guardianships, which is kind of under that umbrella. I’m working on merging/forming with another firm that offers family law, but that’s probably six months away from coming to fruition.

Sarah: 

You wear all the hats! Jack of all trades! What made you want to get in to this type of career? I feel like most people aren’t thinking, “let’s do probate”, so what was it that interested you?

Emily:

I always thought it was interesting. I’ve experienced death in my family, and we had to go through these processes. Some experiences were good, some were bad. When I was working at the legal clinic, since it was one of the things that we did, I gravitated towards it. I find it so fascinating because you have to know something about everything, since it really depends on what people die with. In some ways, it’s formulaic and very code driven. I appreciate how well organized the area of law is, especially in Harris County. The courts are great; they have a judge, associate judge, and a staff attorney that make sure everything’s perfect all the time.

Sarah: 

Having a good system always makes things a little bit easier. If you’re already having to deal with something that’s complicated, you don’t want to have a complicated system, as well!  I’ll jump right into my first question. For those here that are familiar with probate but are reading to get a better understanding, can you define probate for us and why it’s important to understand in relation to Self-Directed IRAs?

Emily:

Probate is the formal process of getting assets out of a deceased person’s name and into that of his/her heirs or beneficiaries’ names. So, as it relates to Self-Directed IRAs, if a deceased person had any asset that listed a designated a beneficiary, then the formal probate process is not necessary and the beneficiary can deal directly with the asset holder. Usually, I’m talking about financial assets, but you can have a piece of property that you’ve acquired in your SDIRA but that account has a beneficiary. If your loved one dies and leaves you as the beneficiary, then you would contact Quest and ask them information and what you need in order to change this account over into your name.

Sarah: 

How involved is the custodian when somebody passes away? 

Emily:

The custodian is mostly passive, waiting for notification and then receiving the notification. They’re not going to find it by looking through the death records or from the obituaries. They’re going to need to be notified by the beneficiary, and the beneficiary needs to contact that institution. Whether it’s a custodian of a Self-Directed IRA, if it’s an insurance company, if it’s a bank, an investment firm – all of those are different entities and the beneficiary needs to reach out to them. If you don’t know you’re a beneficiary, that’s where it gets kind of tricky. Nowadays, no one really has paper statements anymore. In the past, you could rely on looking through the loved ones’ mail, but now you have to look through their computer, passwords, and usernames.

Sarah: 

Oh man, I never thought about that. 

Emily:

Yes, so you can see how tricky that can get. And there’s no harm in digging around!  But, if you contacted Quest because a loved one died and you’re not the beneficiary, Quest is not going to tell you any of the asset holder’s information if you’re not the beneficiary. 

Sarah: 

Thanks for answering that. It’s so important that clients understand our role as the self-directed IRA custodian.  

Emily:

If you’re really lost and have no direction, then it’s possible to open probate and to get an executor/administrator with the authority to act on behalf of the estate and perform the necessary inquiries. Now, if I was an executor/administrator and I inquired, I have authorization. I could potentially find out who the beneficiary was or get them going. But, that would be a lot of work. For planning purposes, you should write your assets and accounts down or print out a statement of account and have a folder to keep everything in one place. Even if you have old stuff in your folder, like a closed account, there’s still no harm. Try to have all of your accounts in one place, so that [your beneficiary] knows who to contact.

Sarah: 

It definitely sounds like it could get complicated. Especially if you didn’t know you were a beneficiary! Is it possible to avoid this probate process all together?

Emily:

It is possible, but it requires planning. I think you need to sit down and write out everything you own as an asset. And don’t say cash! If you have life insurance policies, financial accounts, self-directed IRAs, IRAs, homes, boats, whatever – list it all out! Then go through your goals. If your goal is to avoid probate, then you need to make sure each asset is planned in such a way that that’s what would happen. The first step is listing out everything, so that you know what to do to plan for each asset.

Sarah: 

Let’s say a family has done poor planning, and they do have to go through the probate process. Can you explain that process for us? Is it long? Is it complicated? Does it differ for everybody? 

Emily:

It can be long and difficult, but sometimes it can be quick and straightforward. It really depends on the types of assets the decedent has and how well the heirs/beneficiaries/personal representative get along. An attorney will advise your executor/administrator or interested party as to the proper probate process for your estate, but, generally speaking, an application is filed, all interested parties are notified, a hearing is held and the executor/administrator gets court authority to officially commence his/her role as fiduciary. The executor/administrator then begins collecting assets, paying debts, taxes, etc. After everything is accounted for, debts/taxes paid, then the executor/administrator will distribute the assets according to the will or the laws of descent or distribution.

Sarah: 

Okay. Yes. It does sound like a lot of moving parts and a lot of steps there. It’s definitely important to have somebody who knows what they’re doing.

Emily:

Sometimes it’s not even because you have a complicated estate. It just depends on how long it is. And there are always things that can get jammed up.

Sarah: 

Speaking of those jams and things that could get complicated. How does the probate process differ from state to state? Can this hold things up? How do different laws in each state factor into this?

Emily:

They do differ and every state will have different requirements. It could also require ancillary probate. When I say ancillary probate, it means you’re going to have to do something in that other state to get that asset turned over. It’s the process of transferring property that is located in a state.  That’s why a lot of people who are residents will put their non-Texas assets in a trust. 

Sarah: 

Because you mentioned an executor, let’s touch on that. Who should I appoint as my executor?

Emily:

I would say first and foremost, it should be someone that is trustworthy, somewhat business savvy, resourceful, diligent, and dedicated, because it’s a job. It’s a job, no matter how simple it is. For example, everyone’s going to die with some bills. You’re going to have a Verizon account or a Comcast account, and you’ve got to shut all that down! It may be just trying to get it transferred over to your name, but you know what it’s like to even get on the phone with someone if you have an issue. It may take two hours. And that’s just the preliminary phone call! First, you’re going to call to find out what they need, then there’s a follow-up where you have to send them a death certificate or whatever. Then you maybe pay the final bill, and finally, actually follow up to make sure they did it. You can see, every little thing is going to take time, and it’s a lot of work. So, you could appoint your spouse or child, just as long as they have those attributes.  At the very minimum, your executor needs to have the ability to understand that this is going to be a process and that they could hire a good attorney to guide them through it. 

Sarah: 

What would happen if your loved one died without a will? What happens then?

Emily:

This is called dying intestate. If there is no will, someone needs to step forward to choose a process of getting the loved one’s assets out of their name and into the name(s) of the heir(s). The method of doing this will depend on the assets your loved one leaves behind. The loved one’s heirs are defined under the laws of descent and distribution.

Sarah: 

What actually constitutes a valid will?

Emily:

With this, it’s such a specific question, and you can’t generalize. It’s the law. It’s as follows:

  • Testator was at least 18 years old (or has been married or a member of the armed forces) at the time of execution
  • In writing
  • Signed by the testator or another person on the testator’s behalf in the testator’s presence and at the testator’s direction
  • Attested by 2 or more credible witnesses who are at least 14 years old and who subscribe their names to the will in their own handwriting in the testator’s presence
  • Credible cannot be a beneficiary
  • For holographic will: wholly in the testator’s handwriting

Sarah:

And does that have to be official? Typed up or notarized?

Emily:

No! It could be on a napkin. As long as it’s all in your handwriting. Just have something that works in a pinch. It could be better than having nothing at all.

Sarah:

Thank you for clarifying! One of my last questions relates to potential complications with large families. If somebody is in a mixed family, how can somebody protect themselves in those types of situations, i.e. stepchildren, new spouses, etc?

Emily:

First, make sure you know what you have by writing it down and when you acquired it (before or after marriage). Familiarize yourself with the laws of intestacy and where real property vs. separate property goes if you die without a will. Once you do that, picture how you would want your estate to pass once you die. Make sure you have a will. A lot of times people choose to utilize trusts to take care of a surviving spouse while they are alive, but leave the trust assets to their children once their spouse dies. There can be unintended consequences of not doing anything. 

Sarah:

I think there’s a lot about the trusts that people just like. Plus, it’s a good shelter for things. 

Emily:

I think so, too. 

Sarah:

Well, Emily, I really appreciate you taking the time to dive deep and answer all these questions for me! Before we wrap up, what’s one piece of advice that you would give somebody who is planning and preparing for the future?

Emily:

I definitely think they need to write lists for what they have. That is a preliminary for figuring it out on your own. If you’re going to go see an attorney, a lot of times they’ll send out a preliminary questionnaire and that’s exactly what the goal of that questionnaire is – to see what you have. Also know, you are never responsible for a deceased person’s debts. Never. If you’re going to pay any expenses of administration or debts of a loved one, just make sure you keep all the receipts and then you can get reimbursed. 

Sarah:

That’s really helpful to know! I’m glad you threw that in! I think I’ve asked all of my questions, and I’ve loved getting to hear your answers and learn a bit more about the probate process. Thank you, again. I’ll include your contact information at the bottom for those that would like to learn more!

When preparing for the future, being proactive ahead of time is the best thing you can do. By following these practices, you can do everything you need in order to set yourself up later in life. To learn more about the probate process in Texas, you can contact Emily Bohls at emily@bohlslaw.com.

If you have questions regarding your benefices or any other Self-Directed account need, we would love to help. You can speak to an IRA Specialist by scheduling a free consultation HERE.

Sarah Bio

How To Maximize Your Investments Funds With Partnering

Estimated reading time: 3 minutes

It’s no secret that people choose self-directed IRAs because of the many benefits they offer, like reducing taxes and providing options for alternative investments. They are also very powerful accounts for real estate investors, as they allow the possibility for utilizing creative investment strategies. 

What is Partnering? 

One of the great features of self-directed IRAs is that they don’t have to be used only on their own. Self-directed IRAs can work together by using a beneficial strategy called “partnering”. This term is used when one entity (or more) and an IRA come together to put up the funds for an investment. 

In this strategy, all parties have a vested percentage of ownership in the deal. When doing this, the percentage of ownership is decided at the beginning of the investment and must remain the same throughout the life of the investment. This means that any profit the investment receives is returned based on this percentage of ownership. Additionally, the IRA would be responsible for its percentage of any expense associated with the investment, too. 

Who does Partnering work for?

Partnering is a great strategy for a variety of people. For investors who are just getting started, partnering allows the chance to participate. Even having only a small percentage of a total investment allows a small dollar IRA to gradually grow. Oftentimes, Coverdell Education Savings Accounts (ESAs) and other small dollar accounts will partner together to purchase an investment. 

There are also many occasions when a good deal is available, but an investor doesn’t have enough money in their IRA to make up the total cost of the purchase. Being able to partner with another IRA account they may have or another money partner provides the ability to purchase the investment after all. 

It is also beneficial for account holders that have multiple IRAs. For those who want to utilize all of their accounts at once, this is a great way to have all accounts involved in one deal. Over all, partnering provides more possibilities for accounts to be involved in deals when they may not have been able to before.  

Who can your IRA Partner with?

Not only can one or multiple accounts be partnered together on investments, self-directed IRAs can also partner with personal funds. When partnering with personal funds, your IRA has a percentage of ownership and you do, too. This is not to be confused with doing a transaction with yourself. Keep in mind that when partnering with a disqualified person, the percentage of ownership is decided at the time of purchase and must remain the same throughout the life of the investment.

Knowing what you can do is great, but it’s even more important to know what you and your IRA can and cannot do. If you haven’t heard about disqualified people and prohibited transactions, it’s important to know these terms to better understand how partnering is different. Disqualified people are certain people or entities that your IRA is not allowed to transact business with, and it’s important to understand who they are before entering into any deals to avoid doing a prohibited transaction. 

Being able to combine funds with other investors and IRAs opens a door to a whole new world of possibilities, and understanding how to partner accounts will allow more investors to grow their accounts faster. For more information on partnering or how to maximize all of your self-directed IRAs, give an IRA Specialist a call at 855-FUN-IRAs (855.386.4727). 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.

The Best Alternative Investments That You’ve Never Heard Of

Estimated reading time: 3 minutes

After years of diminishing returns on the stock market, more and more financially savvy people are looking towards alternative investments. But what are alternative investments?

Strictly speaking, these are any investment assets which fall outside of the scope of “traditional” investments such as stocks and bonds. They benefit from being less restricted, allowing investors to choose what, when, and how they invest.

By 2023, it is estimated that the alternative investments market will hit a whopping $14 trillion in size, as more and more people seek to avoid the restraints and disappointing returns of conventional investments.

If you’re looking to invest outside the box, here is a list of alternative investments that you absolutely need to consider in 2020. 

1. Venture Capital 

One of the most popular options for alternative investment funds in 2020 is venture capital or VC. This is essentially when you use your money to invest in a growing company that has long-term potential.

By providing venture capital to a company, you stand to profit from the future growth of that company. This is why Silicon Valley is the world’s epicenter for VC funding, owing to the high number of “unicorn” startups that are based there. 

2. Real Estate

By some measures, real estate is the most popular asset class in the world. In times of market turmoil, real estate has historically proven to be a sound investment. With the right knowledge of high-growth real estate markets, you could yield considerable returns by investing in real estate.

To do so, you could switch out your traditional IRA with a Self-Directed IRA, which removes the restrictions placed on traditional IRAs to allow you to invest in real estate for your retirement. Alternative real estate investment comes in all shapes and sizes, so do your research before committing. 

3. Commodities 

The commodities market is vast and incredibly diverse. This means that you should always consult commodities experts before you consider dipping your toe into this oftentimes volatile market.

Popular commodities include oil, gold, coffee, and steel, and are usually traded on futures markets. If you play your cards right and open a commodities contract at the right time, you could make a substantial profit. 

4. Private Equity 

Private equity is a cornerstone of alternative investment management. In a nutshell, this involves investing in companies that are not publicly traded. This is usually about playing the long game, as you will have to wait for the private equity fund you have invested in to sell your holdings, either as part of an IPO or as a merger or takeover. This can easily take several years, but the returns can be substantial. 

Self-Directed IRA: A Vehicle for Alternative Investments 

No matter what kind of alternative investments appeal to you, it is important to have access to the funding vehicles that actually allow you to make those investments. One effective way to do this is with a self-directed IRA.

Traditional IRAs have strict limitations on how the money in it can be invested. However, a self-directed IRA gives you the power to control how you invest in your future. 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.

How the CARES Act Relates to Retirement Accounts

Estimated reading time: 2 minutes

The COVID-19 crisis fundamentally changed society in many ways and spread through the world like a wildfire. While much of the United States stayed home in isolation, the federal government passed the Coronavirus Aid, Relief and Economic Security Act to help relieve the burden on families, businesses, and local governments.

The CARES Act is expansive and contains many provisions, but what does that mean for the financial wellbeing of your family? We’ll examine some aspects of the Act that impact your family finances and the pros and cons of taking advantage of these temporary measures.

You’ll be able to make educated decisions and determine which are best for you.

CARES Act and Individual Retirement Accounts

With the country in isolation, many people were left with jobs temporarily suspended or laid off from work. The CARES Act allows people having a hardship to remove up to $100,000 from their IRA without the usual 10 percent penalty.

The money is considered taxable for that year. You can pay the amount back into the account over the next three years. If you have a 401(k), then you can take an increased loan amount of $100,000 or all your 401(k) if the amount is less than that. Before the legislation, the maximum loan amount was $50,000.

Federal Tax Deadline Extended

Coronavirus hit the country in the prime of tax season, leaving many people either unable to have their taxes done or without the income to pay off their tax debts. Many of the accountants and tax preparation companies shut down because of the coronavirus.

The government understood that this would be a problem and extended the tax filing deadline from April 15 to July 15, 2020. It allows an extension of an IRA holder to contribute for the 2019 tax year.

Take Advantage if You Can

If your family is financially disrupted because of the COVID-19 epidemic, then take advantage of the CARES Act stipulations. You don’t need to take the full amount from your 401(k) or IRA unless it is needed.

These are still designed for your retirement, so if you do take money out try to have it repaid so it doesn’t negatively impact your portfolio or your retirement plans. You’ve spent years building it up, so keep your future safe.If you want more information on the CARES Act or IRAs, then contact a Quest IRA specialist.

3 tips for reducing taxes on your retirement income

Estimated reading time: 2 minutes

Minimizing taxes for future retirement income is not always easy, but it is very important for putting together an effective retirement plan. For example, although many retirees expect to pay lower tax rates on their IRA or Individual 401k after they have left the workforce, their tax rates may still go up due to social security taxes and medicare taxes. 

Follow these three steps to reduce taxes on your retirement income and get the most out of retirement savings:

1. Learn about income tax advantages

Despite what many people think, certain types of income are taxed differently from others. A few examples include:

  • Capital gains
  • Real Estate investments
  • Earned income
  • Unearned income

If you buy a physical asset such as gold or an investment property, your tax rates for capital gains will be much lower than it would be for an ordinary earned income. 

Also, if you sell a home you’ve lived in for the past five years, you may qualify to have a large portion of your capital gains excluded from your taxes (double the amount if you are filing jointly as a married couple) by completing a 1031 exchange.

2. Create a budget to keep your expenses low

In order to reduce your taxes, you will want to stay in low tax brackets as much as you possibly can. One of the best ways to do this is to keep your expenses low so you won’t have to withdraw much from your retirement accounts. 

Create a budget to manage your annual spending and withdrawal habits, and if possible, move to a region with lower taxes and a lower cost of living.

3. Convert your traditional IRA or 401k into a Roth IRA

Another strategy is to convert your current retirement account into a Roth IRA. By doing this and paying taxes up-front when your marginal tax bracket is still low, you will reduce the amount of tax you will eventually pay in the future and you will be eligible for tax-free distributions after retirement.

Contact a Quest IRA Specialist today to learn more ways you can reduce taxes on your retirement or register for one of our events.

How Real Estate Syndication Works

Estimated reading time: 2 minutes

Real estate syndication is a strategy that investors can use to pool their resources and invest in large real estate projects. 

If you’re looking to invest in large real estate projects but don’t have the funds to get a project started on your own, syndication is a great strategy that you can use to get your foot in the door. 

Here’s what you need to know about real estate syndication:

What is real estate syndication?

Syndication is the process of pooling resources with other investors to invest in a large property or real estate project, such as an apartment complex or a commercial retail development. 

Syndication is not only the process of pooling financial resources, but also intellectual resources in order to make smart decisions about the properties you invest in. In a syndicated relationship, one party invests the money, while another party invests time and labor to find the property and run the day to day operations. 

The party investing the labor in the property is called the sponsor. Sponsors still invest some money, but the amount is much lower than what the investors put in. However, they still get a fair share of the profit. Syndicated partnerships are usually structured as an LLC.

Why get involved in real estate syndication?

Syndication has become much easier in recent years, as investors and sponsors can easily connect online. Crowdfunding has made real estate syndication much more accessible for the average person, because you can contribute relatively small amounts of money to a real estate project that is interesting to you, and reap the benefits accordingly. 

If you have a property that you are interested in, syndication is one of the best ways to get the project off the ground quickly. 

Real estate is a great investment, as it can serve as an excellent source of passive income for a very long time, and doesn’t fluctuate financially the same way that many other types of investments do.

Interested in real estate investing? Talk to the expert team at Quest Trust Company. Quest offers flexible investment account options designed to meet the needs of modern investors.

Questions you should ask before opening multiple IRA accounts

Estimated reading time: 2 minutes

Image Credit: 401kcalculator.org

Many people wonder if you can open multiple IRA accounts, and the short answer is yes, it is something that is legally allowed. However, just because it is legal doesn’t necessarily mean that it’s something you should do.

There are many important things to take into consideration when opening multiple IRA accounts. Here are the key questions you should ask yourself before setting up multiple IRAs.

Do you need the tax benefits of both a traditional and Roth IRA account?

  • This is the main reason why people opt to open multiple IRA accounts. Traditional IRA accounts give you tax breaks for deposits during the year, but Roth IRAs give you tax breaks in the year that you withdraw them. 
  • There are advantages and disadvantages to using both types of IRAs. You might opt to use a traditional IRA for a personal benefit today (such as a tax deduction). 
  • On the other hand, use a Roth IRA for a long-term investments to capture the benefit when you truly retire and withdraw tax free money. 

Are you willing to manage the paperwork for two IRAs?

  • While multiple IRAs can come with tax benefits, they can also come with a lot of extra paperwork. 
  • This means higher chances of making mistakes with your paperwork or taxes, or missing important deadlines that could negatively affect your account’s growth. 
  • Before you get set up with multiple IRAs, be realistic with yourself and decide if you are willing to spend the extra time and energy to manage two accounts.

Do you have a good financial institution on your side?

When opening any financial account, it’s important to work with providers who are going to meet your needs.

Is their staff friendly, knowledgeable, and available to help when you have problems? Do they offer the investment options that you need? Doing your research before choosing an account provider is crucial.

After pondering all the pros and cons of opening multiple IRA accounts vs. one IRA account, you will be ready to make the best choice for you and your financial future. 

If you are interested in opening an IRA account, contact Quest Trust Company today! QTC offers completely self-directed IRAs with flexible investment options and fast processing times. This gives you more control over the way you manage your money and plan for the future.

Avoiding the Conflicts of Interest of 401(k)s with a Self-Directed IRA

Estimated reading time: 3 minutes401(k)s with a Self-Directed IRAIn recent weeks there has been new talk about introducing stronger investor protections and providing increased opportunities within the area of retirement savings. One of the biggest areas of concern has been a new focus on how individual investors fare in their employer-sponsored 401(k) plans.

Surprisingly, under current law there is no legal obligation for a 401(k) plan provider to put the interests of plan participants before their own. This type of duty is known as a “fiduciary” duty, and without this protection retirement savers may be fighting an uphill battle in trying to build their nest eggs.

Perhaps the biggest conflict is the limited choices that you are provided with a 401(k). For example, you might assume that the 401(k) provider selects the available investments based on their quality or suitability for the 401(k) plan participants. But in fact, in most cases, the fund company provides a fee to the 401(k) provider in order to be listed. And in many cases, the fund company can charge additional fees to the plan participants (often in the form of so-called “12b‑1” fees).

These types of fees, which relate to marketing and preferential treatment within the fund, do not benefit the 401(k) plan participants in any way, and essentially represent an extra charge that lowers their overall return. This is permitted under current law because 401(k) plan providers do not owe a legal “fiduciary” duty to the plan participants.

In contrast, a self-directed IRA custodian such as Quest Trust Company cannot market any specific investment funds or opportunities to the account holders. Self-directed IRA account owners make all the investment choices, and have the widest possible range of investment opportunities available to them. Rather than being limited to a handful of mutual fund choices (with the potentially inflated fees we discussed above), a self-directed IRA account holder can choose whatever fund or other investment asset is legally permitted under the IRS regulations.

You’re only given one choice when it comes to 401(k) plans – the one that your employer offers, or none at all.

Within the plan that your employer chooses to provide, you’re likely to note a significant limitation in your investment choices. For example, you may only have a single choice when it comes to a particular type of neutral fund or investment philosophy. And forget about being able to select individual stocks yourself; that won’t be available in an employer-provided 401(k).

A self-directed IRA is better because you have the maximum freedom in choosing where you want your retirement funds to be invested.

Finally, with a 401(k) plan, you are essentially locked into the choices and account custodian that your employer provides. There’s no incentive for your plan provider to offer the best service or even to offer a range of fee options, because they know you can’t take your 401(k) business elsewhere. The plan they provide is your only 401(k) option, and you generally can’t move your funds to a different retirement investment vehicle.

But when you do change jobs, you’ll certainly want to use that as an opportunity to roll any 401(k) account you have into a new self-directed IRA.

Using A Self-Directed IRA To Move Beyond Stocks And Mutual Funds

Estimated reading time: 2 minutesSetting up a new self-directed IRA with a custodian such as Quest Trust Company can be one of the best ways to retirement planning efforts to a host of new investing options. With a self-directed IRA you be able to move beyond investments in stocks and mutual funds, and explore asset classes that might be a much better fit to your investing personality and needs.

First things first – there’s not necessarily anything wrong with incorporating stocks and mutual funds into your retirement portfolio. These types of investments can be a great cornerstone for many individuals’ retirement portfolios.

The potential issues arise in that there are other individuals who want additional options – options to target other investing markets and potentially secure a much higher level of return for themselves. Let’s take a closer look at the self-directed IRA.

Real Estate. There are a variety of methods through which you can invest in real estate with your self-directed IRA. The most accessible type of real estate investment is probably the single family home. These may be the easiest real estate investments to manage yourself (assuming that you don’t want to incur the expenses of an outside professional).

But you can also use your self-directed IRA to invest in multifamily properties, farmland, commercial real estate, undeveloped land, or any other type of real estate interests that a non-retirement account investor has available to them.

Private Investments. The IRS rules governing IRAs also authorize account holders to invest in non-public assets such as private equity and private debt instruments. Depending on the nature of the investment, you may need to meet the definition of a “qualified investor”, but even non-qualified individuals can still make other types of nonpublic investments, including loans and mortgages.

One of the biggest challenges may simply be acquainting yourself with being able to find these types of opportunities. This is one area of investing in which the Internet can provide you with a great deal of useful information. A number of different private investment exchanges and clearing houses have come online in the past few years, and these can help you find suitable private investment opportunities for your self-directed IRA.

These types of non-stock investments are sometimes unfamiliar to retirement savers, so always be sure to do your research and understand the risks of any investment fully before committing any funds.

Steps For Rolling Over Existing Accounts Into A Self-Directed IRA

Estimated reading time: 3 minutesAs people work their way through one or more careers, and have several (if not dozens) of jobs, they can easily accumulate multiple retirement accounts. They generally come in the form of 401(k) accounts at past employers, traditional IRAs, Roth IRAs, and perhaps even employer pension plans (although this last type of benefit is becoming increasingly rare).

Unfortunately, it can often become quite an administrative burden to manage so many different accounts. For some individuals it can be challenging enough trying to come up with the time to review the monthly or quarterly statements from a single retirement account. Trying to do so for a half-dozen or more accounts can quickly become nearly impossible.

The best way to clear up this administrative nightmare is to roll over all of your existing accounts, including accounts from prior employers, into a single self-directed IRA. Here are the steps for doing so.

1. Identify Your Target Account.
If you don’t currently have a self-directed IRA, then you’ll need to set one up before you go any further. Requesting a rollover from a prior 401(k) or a current IRA, but not having a target account in place, can result in the other plan administrator sending you a check for your account balance. If you don’t deposit this check quickly enough, the IRS may consider it a taxable distribution, and the cost to you could be significant.

The better path forward is to have your self-directed IRA already in place, and request that your current custodian or plan administrator send your rollover proceeds directly to the new account.

2. Contact Your Prior and Current Account Administrators. Once you have a self-directed IRA set up, it’s time to contact each of your current and prior account custodians and administrators. When attempting a rollover of a 401(k) from a prior employer, you may need to begin the process by contacting the employer first; and if you don’t know where to begin, start with the HR or benefits department.

Have all the information regarding your new account ready to give the prior administrators, and be prepared to follow-up if the rollover doesn’t occur within the timeframe they specify. Some plans will give you the choice of liquidating your account and doing a rollover of the proceeds, or rolling over the investment positions themselves, while other plans will automatically liquidate your investments and do a rollover of cash. If you have the choice, make sure to do your research on what’s best for you.

3. Consider Your Next Investment Steps. As you may already know, self-directed IRAs provide significantly more investment options than traditional IRAs or 401(k)s, so it might seem a little overwhelming. You can use a self-directed IRA to invest in real estate, certain types of precious metals, private companies, private mortgages, and many other investment classes that almost certainly weren’t available with your prior retirement plans.

Exploring investment possibilities while the rollovers are occurring will give you the confidence to proceed with your retirement investing plan once the rollover funds are in your new account.