Estate Planning in My Self Directed IRA - Self directed IRA investment options go beyond the traditional stocks and bonds into real estate, limited liability companies and partnerships; tax liens, mortgage receivables, precious metals, notes and so on. |
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Self directed IRA investment options go beyond the traditional stocks and bonds into real estate, limited liability companies and partnerships; tax liens, mortgage receivables, precious metals, notes and so on.
Author: Islandview
Date: Sep 12, 2011 - 12:20:28 PM
Self directed IRA investment options go beyond the traditional stocks and bonds into real estate, limited liability companies and partnerships; tax liens, mortgage receivables, precious metals, notes and so on.
To establish a real estate IRA investment account, the first step is to set up a self directed IRA. A self directed IRA account allows the account holder to control and make the final decisions in the type of IRA investments they consider to be the most profitable.
Self directed IRA investors can leverage their real estate investment via a non recourse mortgage – aka IRA loan. Through an IRA loan, the real estate investor can buy property with their self directed IRA account without needing the total sales price in their IRA account to do so. The IRS mandates that any loans related to a self directed IRA must be “non recourse” where the loan is not personally guaranteed by the borrower. This means that even in the event of a loan payment default, the lender has only the collateral as a remedy to repay the loan and not on the IRA account or the borrower. This is valid even if the collateral property value does not cover the defaulted loan amount in full. In short, the IRA and borrower is free from personal liability with this type of loan.
Once the self directed IRA has been set up, the investor needs to identify a lender for the non recourse mortgage. At the time of applying to the lender, the borrower would need to produce statements related to their self-directed IRA, their credit application and their latest credit report. After the loan is approved, the borrower then locates a suitable property and purchases it through the self-directed IRA.
Investing the self-directed IRA funds
The self directed IRA account holder can invest the IRA’s funds in two ways:
Instruct the IRA custodian to directly buy the property with the IRA’s assets
Form a limited liability company and buy the property through the LLC
Both the above methods involve typical estate planning challenges. The account holder needs to know which transactions are prohibited and discuss the tax implications with a competent tax advisor.
Investing in real estate through a non recourse mortgage is one of the most profitable ways to get the most out of a self-directed IRA, allowing the investor to enjoy a comfortable retirement. The primary advantage of real estate IRA financing is the ability to buy property at a significant discount – for example, an investor could purchase foreclosed properties – and make enough profit to pay off the loan. The other advantage of the non recourse mortgage option is its ability to protect the investor’s assets, since the property that is purchased is the security for the loan. This indemnifies the self directed IRA holder from any liability.
The non recourse option for a real estate IRA empowers the self directed account holder, providing total freedom and control over the investment along with specific benefits such as tax deferred income, protection of assets and compounded interest.
Director of Business Development
http://www.islandviewmortgage.com/
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