Checkbook Controlled IRAs & Entity Investments

A series of articles discussing the issues that arise when investing your IRA into an entity investment, such as a limited liability company, corporation, limited partnership, or trust.

  • The Advantages of a Self-Directed Roth IRA

    Individuals who are actively saving and planning for their own retirements have a number of account choices available to them. Many of us have access to 401(k) plans at work (or possibly traditional pension plans), and every taxpayer with earned income can start their own individual retirement account (“IRA”). Most people are at least somewhat familiar with the IRA vehicle, but might not know much about the different account structures and options that are available. For example, there are traditional self-directed IRAs and Roth self-directed IRAs. Unfortunately, when it comes to deciding what type of account is most suitable for them, many retirement savers focus only on the contribution differences between the two accounts; namely that contributions to traditional IRAs are sometimes tax deductible, whereas contributions to Roth IRAs are never tax-deductible. Here is a brief summary of some of the most important advantages that a self-directed Roth IRA as over a traditional account. No Taxes on Distributions with self-directed Roth IRAs Interestingly, one of the most significant advantages of a self-directed Roth IRA is the complement of one of the things that lead some investors to initially become more interested in Traditional IRAs. Earnings within a Roth IRA are never taxed, even when ...

  • Do Roth IRA Conversions Make sense?

    How to Analyze the 2010 Roth Conversion Opportunity By: H. Quincy Long How would you like to have tax free income when you retire? Would you like to have the ability to leave a legacy of tax free income to your heirs when you die? The great news is that there is a way to achieve these goals – it is through a Roth IRA. Historically, because of income limits for contributions to a Roth IRA and for converting a Traditional IRA into a Roth IRA, high income earners have not been able to utilize this incredible wealth building tool. Fortunately, the conversion rules are changing so that almost anyone, regardless of their income level, can have a Roth IRA. But is it really worth converting your Traditional IRA into a Roth IRA and paying taxes on the amount of your conversion if you are in a high tax bracket? For me, the answer is a resounding yes. I firmly believe it is worth the pain of conversion for the tremendous benefits of a large Roth IRA, especially given the flexibility of investing through a self-directed IRA. For Traditional to Roth IRA conversions in tax year 2009, the Modified Adjusted Gross Income (MAGI) ...

  • How Can My Minor Child Have a Roth IRA?

    “How can my minor child have a Roth IRA?” If I only had a million dollars for every time I have been asked this question, I would be a very rich person!  When entrepreneurial people learn of the myriad of possibilities for non-traditional investments within a self-directed IRA, they usually immediately see the benefit of starting on their child’s retirement now in addition to utilizing their own IRAs.  In this article I will discuss the benefits of starting an IRA early, how a minor can qualify for a Roth IRA, the tax filing requirements for a minor with earned income, and what can be done with the IRA once the money is deposited in the account. First, let me briefly discuss the benefits of starting early on retirement savings.  Assume your 15 year old daughter starts off her Roth IRA with $1,000 from her earnings and adds $1,000 per year until she retires at age 67.  If she can earn an average return of just 10% per year, her tax free Roth IRA will be worth $1,552,472 at retirement – not bad for only investing a total of $52,000 over 52 years.  Contrast this with an individual who starts saving at ...

  • How to Stretch a Roth IRA to Last More Than 150 Years

    I have a philosophy, which is that if you can create win-win situations you should always do so. My daughter, Briana, is 12 years old and has been invited to travel to Europe next summer to be a Student Ambassador through the People to People program (www.studentambassadors.org). One of the requirements I am making for Briana to go is that she must raise one-half of the finds for the trip. Since Briana needs funds for her trip, and my company, Quest Trust Company, Inc. needed help stuffing envelopes to send out our quarterly statements, Briana came to work for us to help stuff envelopes. This earned her money for her trip and at the same time reduced my taxable income – a definite win-win scenario. You may be asking, “What does this have to do with IRAs?” As her father and as a professional in the area of self-directed IRAs, of course it immediately struck me that Briana now has earned income and is therefore eligible for a Roth IRA, even at age 12. This got me thinking about how long a Roth IRA could last under a certain set of circumstances. The original owner of a Roth IRA never has to ...

  • Should I convert to Roth in 2013? Roth conversion 2013 facts to help you make a decision

    When you first set up an individual retirement account, you’ll be faced with a number of different choices to make, long before you ever have to be concerned with whether you should convert to Roth. First you’ll need to decide whether to open your new account with a traditional IRA custodian, or a self-directed IRA custodian such as Quest Trust Company. Choosing a self-directed IRA will give you the greatest investment flexibility. You’ll also need to decide on the type of account – a traditional IRA form or a Roth IRA. While many of the basics features for each account are similar, there are some important differences between the two. Traditional IRAs have the advantage that contributions are sometimes tax deductible in the year they’re made. On the other hand, withdrawals from Roth IRAs are completely tax free (unlike traditional IRAs), and Roth accounts are not subject to the rules on required minimum distributions. For many retirement savers, a Roth IRA is a better long term solution to their needs. Unfortunately, some people only come to this conclusion after they’ve already opened and grown one or more traditional IRAs. Fortunately, it’s possible to convert to Roth from a traditional IRA. The process ...

  • Traditional or Roth – Which type of self-directed IRA is for you

    Traditional or Roth – this is a question every investor asks at least once in his life. Most investors ask this question several times over the course of the lifetime – traditional or Roth -which type of investment is the best? Figuring out whether a traditional or Roth IRA structure is best suited to your goals and needs is fundamental to your retirement. Here are some tips for how to decide whether a traditional or Roth IRA is best for you. Tax Rates – Current vs. Future. A significant factor in your decision between a traditional or Roth IRA will certainly be your current income tax rate, in relation to what you expect that rate to be during your retirement. Contributions to a traditional IRA are sometimes tax deductible in the year you make them (more on that later), while contributions to a Roth IRA are never tax-deductible. Conversely, withdrawals from a Roth IRA are tax-free, while withdrawals from a traditional IRA are subject to current year income tax. In general, the more your current income tax rate exceeds your expected rate during retirement, the more advantageous it may be to choose a traditional IRA When making this determination, it’s important to ...

  • Roth or Traditional: Strategies for Converting Your Traditional Self-Directed IRA into a Roth Account

    Regardless of whether you currently have a Roth or traditional self-directed IRA, you’re benefitting from one of the most valuable retirement savings tools. The combination of long term growth that’s free from yearly taxation, the potential for tax deductible contributions to the account, and the investment freedom that a self-directed IRA custodian such as Quest Trust Company can provide you. But for many individuals debating Roth or Traditional, the Roth self-directed IRA is a preferable structure. Arguably the only advantage that a Traditional IRA has over a Roth IRA is that contributions to the traditional IRA can sometimes be deductible in the year they’re made. In contrast, with a Roth IRA your investment earnings will grow on a tax free basis (rather than a tax deferred basis as with a traditional IRA), you won’t be subject to the rules on required minimum distributions, and you’ll have greater options for using your account to achieve your estate planning goals. Fortunately, it’s not necessary for all of the funds in your Roth self-directed IRA to come from direct contributions. The IRS permits you to convert any funds you have in a traditional IRA account to a Roth IRA, provided that you pay taxes on ...

Read more