Does an IRA-Owned LLC or Trust Make Sense for Me?
Investors often wonder if an IRA-owned LLC or trust makes sense for their portfolios. Like all other investments, it depends on many factors, the most important of which is your normal custodial account. Is it working well for you? If so, there may be little reason to consider adding an LLC or trust to your IRA. However, if you’re looking for more growth and opportunity insulated from taxes, an IRA-owned LLC or trust may be something you should consider.
Privacy with an IRA-Owned LLC
IRA-owned entities keep individual account holder’s names off of public records, even for low liability paper investments including contracts, notes, mortgages and real property ownership. Instead, the name of the LLC or trust is available.
Family Investment
You can pool multiple IRAs in this type of investment; it can become a family affair! Even small accounts can work for you as they are combined with others. If you like the idea of joining together, but worry about the cumbersome aspect of family decision-making, rest assured! The manager or trustee is the only decision maker and can act to fund the investment without involving multiple accounts and holders. Remember to spread accounts over multiple deals to insulate your accounts from risk.
Pooled Investments from Different Types of Accounts
Different types of pension accounts can be pooled together to make deals. Rather than having to address and coordinate each account to fund the investments, you can make a swift, decisive action. Remember that you will need to retain proof that you received no current benefit from the pension plan investments to avoid issues with the IRS.
Quick Action
When all paperwork is in place and your funds are in a local bank account, deals can be funded quickly in comparison to the turnaround time of other IRA custodians and administrators. Of course, it is always your responsibility to properly document the transaction, which is especially important in case of an audit.
Asset Protection
LLCs have a statutory liability shield that can protect your IRA from liabilities that arise from ownership of real estate. Property insurance is still the first line of defense, but there are times when insurance companies deny claims or the claims are not covered, and an LLC helps insulate from these instances.
Management and Investment Expertise
Someone with expertise can directly manage the funds without having to direct a custodian, in the case of IRA-owned trusts and LLCs. The manager is an invaluable resource when it comes to directly managing the property and negotiating purchase of other properties. All this means easier bookkeeping for you!
A reminder that the IRA must set up and fund an LLC or trust. Pay strict attention to the structure of the Operating Agreement or Trust Agreement; it must be very specific in delineating ownership rights to the IRA.
Questions? Contact us at 1-855-60-iPLAN (1-855-604-7526)
If my IRA invests in properties should I have an LLC per property within the IRA (ie several LLCS), or just one LLC that owns several properties within the IRA.