How a Checkbook IRA Gives Investors Faster Access to Funds
A Checkbook IRA offers self-directed investors the opportunity to make multiple investments while maintaining complete control of their assets. In addition to quick investment turnaround, convenient checkbook control, and the many associated legal and financial benefits, a Checkbook IRA also gives investors immediate access to funds within their IRA when they’re ready to make another investment.
What is a Checkbook IRA?
As a self-directed investor, your IRA will be managed by an administrator like iPlanGroup. You the investor direct them as to where you want your money invested. They work with you, ensuring all paperwork is complete and all requirements have been met. Then they distribute the money from your IRA to the investment of your choosing.
A checkbook IRA puts control of the funds in your IRA directly in your hands. You’ll have a checkbook just like you would with a normal checking account, but instead of the money being deducted from your personal checking, funds are deducted from your IRA.
Unfortunately, setting up a checkbook IRA isn’t as simple as setting up a checking account at the bank. Investors wishing to set up a checkbook IRA must form their own Limited Liability Company (LLC). The LLC then owns the IRA and checks being written for investment purposes come from the company, not the individual. Investors interested in setting up a checkbook IRA will still need to work with an administrator.
How Checkbook IRA Gives Investors Faster Access to Funds
As the owner and manager of the IRA, you will have full control over the funds within the IRA. For this reason, a Checkbook IRA is an optimal investment opportunity for experienced investors who want an active role in their portfolio.
When the IRA owner wishes to make an investment with their new LLC, they will simply wire the funds or write a check from the LLC bank account. The paperwork and processes required by the IRA custodian are greatly reduced or eliminated.
How Clients Can Start a Checkbook IRA
Starting a Checkbook IRA begins with a self-directed IRA. Once opened, the IRA will establish a Limited Liability Company, or LLC, which is owned by the IRA and managed by the IRA account owner.
Here’s how it works:
- Establish a Self-Directed IRA based on IRS approval and an FDIC-backed passive custodian.
- Fund the Self-Directed IRA account with funds from another IRA, 401K, or similar account.
- Form a Limited Liability Company (LLC) with the IRA account and designate the IRA owner as the “Owner” or “Managing Partner” of the LLC with 50% or more ownership.
- IRA owner invests funds from the IRA into the newly established LLC.
- The IRA owner (and LLC Manager) invests in other opportunities through the LLC and enjoys the income that flows back through the LLC.
Is a Checkbook IRA Right For You?
A Checkbook IRA has several pitfalls, which we cover in “Common Pitfalls of Funding Your LLC Through Your IRA,” but there are also several unique benefits of this investment option.
Abundant Investment Opportunities Allowed
Of the investments one can make with a Checkbook IRA LLC, here are a few:
- Commercial, residential, or raw land real estate ownership.
- Private loan, mortgage, mortgage pool, and deed ownership.
- Tax liens, private placement, stocks, bonds, and mutual fund ownership.
- Precious metal and currency ownership.
- Private business, limited liability, and limited liability partnership ownership.
Lower Overhead Costs
For many investors, the overhead costs associated with an IRA administrator are well worth their weight in gold. An administrator takes care of the paperwork, the research, and the finances. But for an experienced investor looking to make their mark in the financial world, a Checkbook IRA gives them the control and flexibility they deeply desire. This structure offers the added benefit of reduced or eliminated administrative fees.
Learn More About Checkbook IRA
If you or one or more of your clients would benefit from a Checkbook IRA, schedule a FREE strategy session with the team at iPlanGroup to learn more.