Experience the Future of Finance! Coming soon: the All-New IRA Financial App

IRA Financial Blog

Self-Directed IRA with Checkbook Control

Checkbook Control IRA

IRA Financial Trust Company is one of the few IRA Custodians in the country that specializes in establishing Self-Directed IRA (SDIRA) with Checkbook Control accounts. These accounts are often known as a Checkbook Control IRA.

What is a Self-Directed IRA LLC with Checkbook Control?

A Self-Directed IRA LLC is a type of IRA (Individual Retirement Account). It allows the IRA holder (you) to gain control over your retirement funds. As a result, you gain the ability to self-direct alternative investments using your retirement funds. With a traditional Self-Directed IRA, you will direct the IRA custodian to make investments of interest to you. However, this often triggers high custodian fees and transaction delays. Whereas, with a Self-Directed IRA LLC with Checkbook Control, you have the ability to make traditional investments. These include stocks, and mutual funds. You can also make non-traditional investments, like real estate, precious metals, etc. All of this is tax-free and without custodian consent.

The Checkbook Control IRA Structure + Swanson vs Commissioner

The Checkbook Control IRA Structure is IRS and tax court approved. Using an entity the IRA owns to make investments was first reviewed by the Tax Court in Swanson V. Commissioner. In Swanson, the Tax Court ruled that the capitalization of a new entity by an IRA making IRA related investments was allowable. However, recently, the Tax Court confirmed that using a newly established LLC the IRA owns and IRA holder manages will trigger a prohibited transaction.

In October 2013, the Tax Court in T.L. Ellis held that establishing a special purpose LLC to make investments didn’t trigger a prohibited transaction. A newly established LLC is not a disqualified person according to Internal Revenue Code Section 4975.

Custodian Control vs Checkbook Control

A custodian controlled Self-Directed IRA requires the IRA Financial Trust to be the IRA custodian. However, Checkbook Control gives you full control over your investments. With the custodian controlled SDIRA structure, IRA Financial will be directly involved in every aspect of the transaction. Whereas a Checkbook Control IRA will allow you to buy investments by writing a check straight from the LLC bank account. With a Self-Directed IRA LLC, a special purpose Limited Liability Company is established. The IRA owns the LLC, and you (IRA Holder) manages it. However, a third-party may also manage the limited liability company. The beauty of Self-Directed investments is that you can invest in assets you know and understand.

Checkbook Control with IRA Financial Trust

By establishing a Checkbook Control IRA account with IRA Financial Trust you will have total control to make any approved investment. Again, you have no requirement to seek the consent of IRA Financial Trust – the IRA custodian – to make an investment. You don’t need IRA Financial to sign transactions or investment related documentation. As a result, as manager of the IRA LLC, you can execute the IRA investment by simply writing a check.

The following are a number of benefits using a Self-Directed IRA LLC:

Checkbook Control

So with a Checkbook Control IRA, you no longer need investment approval by IRA Financial Trust. This is the IRA custodian of your account. Instead, as manager of the Self-Directed IRA LLC, all decisions are truly yours. Write a check and use the funds straight from your Self-Directed IRA LLC bank account. Shortly after this, the investment is yours.

Speed & Cost Efficiency

With a Self-Directed IRA LLC, you have the power to act quickly on a potential investment opportunity. Therefore, when you find an investment you want to make with your IRA funds, simply write a check or wire the funds straight from your Self-Directed IRA LLC bank account. The Self-Directed IRA LLC allows you to eliminate delays. This enables you to act quickly when the right investment opportunity presents itself.

Tax Deferral

With the Self-Directed IRA LLC structure, all income and gains from IRA investments will generally flow back to your Self-Directed IRA LLC tax-free. This is because an LLC is treated as a pass-through entity for federal income tax purposes. The IRA (Individual Retirement Account), as the member of the LLC, is a tax-exempt party pursuant to Internal Revenue Code Section 408. All income and gains of the LLC generally flow-through to the IRA tax-free!

The Self-Directed IRA LLC, allows the IRA holder to:

  • Use the same Self-Directed IRA LLC to purchase real estate, private mortgages, gold and stocks, bonds and mutual funds inside the same plan and generate profits tax-free
  • Purchase real estate foreclosures and tax liens on the spot, or make personal loans by simply writing a check and generate profits tax-free
  • Buy your retirement home or vacation property now at today’s prices, rent it out or sell and generate tax-free income or gains
  • Diversify your retirement portfolio and invest in almost any type of investment tax-free
  • Take control of your retirement funds and hold them at a local bank or credit union
  • Make a real estate or other investment by simply writing a check – it is that easy
  • Generate tax-free income and shield your retirement assets from creditors or bankruptcy

Get in Touch

For more information about the Checkbook Control IRA, please contact a Self-Directed IRA expert @ 800.472.1043.


Latest Content

Send Us a Message!