Frequently Asked Questions (FAQs) About Self-Directed Checkbook Control IRAs

November 5, 2011

Self-Directed IRAs

There are regular Self-Directed IRAs and Checkbook Control Self-Directed IRAs, which allow you to form an LLC inside the IRA and write the checks yourself, instead of having your IRA “custodian” make payments on your behalf.  Guardian is a Checkbook Control IRA, for example. 

Personally, I think Checkbook Control IRAs are too expensive and too much trouble, and that regular self-directed IRA is much simpler to deal with.  But, it all depends on what your needs are.   Below are some questions and answers about creating a Checkbook Control IRA.


What type of retirement accounts can I move into a Self Directed IRA LLC?

  • Any retirement account that allows a transfer to a traditional IRA including 401k plans, a traditional IRA, a Roth IRA , and a Simplified Employee Pension plan, or SEP-IRA.

Is this a new law?

  • No. It has been allowed for many years. Few people seemed to know about this option – or even care – until the stock market began to decline. Financial institutions, meanwhile, had little incentive to recommend something other than stocks, bonds or mutual funds, since these provided a source for their fees. You can also see Section 408 of the Internal Revenue Code.

How do I know this is legal?

  • Discuss this strategy with your tax advisor. If he is unfamiliar with it have him consult resources such as The Journal of Taxation, the Journal of New York CPA’s and Trust and Estates magazine and other resources used by tax attorneys and CPAs.

Can my LLC purchase real estate I already own?

  • No, not without filing for an exemption. Property that you or a disqualified person has ever owned is not eligible to be purchased by your LLC since this would be a prohibited transaction,

Can I co-invest with the IRA of my spouse or other investors?

  • Yes, both IRAs can be owners of the LLC, in fact so can other individuals and entities as long as the other owners are not disqualified persons. This is very useful for large investments.

Can I buy vacation property?

  • Yes, but you can not personally use it. Neither you nor any other disqualified person can have any personal use or benefit of the property while it is held in your retirement account. The property must be purchased for investment purposes only. However upon reaching retirement age you could take the property as a distribution.

Can my LLC make loans with its funds?

  • Yes, you can make loans to any person or entity that does not violate the “related party” rules.

Can my LLC invest outside the country?

  • Yes, there are a lot of investment opportunities outside the country that are now available to you including international real estate..

Can I still invest in stocks and bonds?

  • Yes, you can invest in anything that is not a prohibited transaction.

Must I have a custodian for my IRA?

  • Absolutely, all IRAs are required to be held by a custodian approved by the IRS. Only a few of these allow truly self-directed IRAs.

Will my custodian assist me in setting up an IRA LLC?

Must I form my LLC in my state of residence?

  • No, you can use most any state you prefer. Delaware, Nevada and Florida are popular options.  You can form an LLC in a state without residing in it.

How much time does it take to implement this strategy?

  • That depends upon how long it takes your current IRA holder to transfer your funds to your new custodian. Some are fast some are slow. The entire process should take 2 to 4 weeks.

Can my LLC borrow funds to finance a real estate purchase?

  • Yes, but only with the use of a non-recourse promissory note issued by a lending institution or by the seller of the property. The non-recourse promissory note cannot be personally guaranteed, and the lending institution can only look to the property securing the note as collateral. Important: Debt-financed property may generate Unrelated Business IncomeTax e (“UBIT”), and any taxes due must be paid by the account. For more information regarding UBIT, please consult your tax advisor.

In addition to real estate what investments can my IRA purchase?

  • Closely-held stocks, Private Limited Partnerships, Limited Liability Companies, Real estate including Tenants in Common, Debt financed or leverage real estate, Tax Lien Certificates, Promissory notes or Corporate Debt Offerings, Trust Deeds, Mortgages, Managed commodity trading accounts, Mutual funds in any mutual fund family, Stocks and Bonds in a brokerage account, Annuities, Public Limited Partnerships, Direct participation programs , REITs, Treasuries, Bank CDs, U.S. Treasury coins or bullion.


Below are some links to other Self-Directed IRA posts on this website:

For more photos by  Salvatore Vuono on, click here.

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