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For 40 years, The Entrust Group has provided account administration services for self-directed retirement and tax-advantaged plans. Entrust can assist you in purchasing alternative investments with your retirement funds, and administer the buying and selling of assets that are typically unavailable through banks and brokerage firms.

Tax Lien Investments in your Self-Directed IRA

Tax Lien Investments in your Self-Directed IRAEstimated reading time: 2 minutes

Investing in tax liens with a self-directed IRA can help diversify your portfolio. So what are tax liens and how can a person benefit from them?

Tax Lien

A tax lien is a legal claim that is placed on someone's property as a result of the owner being behind on property taxes. Tax liens are senior to other liens placed on a property, which means that if the municipality responsible for placing the legal claim in the real estate forces liquidation, the tax lien must be satisfied before other claims.

Tax Lien Certificate or Tax Sale Certificate

An official document issued by the legal jurisdiction that is responsible for issuing the lien on the property. Having this document grants an investor conditional ownership of the property's title in the case that a tax sale happens. If the owner of the property does not pay off all property taxes and penalties within a specified time frame, the person holding the tax lien certificate can foreclose on the property to obtain a tax deed.

Absolute Deed

This legal document provides the holder with ownership of a property without restrictions, conditions or encumbrances. An absolute deed can also be called a deed absolute.


An encumbrance is a legal claim on a property, for example a mortgage.


A person that uses a self-directed IRA to invest in tax liens can obtain one of two benefits. Either the owner of the property pays the holder of the tax lien all back property taxes plus an interest rate that is specified by the state where the lien is issued, or the certificate holder will be awarded an absolute deed on the property in question.

In the majority of cases, the owner of the property pays the property taxes and all accumulated interest to the self-directed IRA. Sometimes, the tax-advantaged savings vehicles obtains ownership of a deed for only putting forth the money needed to buy the certificate and paying the required closing fees. In the first case, the owner of the retirement account can utilize the acquired funds however it wants. In the second case, the retirement account can sell the property for whatever price it can obtain in the real estate market.

Tax Lien: http://www.businessdictionary.com/definition/tax-lien.html#ixzz131fStV9I

Tax Lien Certificate: http://www.businessdictionary.com/definition/tax-sale-certificate.html

Absolute Deed: http://definitions.uslegal.com/a/absolute-deed/ 

Encumbrance: http://dictionary.reference.com/browse/encumbrance

Contact us if you'd like to discuss investing in tax liens further. Our trained specialists are available to help you with any questions you have. 


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