bill neville: All right, let's go ahead and get started.
bill neville: So.
bill neville: as we always do, we put up this disclosure that says that we do not give advice or promote or endorse any particular investment.
bill neville: We are custodian and record keeper of retirement accounts what are called self-directed retirement accounts.
bill neville: So you make all your own investment decisions with us. You have to choose your investment, do your own due diligence. So we encourage everybody to
bill neville: discuss any investment you want to make with advisors, attorneys, Cpas, etc, etc.
bill neville: But you won't be getting that kind of advice from interest.
bill neville: So what we're gonna do, we're going to go over the top 7 mistakes that we see Ira holders make and how to avoid them.
bill neville: Some positive management habits. And then at the end, as I mentioned, we're gonna do a Q&A
bill neville: that's me I've been with entrust for a little over almost 15 years at this point.
bill neville: and my role is to business development managers to provide education on how self-directed Iras work
bill neville: we are self-directed. As I mentioned, we have on their self-directed Ira administrators we are. We have the Entrust Trust Company as the custodian of the Ira, and then the entrust group acts as the record keeper, slash administrator.
bill neville: A large part of our company are certified Ira service professionals. That's what the Cisp says, and we do these
bill neville: a monthly educational only webinars. A lot of times we bring on subject matter experts to present. But this time it's just going to be me.
bill neville: We've been in business since 1981. So over 40 years in business. We currently have about 5 billion dollars in
bill neville: in holdings, we have somewhere between 24 and 25,000 investors, and with interest you get a single point of contact. So if you have an account with us, I'm 1 of 4 business development managers. We each have an associate. So you get a team of 2 people depending upon who may have referred you or what region you're in. You are assigned that team as your point of contact.
bill neville: All right, let's get to it. Top 7 mistakes for Iras.
bill neville: I'm going to go ahead and read this part of learning how to manage your Iras. Understand the most common errors that account holders make, so you can avoid them.
bill neville: We'll highlight some of the classic ones still getting investors in trouble before some less known benefits that often go overlooked
bill neville: not only important lessons to understand, but a great foundation for all to maximize your Ira strategy.
bill neville: as it says, don't risk cracking your nest egg by mistake. Spend some time now to save money later. So
bill neville: for the almost 100 of you that are on here. That's what you're doing.
bill neville: Whoops! Let me go back one. So number one, not creating a strategic strategic plan
bill neville: for managing beneficiary updates. So the way retirement accounts work for Iras. 401 ks. etc. You have a custodian and you have a beneficiary. The account holder is the beneficiary, and then, in a case with the account with us, we are the custodian.
bill neville: You also need to name a beneficiary in the event of your death. Right? So an Ira has one person who is the account holder who is the beneficiary, and then you name people, or a trust or something as the beneficiary of your death. So
bill neville: as it says, there are many circumstances potential outcomes to account for when creating a good beneficiary strategy
bill neville: without a good contingency plan. You risk some oral assets and cash not having a clear place to be sent, and then being incorrectly distributed
bill neville: to, were claimed by the state. Okay?
bill neville: So
bill neville: we have. When you open an account with us, we ask you to name both primary and contingency beneficiaries.
bill neville: So you have the ability to open an account with us without naming a primary or contingent beneficiary without naming a beneficiary at all. But then, if you pass, then your account is going to go to probate. And it's, you know, there's legal things associated with that.
bill neville: So make sure that you keep your beneficiary information updated. So, for example, if you were to get divorced, or something were to happen, or something like that, and you haven't changed your beneficiary in the event of your death. It's going to go to whoever you named as the beneficiary.
bill neville: Also make sure your beneficiary is aware of the scenarios, so, as it says, if you don't prepare your beneficiaries for tax rules on future inherited accounts. They may not be ready to manage the new Ira, so if your beneficiary is a spouse, they can roll their Ira into their own name.
bill neville: Right? So for for spouses they can take the account and move it into their own account.
bill neville: and then it's now not subject to the rules for beneficiary account, so it can either be for a spouse. It can either be a beneficiary account, or they can move it into their own account
bill neville: for everybody else. It has to go into what's called a beneficiary Ira, and for, as it says, designated beneficiaries have to liquidate the entire account within 10 years, while all other beneficiaries must liquidate in 5 years. So that was a rule that was put into place under the last the previous
bill neville: administration.
bill neville: So you want to make sure that your beneficiaries are aware of these roles.
bill neville: and particularly if it's a spouse. The fact that they can take it into their own account.
bill neville: creating an informed plan, so create a plan to assign beneficiaries, educate them, remember to review your beneficiary tree either annually.
bill neville: Mary, if you get married you could add your spouse if you have any children during the time you have an account you can add them as a contingent.
bill neville: again, if someone dies, update your beneficiaries accordingly, you get divorced removing them, and then when you retire, if you're consolidating accounts, make sure that you're reviewing reviewing this information
bill neville: right? So number 2, mistakenly engaging with disqualified persons or prohibited transactions. It's a big one, probably should be number one. Actually. So, there are a list of people that your Ira is not allowed to essentially do business with. They're called disqualified persons that could create prohibited transactions. So you, as the account holder and your spouse.
bill neville: your ancestors, so parents, grandparents, great grandparents, etc, your lineal descendants. So children, grandchildren, great grandchildren, etc. And then also fiduciaries and plan service. Providers are also considered disqualified persons, but there seems to be less issue associated with that
bill neville: than there is with the familial ones. Again, you and your spouse, your ancestors, your lineal descendants. So not all family members are disqualified persons, your siblings, your cousins, nieces, nephews, aunts, uncles, are not considered disqualified persons.
bill neville: So what are the rules? So there's a section of the code section 4,975 of the internal revenue code that talks about this but
bill neville: essentially.
bill neville: your Ira is not allowed to engage in what's called a prohibited transaction with a disqualified person. We're going to give you some examples of those. If you do commit a prohibited transaction inside your Ira, then your Ira
bill neville: would be considered a no longer tax sheltered entity at the time in the year that the prohibited transaction occurred, and it could create a taxable event for you that could go back years depending upon when the prohibited transaction occurred.
bill neville: So an example, you're 50 years old, you have a traditional Ira with a balance of a half a million dollars. You decide to use the funds to purchase a rental property, and then rent the property to your daughter.
bill neville: That's a prohibited transaction, because your daughter is a disqualified person to your Ira right? She's on the list of those people that are considered disqualified persons. So if you buy rental property inside your Ira, and you rent it out.
bill neville: That's great. You're allowed to do that. You just can't rent it to a disqualified person.
bill neville: If you were to do that, and the Irs were determined that you committed a prohibited transaction, then your Ira would become disqualified in the year in which the prohibited transaction occurred.
bill neville: Right? So for $500,000, it would become a distribution to you in the year that that occurred. And now you're subject to taxes and depending upon how old you are potentially a penalty on top of that.
bill neville: Okay.
bill neville: so it says on here for most taxpay pairs. This would relate to a single year Federal tax bill of over $160,000 based on the current
bill neville: tax rates.
bill neville: The way the wording is, as far as what is a primitive transaction. It's any improper use of an Ira or plan by the plan participant or a disqualified person
bill neville: is not permitted by the Irs right? I know that there's some some
bill neville: vagueness to that some ambiguity associated with what exactly, is committed as a privileged transaction. When it comes to real estate, it can be pretty black and white. A disqualified person can't stay in a property owned by the Ira, and also can't do any physical labor, any sweat equity on the property.
bill neville: So some examples your Ira is allowed to borrow money, but it can't borrow money from a disqualified person. You can't sell a property in an Ira to a disqualified person, so, for example, you can't buy a property from your own Ira, or sell a property in your Ira to your children.
bill neville: You're not allowed to use your Ira or your plan as security for you to personally go borrow money again. The Ira itself can borrow money, but you can't go to a bank and put up, let's say, a property that's owned by your Ira as collateral for you to get your own loan
bill neville: again. The Ira itself can borrow money. The Ira that owns property can use this collateral for the Ira to borrow money. But you can't use any assets or your plan itself. Your Ira itself to go to a bank and use it as collateral for you personally to borrow money.
bill neville: Again buying property for personal use. Your if your Ira buys around a property it has to be for investment purposes only.
bill neville: and then investing in a privately held company that's owned by a disqualified person. So if you have kids who are starting up a company, and you want to use your Ira to invest in that company. You're probably not going to be able to do it.
bill neville: There are some. There is some ruling in the way the code is written in terms of it depends upon the role that the disqualified person has in the company and how much ownership they have in the company. So it's not a matter of if your kid works for a company and has 2% ownership you might be able to, probably would be able to use your Ira to invest in that company. But if it's wholly owned by your you know your kid, then you can't use your Ira to invest in it.
bill neville: They're also, if you have your own retirement account, and you have your own company, and you'd like to use your own retirement account to invest back into your own company. There is a program called Rollover for Business Startup. Rob's that does allow you
bill neville: to use your retirement account funds to invest back into your own company. But there's a couple rules that's very specific that you have to meet to qualify for the Rob's scenario. One.
bill neville: The business has to be a C. Corp. It can't be a S. Corp. An Llc. A limited partnership, anything else, and 2. The account itself. The plan itself has to be a 401 K. Plan. It can't be an Ira. There's no scenario where you can use your Ira to invest back into your own company. If you have a specific amount of ownership in the company, and depending upon the role you have in that company right? If you want to operate under the robs, it would have to be a 401 k. Plan, and the company would have to be a C. Corp.
bill neville: all right. Number 3, not understanding and planning for future costs and potential additional funding needs. This is often going to come into case with real estate, but it could be with a private equity if they're doing capital calls. So the Ira. Your Ira has very strict funding rules. So with depending upon the type of retirement account that you have. Whether it's traditional. Ira Roth Ira.
bill neville: you know the maximum contribution, I think, is 7,000 7,500. I'm not sure what it is these days. That's the maximum you can contribute in a year a 401 k. Plan or a sep Ira. There's maximum contributions you can make in a year.
bill neville: depending upon your income. So if you have maximized your retirement account to make the investment you want to make, and then you need more money to either meet a capital call, or if you're owning real estate, and you have some unexpected expense like a roof repair, or something like that, and you don't have the cash inside your Ira to cover that.
bill neville: There's only certain things you can do to get more money inside the retirement account. You can't just simply pay it out of pocket, and you just can't put any money that you want into your retirement account. You can transfer or roll over more money. If you have another retirement account with a different custodian, let's say you have an account with entrust. You only have some of your money there. You're invested in a property. You need to add more money. You can transfer, roll more money over.
bill neville: But let's say you don't have another account.
bill neville: and the amount that you're able to contribute based on your earned income, and the type of account that you have doesn't meet the
bill neville: amount that you need in order to pay whatever expense you have.
bill neville: You need to plan for that. The other option is again the Ira can borrow money, it can borrow money from a disqualified person, but it can't just borrow from anybody that you want. So you want to. When you're before you make any investment inside your Ira. You want to think about that and have a plan in place for all of that.
bill neville: So must understand all available funding options. Again, you can transfer, roll over more money, you can make annual contributions. Your Ira can borrow money.
bill neville: have a plan in place, never risk being in a position of need to engage in a prohibited transaction or early withdrawal to fulfill funding needs. Some prohibited transactions, cause your Ira to be deemed ineligible, and most early withdrawals have 10% penalties. So from a standpoint of with a self-directed Ira, you're offering oftentimes also holding assets that aren't tremendously liquid.
bill neville: And so if you do have like a personal expense, and you might need to access the money that's inside your retirement account. Bear in mind with a self, directed Ira.
bill neville: It might not be so easy to liquidate whatever holding that you you have great.
bill neville: So an example, you purchase a multifamily home apartment building or condo, using your Ira, you end up investing 90% of your funds to close the deal. However, now you only have 10% to handle all the unexpected costs or damages that may occur, since the Ira owns the asset, all these costs must be paid through the Ira, so make sure you have a good funding strategy to avoid cash flow industry issues. If you run into something where it says the water heater breaks.
bill neville: So one example is people partner their Ira with other investors. So where your Ira doesn't bear the entire cost of an expense, your Ira doesn't also incur 100% of the income that's generated from that investment. But partnering with other investors, including yourself or other. Iras is also a potential scenario that you can create upfront
bill neville: to not have to worry about potential issues down the line.
bill neville: So work with your financial advisor, make sure you know what annual contributions you're allowed to make
bill neville: current partnerships, laws and processes, and that the financials and business plan for the investment. So make sure that you know, for example, if you're investing in a private fund.
bill neville: if there are going to be capital calls. If there's potential that you'll have capital calls down the line that you will need to be able to cover inside your retirement account, and with these you can better determine if an investment is appropriate for you at this time.
bill neville: Okay. Number 4, not completing enough. Due diligence on companies, partners or investments. Again, excuse me
bill neville: with self-directed Iras. If you're investing in nontraditional investments, if you're investing in stocks, bonds, and mutual funds, and you're working with a bank or brokerage firm. They're going to give you advice right? These are publicly traded. And you can probably do a lot of research online, but with privately held investments privately held companies
bill neville: privately held funds. The onus is going to be on you to make sure that you do all your due diligence right? So unexpected costs or taxes. Most common consequences are higher costs than expected, or paying taxes on investment that they thought was going to be tax free. So that's called unrelated business income tax, and we'll come to that.
bill neville: You don't have the funds to handle these costs. You may earn less than you expected, or fail to uphold your funding responsibilities again when we talked about capital cost.
bill neville: So you enter a rental real estate investment agreement. So not that your Ira owns a property. But your Ira is investing, let's say, a syndication or some kind of privately held fund, and that fund is turning around and investing in real estate.
bill neville: and you didn't realize there would be what's called unrelated business income tax on your investment.
bill neville: So now all your financial projections are inflated, you're locked in for 3 years before the ability to withdraw any funds. So what is unrelated business income tax when it comes to this? Here, I think we talk about it unrelated business income tax. How does it work?
bill neville: Money earned by a tax exempt entity like your Ira? That's not related to its tax exempt purpose. So the Irs defined as this as income from a trade or business regularly carried on, that is not substantially related to the charitable education or other purpose that is the basis of the organization's exemption. Verify if your investments are deemed upti, please consult your tax advisor. For example, if your Ira owns a franchise like some kind of franchise business.
bill neville: Your Ira is running the business right? So your Ira is receiving all the income from the business. Your Ira is paying all the expenses associated with the business
bill neville: that would fall under unrelated business income tax. Your Ira would have to pay a tax that's called Upti. The other side of this coin is called unrelated debt, financed income tax.
bill neville: which comes into place with real estate. So let me explain to you how that works. If you use leverage if your Ira borrows money to buy a property. And so let's say, I'm going to use really basic numbers here that probably aren't largely optical in the real world here. But let's say you find a property for $100,000.
bill neville: You put your Ira puts up 50,000, and your Ira borrows the other $50,000 to come up with the total $100,000 at the end of the year. Your Ira earns $10,000 in rental income.
bill neville: The way the Irs looks at that is, they say, okay, 50% of that $10,000 came from the Ira's money. The other 50% came from borrowed money. It came from outside the Ira, so that other 50%, that $5,000 that wasn't earned
bill neville: from the Ira's income, but rather from the borrowed money, is subject to Udfi or unrelated business taxable income. It's again, it's sort of the 2 sides of the same coin. It's taxed at trust rates.
bill neville: so the Ira will have to pay an expense because of the leverage. Now, in this example, let's say, at the end of the following year you've bought down the mortgage. And it's now at 10% or at 40%, you bought down, you know, 20% of it
bill neville: down from 50% of your Ira. So now your Ira, excuse me, owns 60% of the property
bill neville: or your Ira owns 100%. But 60% of it is by Ira money. And now 40% of it is from borrowed money because you paid down the note. Let's say you earn the same $10,000. Well, now, this year you're going to have to pay unrelated that finance income tax or Uvti on 40%, right? Because the mortgage got paid down right now where this could potentially come into play. If you're investing in some kind of
bill neville: private fund or private equity is is that private equity? So is that company? Let's say they're investing in a large apartment complex. Let's say in their example.
bill neville: you're you're gonna be 1% of a
bill neville: 10 million dollars project right. But the the fund. The Syndicator raised 5 million dollars and borrowed the other 5 million dollars. The same 50% could apply to your Ira. So the 1%, let's say one per you get your 1% holding in that 10 million dollar project and you get a return on the same scenario. $10,000, but 50% of it from the from the
bill neville: the Syndicator, from the Fund Company
bill neville: came from borrowed money. The same concept will apply to your Ira. It could be subject to unrelated business income tax.
bill neville: But that would be something that the fund, the private equity investment, would need to make you aware of, so that you can file the form that needs to be filed as a 990 T. And then the expense needs to be paid from the Ira. So the whole purpose of all this is just to be aware of when you're making an investment. And if somebody, if you're investing in some kind of real estate type investment where you're investing in a real estate
bill neville: fund
bill neville: syndication, something like that. And they're telling you we're going to generate 20% return. You want to find out if you potentially are going to be subject to Ubti, because that 20 might turn out to be
bill neville: 18% or 16% or something like that. Right? Once you once you add on the expense of the Ubti.
bill neville: I hope everybody understood that.
bill neville: And we're always going to encourage people to talk to like Cpa. Tax advisor, somebody like that, to understand this better, and also before you do any types of investments. So review, as it says here, review investments with your financial or tax advisors to verify the implication of the agreement. What sort of taxes are tied to that investment?
bill neville: Your responsibility is to provide current database evidence, best practices, whirlword examples. Blah blah that are vital for success in the industry being taught. So again.
bill neville: the main point of this is to be aware that although an Ira is a tax sheltered entity, and so any investment that's made in the Ira is subject from Federal income tax
bill neville: until you take a withdrawal.
bill neville: Then, depending upon the type of account you might have to pay Federal income tax, but it might be subject to unrelated but unrelated, that financed income tax or unrelated business, taxable income again, sort of mean the same thing. But how you get to? There are 2 different ways.
bill neville: Okay, paying more with poor Roth, conversion or transfer strategies. So
bill neville: Roth, conversions are taking what is a pre-tax account. So like a traditional Ira or 401 k. And converting it to a post-tax account, which is a Roth Ira. When you do the conversion you're taking money that you deferred the tax on where, when you made the contribution, you lowered your taxable income and you grew earnings, and it's all been tax sheltered, and you're moving into account. That's post-tax contributions, which means, if you take $10,000 from your traditional Ira and move it to a Roth Ira.
bill neville: you have to pay taxes now on that $10,000 conversion. Now a Roth Ira grows tax free
bill neville: as long as you meet the qualifications. If you have a Roth for at least 5 years, and you're over 59, and a half years old, but it does grow completely tax free. So, depending upon you know what your tax consequences are, it might make a lot of sense to do that. But you want to be aware of the tax consequences in the year that you make the conversion.
bill neville: So some people, I think, make conversions without really planning it.
bill neville: So you want to make sure when you're transferring from one Ira to another, Ira. So when you're transferring from a brokerage firm to end trust you have to do like to like transfers. You have to go from a pre-tax account to a pre-tax account. So traditional ira sep iras, simple Iras, or 401 ks. Can transfer or roll over to
bill neville: a traditional ira step ira etc, etc. Roth goes to Roth. So if your goal is to go from a traditional Ira with, let's say fidelity to a Roth, Ira with entrust. You have to do it as 2 steps. You either have to convert it 1st with fidelity in this example, and then transfer it, or you have to transfer it from a traditional to a traditional and then convert it.
bill neville: Okay, you can't go from a traditional Ira with one custodian to a Roth Ira with a different custodian.
bill neville: So
bill neville: with an example, you enter a higher tax bracket last year. Now you want to roll over a hundred K from a traditional to a roth you can invest into a new private equity deal, hoping to cash out down the road, tax free because you rolled over. All right. So what it says, here you rolled over all once, have higher taxes than ever. You're not prepared to handle the massive tax bill coming. So again in this example, you can't roll over from a traditional to a Roth, you would transfer from a traditional to a traditional, then convert it to the Roth.
bill neville: or do the conversion 1st and then do the transfer. But the fact remains is that that conversion that 100 K that gets converted is now going to be filed. We're going to, whoever you do. The conversion with is going to send a 1099 r. To you and to the Irs, reporting that $100,000 conversion. And now you have to pay taxes in whatever tax bracket you have to fall in the year that you do that.
bill neville: So when considering Roth conversions, instead of spreading out the conversion amounts so one way that you could do that. Let's say you have an investment that you want to make. You could do like, let's say, $100,000, and let's say you could do a $50,000 conversion in December of one year, and then do a $50,000 in January of the next year, like literally run at the end of the year, at the beginning of the next year, you've done them essentially back to back.
bill neville: But now you've created a tax hit that spread over 2 separate years.
bill neville: you want to, you know. Consider what tax bracket you're going to be in this year versus next year. A lot of times people do Roth conversions in years in which they've incurred some kind of personal
bill neville: investment loss right where they sold an investment where it lost money. Now you can, if you if you can't, if you don't have anything to write that loss off against doing a conversion now allows you to write that loss off against, or write that loss off against that conversion and lower the taxes
bill neville: again. I I mean, talk to a Cpa about this. I I sort of feel like I'm I'm I'm understanding it better than I'm explaining.
bill neville: If you are required to take a requirement on distribution from your traditional Ira in the year that you convert, you must do so before the conversion.
bill neville: Okay, so you have to calculate your your tax hit based on the pre-conversion amount.
bill neville: Okay, not educating yourself on the latest tactics of scammers
bill neville: we'll use against you and how to stay safe all right. So in 2024, one trillion dollars in losses to fraud were reported from classics like pyramid scheme. More advanced tactics, like spear. Phishing criminals are trying to scam investors like you every day with the added complexities within self-directed Iras. It's crucial that you understand the tactics being used against you, so you can stay safe
bill neville: all right. All it takes is one mistake to break a nest nest egg. Don't risk it.
bill neville: So examples. You get a regular email from a business partner with an urgent need to review an anticipated legal document from your company's lawyer. After opening the document, you realize there's an extra period in your partner's email when you call them. They say they never send an email. You realize you clicked on a scammers phishing link. Now, everything is at risk to the Scammer with access. So when you get any emails, you want to check those email addresses very carefully to make sure that is coming from a trusted source.
bill neville: So common tactics and best practices, business scams like Ponzi schemes 419 schemes, telemarketing fraud 419 schemes. I actually looked that up when I before I
bill neville: did this, because I hadn't heard the term before. What that is is, when you get someone that says, Hey, I'm I'm inheriting a bunch of money, but I can't access it, and I need like $10,000, and then I'll give you a hundred $1,000 right? But they're asking you to send them money 1st because they need it so that they can then access their inheritance. Right? That's a an example of a 4, 19 scheme
bill neville: business email compromise. Again, we as a company, we get this all the time we get. You know, I get an email from the owner of our company. And I, it has some kind of crazy email address that's clearly not him.
bill neville: Charity and disaster, fraud, cryptocurrency, digital currency fraud is is frequent elder fraud.
bill neville: Scams around the holidays. Ransomware, romance scams, spoofing and phishing
bill neville: tech supports. Can't I mean all these different things that are happening. I I was just reading earlier today about like the latest craze. And I get these texts pretty often. That look like the United States Postal Service says that they
bill neville: they send you, you know, say, we, we have this package, and it came with the wrong Zip code. And please click this link. The United States Post Post Service will never send you a link. Right? So if you ever get anything like that that has a link. It's a scam. The United States Postal Service does not text out links. As a matter of fact, not gonna text you anything unless you specifically signed up to be reached out for by text. So I seem to be getting these. I don't know what happened with my phone number, but I seem to be getting these every other day.
bill neville: Alright.
bill neville: the last one not opening a spousal Ira for a non-working partner. So you are allowed. If you are a single income household. You're allowed to make contributions to retirement accounts on behalf of a spouse, a non-working spouse. So, as it says, here, many have a spouse is ineligible from opening their own Ira
bill neville: but you can open a spouse, Ira, and contribute on their behalf. This can significantly increase your earning potential over time. So
bill neville: you open a spousal, Roth Ira in 2014 maximize contributions for 10 years. In 10 years alone you've invested at least an additional almost $60,000 based on contribution limits over the last 10 years
bill neville: can help cover unexpected costs on exhibit. And that doesn't even take into account the potential earnings that that
bill neville: could be growing tax free in a Roth Ira, they grow tax-free.
bill neville: So when considering the strategy, verify spouses, expected future eligibility to determine they're available, remember to establish beneficiaries. We mentioned that. Don't forget to establish clear partnership terms before entering investments together. Right? So if you're going to partner with other investors, make sure your your terms with those partners are clear.
bill neville: So some positive management habits starts with educating yourself. Ira management requires your attention to detail.
bill neville: commitment to understanding what's needed for you to maximize opportunities and mitigate risk for action comes education. So keep learning. We have a lot of educational material on our website. We have these webinars again with a self-directed Ira, though that's all on you right. Your custodian isn't going to be involved in helping you do diligence on an investment help you do due diligence on an investment that you want to make.
bill neville: So, correcting bad habits and building good ones don't happen overnight.
bill neville: You need to outline your annual management calendar with plans to handle all conceivable outcomes and misfortunes. No plan is good without consistent
bill neville: execution. So respect, plan, process involved. Once you fully understand what your strategy demands.
bill neville: So momentum is powerful. Start building it now. These are things you could probably read, and
bill neville: all kinds of self-help books and all that. But
bill neville: and then don't be afraid to ask for help. Right? Don't! Don't hesitate to have other people
bill neville: who are experts in their field to advise you and give you advice, including advisors, tax specialists, etc.
bill neville: If you're ever wronged or duped, it's always better to report it, instead of being too embarrassed and staying silent. So if you do ever are the subject of a scan.
bill neville: encourage you to reach out to the authorities.
bill neville: and, as the 3rd paragraph says, always ask for help when you don't understand something or get a gut feeling that something is not right.
bill neville: Okay. So
bill neville: we're going to go ahead and wrap this up, and then I'll be able to answer questions. If you do want to open a self, directed Ira, with entrust. It's very easy. You can open an entrust account. You go to our website.
bill neville: You'll see a tab up at the top says, Open an account, click on it. Enter in an email address. You get sent. A link
bill neville: click on the link, create a password. Open account, takes 10, maybe 15 min to get an account established. Then you fund your account. You transfer Rollover money from your existing custodian to your account with us, or you can make an annual contribution
bill neville: most people fund it by doing transfers or rollovers from a different account from an account with a different custodian.
bill neville: and then you instruct, entrust to make whatever investment it is that you want to make, so that investment is held in the name of your Ira. The name of your Ira with us is the entrust group.
bill neville: Fbo stands for for benefit of the entrust group Fbo, your name Ira number, and then your account number with us. So if you're buying a rental property, the name on the contract, on the closing documents, and I'll ultimately title on. That would be the entrust group. Fbo, your name and account. Number.
bill neville: Okay?
bill neville: what's next? We will send out a link for this webinar. So for everybody who registered, and we get a lot of people who register, and then don't necessarily show up
bill neville: and I think they do that so that they can get email, the link we send that out. You will get a replay of this, the link will be sent to you in an email
bill neville: and then for January's webinar we go over top dates, deadlines, and tax tips tax tips for for the coming year, which I think is a pretty standard January Webinar for us.
bill neville: If you need more information on self-directed Iras visit our website. We have the learning center in particular has a lot of information. And we have a presence on social media. So you're welcome to follow us.
bill neville: Okay, so I'm gonna get to the QA. Now. And this is my contact information. I'm gonna leave it up on the screen here.
bill neville: Alright, let me get to the Q&A section. Okay.
bill neville: 1st one. If an investment I hold inside an Ira Llc. Which is in turn held within my self-directed Ira and trust goes out of business.
bill neville: What's the 1st step I should take with entrust to correctly 0 out that asset. So
bill neville: if you mean that your investment loses money right? Essentially, if your investment that you made doesn't have any more money, because that would be the way the Llc. Would go out of business right like, if you have investments in there that are generating a return, because it's the Ira.
bill neville: Excuse me, because it's the Ira that owns the investment that invest that that return has to get paid back to the Ira. You can't just simply take all the money out of the Llc. Yourself. It has to go back to the Ira.
bill neville: Once you want to close out your Llc. You want to liquidate it. We have a form in this case. If you just lost the money if the investments just went bad and your Llc. No longer has value. We have a fair market valuation process where you can instruct us that your asset has lost its value or changed value at all. It's not just if it goes to 0, but if it changes at all.
bill neville: the easiest way to do that is to log into your account. There's a tab at the top, says Activity, and then if you click on activity, there is an select activity type, and you scroll down and it one of the activities says, fair market valuation. You click on that.
bill neville: and then it'll it'll there's another button that says, Update Fmv, and then you can go there and then you can put 0, or we have a manual form. We have a Pdf of our fair market valuation form, which you can find on our website under forms. If you go to the entrustgroup.com up towards the top
bill neville: and right like. Next to the login button, it says forms, if you click on forms and you scroll down, you'll be able to see a fair market valuation. It's a Pdf. You can fill it out, and then either have a 3rd party, sign it or attach supporting documentation. So if you have an asset that lost value.
bill neville: If you have some kind of documentation to support that, you need to. Attach that.
bill neville: Okay, I'm 70 and want to convert some of my gold, self-directed Ira in kind to a Roth Ira, aside from paying generated income tax and keeping my total income in my current bracket, is it possible someone to avoid the collectibles tax, and when might it be incurred? I've never heard of a collectibles. Tax
bill neville: gold is not a collectible
bill neville: So if you're holding gold inside your self-directed Ira. It's not a collectible, so I don't think it would be subject to a collectibles tax again. I've never heard of collectibles. Tax. An Ira is not allowed to invest in collectibles.
bill neville: If you want to convert some of your gold to a roth, Ira, then you just have to fill out our conversion form. Well, 1st of all, you have to open a roth, Ira, if you don't already have one, and then you have with us, and then you fill out our conversion instructions.
bill neville: and then what we'll do is we will contact the
bill neville: the depository that's holding your gold and have them open an account in the name of your Roth Ira.
bill neville: and then internally, we will convert it to the Roth Ira. But the the name of the account that's holding the gold is going to change right? Because right now it's the entrust group. Fbo, your name and account Number one, and the new owner of the gold is going to be the entrust group, Fbo, your name and account number 2. So an account has to be established at the depository under that new name of the second Ira.
bill neville: and then, internally, you know, they'll move the gold over to that different account. We'll do it internally on our paperwork. We'll send you a 1099. But again I don't.
bill neville: I don't know what a collectibles tax is. I'm sorry, but I don't think your gold would be subject to it, because gold's not a collectible.
bill neville: How can we check who our current beneficiary is? I mean.
bill neville: if you log into your account and go to your
bill neville: Go to your information
bill neville: you should be able to access who your who your beneficiary is, and and change it in there as well. If you don't.
bill neville: if you don't can't find it, then call. Call somebody in our office, call our our customer service team, and they'll help walk you through how to how to get to it.
bill neville: Can a trust be a primary? Or can you? Said secondary beneficiary. The term we use is contingent beneficiary? Yes, a lot of people have named a trust like a family trust as a beneficiary of their account. That you can certainly do that
bill neville: if you get a non-recourse loan for a property purchased in your Ira, but it has bad boy. Carve out provisions. Is that disqualified loan under Irs
bill neville: erisa rules? Yes, I believe it is
bill neville: the loan by definition has to be non-recourse, and if you have bad boy provisions in there, I think by definition, that means that the loan is no longer a non-recourse loan, because the only recourse in a non-recourse loan that the lender can is is, they can take the property right. And so if you have bad boy carve outs, then I think that's creating additional
bill neville: additional recourse. Essentially
bill neville: so. My answer that is, yes, I believe that that is the case. That that would that is, that would not be considered a non recourse line.
bill neville: Can I make a loan for my self-directed Roth Ira to my 2 member, Llc. For purpose of purchasing real estate.
bill neville: No, if you if, when you say 2 member Llc. If if
bill neville: one of the 2 members, or either of the 2 members, is a disqualified person to your Roth Ira.
bill neville: Then the answer to that is, no. Now, when you say my 2 member, Llc. I'm assuming you are one of the 2 members, which means you are a disqualified person to your Ira and your Ira can't lend to a disqualified person.
bill neville: And so you're essentially asking, can your Roth Ira run to you?
bill neville: Right? And the answer to that is, No, you. Now, if the 2 members are a sibling and a cousin, or something like that. And you know again, when you say my 2 member, I'm assuming that you're one of the members. But if the 2 members are non disqualified persons. To your Ira, the answer is, yes, they can lend to that, but it can't lend to an Llc. That's owned by you because you're a disqualified person to your Ira.
bill neville: Can a Roth Ira be used to buy property for personal use? No, let's just flat out. No.
bill neville: not only a Roth, Ira, no Ira, no retirement account can buy property for personal use. A Roth ira traditional Ira a 4 0. 1 KA health Savings account.
bill neville: can't you? It has to be for investment purposes only.
bill neville: Can you please elaborate on the specifics of investing in a company owned by a disqualified person. If the self-directed Ira investor becomes a senior employee and takes a salary, are they disqualified? And what is the Max amount of equity that an individual can have before they become disqualified. I've heard it has to be less than 50% would be like to confirm. Okay, so I'm going to add a qualifier before I answer this question, which is that the way it's written in the code?
bill neville: Leave some room for interpretation. There's some ambiguity associated with it, but I can tell you largely how we
bill neville: interpret it. And before you were to make any kind of investment like this, we encourage you to have, like a tax advisor, or Cpa. Or somebody with letters after their name, read the code for themselves, and give you their thoughts. The way it appears to read is that an Ira can vest in a company
bill neville: as long as you own less than 50%. As long as you're a passive investor in the company. What I mean by that is, you have no involvement. You, or any other disqualified person have no involvement in running the company right? You have no no involvement as a manager or any involvement in in working for that company. Right? You're just investing in a company the same way as if you buy stock in apple
bill neville: right through. You're buying a percentage of apple. Now, it's a tiny percentage because there's so much stock. But the concept remains the same is that when you're buying stock in apple, you're buying stock in a company that you're just unless you work for stock work for apple. But again.
bill neville: the percentage is going to be so small that it's fine. So the 50% rule is, if you're strictly a passive investor. And so it says, can you please elaborate on Specific investment company owned by a disqualified person. So if you want to use your Ira to invest in a company, and that company is owned
bill neville: at all by a disqualified person. Now you have to look in. What's the role that that person has in the company, and how much ownership does that person have. If the person has like has a role in the company, then that drops down to 10%, the ownership has to be less than 10%.
bill neville: So your Ira can invest in a company that a disqualified person, as you say in here, becomes a senior employee and takes a salary. The senior employee has 10% more ownership, 10% or more ownership in the company. Your Ira can't invest.
bill neville: If you're the senior employee has less than 10% ownership, then you can. Now again.
bill neville: that's how we read the code
bill neville: I would encourage you to before making investment in a company where a disqualified person is a senior employee and has ownership in the company. You have someone, some tax advisor, somebody like that take a look at it and give their opinion as well.
bill neville: The last slide mentioned an early withdrawal are those allowed from self-directed Iras. The the rules within a self-directed Ira from a contribution rules, distribution rules.
bill neville: transfer rules like none of those are different. Right? A traditional Ira or a Roth Ira, a self-directed traditional Ira, and a self-directed Roth Ira, and a self-directed 401 k.
bill neville: The the tax and distribution and contribution rules are no different than a non self-directed, traditional Ira Roth, ira sep ira. 401 k. etc, etc. So you're allowed to take early withdrawals from an Ira right? Whether it's self-directed or not. But it's subject to a penalty right? There's a 10% penalty if you're
bill neville: if you're under age, 59 and a half.
bill neville: do I have that age? Right?
bill neville: all right. So here's another question. If my Ira is invested in stocks, bonds, funds, do I have to liquidate the amount, say 100 k to cash in order to do a self-direct investment. Yes.
bill neville: you're opening an Ira with us. Right? So you're not
bill neville: like we're not acting as custodian on behalf of your vanguard. Ira, right? You're actually opening an Ira, and then transferring cash from your vanguard, Ira, to your interest, Ira, and then instructing us to make that investment. And yes, so the answer that is. Yes, you would have to liquidate the $100,000. Transfer it to your interest, Ira, and then instruct us to invest it.
bill neville: Isn't it true that the 5 year Roth conversion limitation applies only to gains in the Roth account and not principle transferred from the Roth account.
bill neville: You're probably right.
bill neville: Honestly, I'm I'm not sure. But that sounds right, I mean, certainly it's only the gains that are are subject to like potential like, if you if you if you try and take it out, and when you haven't had a roth for at least 5 years, you're under 59 and a half. Then you have to pay taxes, etc, etc. That's only on the gains, not on the original contribution. So
bill neville: I'm guessing you're probably right. I'd have to.
bill neville: I I have to admit I'm not, I'm you know, like some of these roles.
bill neville: It's tough to to stay on top of, and I'm not a Cpa. But
bill neville: that does sound that does sound like that's probably right.
bill neville: Just to confirm. We can open a Roth, Ira, for a non-working spouse. That is correct.
bill neville: not only open, but contribute to right like that was the whole point of this is to make contributions right like anybody can open a Roth, Ira, right like, but if you want to contribute to it, you have to. Now, I think the rules also say that you have to be filing time filing married filing jointly right like again. Talk to a Cpa about this about your ability to make contributions to a non for a non-working spouse. But how you file your taxes, plays a part in that.
bill neville: Could a self-directed Ira holder expect
bill neville: that they would receive some type of warning about unrelated business income tax from a fund manager that is used to having investors using a self-directed Ira
bill neville: I would like to say yes, that you
bill neville: could expect that, but I don't know that all
bill neville: you know, private fund managers, syndicators, and things like that are aware of whether they're
bill neville: Their investment is if they're bringing in Ira investors, if they're potentially exposing those investments to self directed or to unrelated business income tax. So
bill neville: you know, it depends. I again, before you make any investment. My my suggestion. Our suggestion is.
bill neville: have the conversation with the with the people running the fund that you're thinking about investing in
bill neville: in terms of?
bill neville: Are they aware of unrelated business income tax. And could your Ira be subject to unrelated business income tax? And if the answer that is, we don't know
bill neville: we've never heard of it. We don't know what you're talking about. Then, you know. Bear that in mind, and maybe talk to an a tax advisor or Cpa before you make the investment.
bill neville: If you consult an advisor, Cpa. Tax, expert attorney, etc. For your self-directed Iras must fees for those services be paid with self-directed ira funds. No
bill neville: you said, I presume? Yes, but please confirm or correct me. Thanks. No. -
bill neville: Your Ira has to pay expenses
bill neville: that come with the asset that's held inside the Ira. So, for example, if you own real estate.
bill neville: then
bill neville: property taxes, insurance, maintenance, things like that have to be paid from the Ira, if you invest in a fund, and the fund is investing in a apartment complex, and that apartment complex is incurring fees that they now need to come back and say we need more money from all of our investors like we need to raise another 1 million dollars. And so you own 1%, you got to give us another $10,000
bill neville: that has to come from the Ira right? But before you make the investment, if you have, if you have to, you know, travel to see it, or if you have, you know again, if you want to talk to an advisor or something like that, and you haven't even made the investment. Those are personal expenses. Those are not Ira. Those are not expenses that come from the asset itself.
bill neville: so no, those wouldn't be paid from the Ira
bill neville: If I'm buying a rental property, am I allowed to represent myself as a real estate broker and manage the property all right.
bill neville: so
bill neville: I feel like you. I see the name you and I haven't had a lot of conversations. I feel like we may have talked about this. Here's another one that again you might get differing opinions depending upon who you talk to.
bill neville: Here's what I can tell you.
bill neville: I would not take a commission
bill neville: right? So there's there's wording in the in the section of the code that talks about providing services to the plan right? And again, it's it's kind of ambiguous
bill neville: in terms of what exactly does that mean providing services to the plan? So if you are a real estate broker or you're a property manager, and your Ira is buying rental property. Can you provide like? Do you have to like outsource this, or can you do it yourself? Here's the one thing I would tell you don't pay yourself right, so don't take a commission to be the broker. Don't take a return
bill neville: to manage the property, because essentially what you're doing is, you're having your Ira pay you
bill neville: without the without it being listed as a distribution, and that would be considered prohibited.
bill neville: Now the actual act itself of being a broker or being a property manager on a property that's owned by your Ira. Would that, could you do that?
bill neville: There's nothing in the code that says you can't.
bill neville: but I would be very careful about that, particularly like it's 1 thing if you got like a single property, and you're managing the property yourself. But you're not a property manager by trade, right? Like, that's not what you do for a living, but you don't. You have a single property and managing. It basically means, like once a year, or every couple of years, showing the property like posting it on on Craigslist or whatever, and showing it to people and
bill neville: and you know, hiring hiring contractors to do work, etc, etc, like
bill neville: I would say that that's probably not. You're probably not really risking anything. But if your business, if you're a property manager by trade, and you're managing a whole bunch of properties, you're not adding this and doing it as like.
bill neville: It's interestingly enough, that's more likely to be considered prohibited than if you're not a property manager and you're managing your property.
bill neville: But again, there's nothing in the code that says you can't be the real estate agent on a transaction involving your Ira, or that you can't manage a property that's owned by your Ira. There's nothing that you will find that says you can't do that.
bill neville: But I would be really careful about that. If that's your what you do. If you're a property manager, you're a real estate agent. You want to do it yourself. I could say personally, based on. I tend to lean kind of with this stuff a little bit conservatively. I wouldn't. I wouldn't do it personally.
bill neville: but you know you might have a conversation with someone else with some like a Cpa. Who might read it, or even somebody else, like another self-directed Ira. Come, they'd be like, yeah, like no problem. But again, I would. I would very, very much
bill neville: recommend that you don't. You don't take any kind of commission. Don't pay yourself okay.
bill neville: The Zen trust. Provide any guidance regarding filing requirements for the corporate transparency act. No, I wouldn't say we do.
bill neville: That would be something that if that's required
bill neville: you would be responsible for knowing that and doing it yourself.
bill neville: but I can honestly say I don't know what that is.
bill neville: I know profits in the traditional Ira are deferred.
bill neville: and we pay tax on them when funds are withdrawn. Correct. Is there any way to recognize a loss incurred? An Ira or you just lose out, you just lose out like either grow your retirement account, or you don't right. You invest in same thing with stocks. You invest in a stock.
bill neville: you know people who invested in in.
bill neville: I'm trying to remember the name of the company Enron people invest in Enron like with their retirement accounts, and then, you know, it turned out to be like one large giant scam. They just lost their money right like their Ira lost their money. They don't get to to deduct that on their taxes.
bill neville: I hold real estate in my interest, Ira. That's pretty much worthless. If I held it outside my Ira, I would get a tax loss.
bill neville: carry forward use on my taxes. Is there anything comparable for assets held inside in Iran? Fortunately? No, there isn't.
bill neville: Are there any restrictions on C corps and Iras can invest in.
bill neville: Can the C Corp be operated by a prohibited per person? So I kind of answered this before.
bill neville: their your Ira can invest in a C. Corp, right? So the only thing an Ira can't invest in our s-corps. They can invest in Llcs when the partnership C corps can't invest in an S. Corp.
bill neville: so an Ira can invest in a C corp. But if the C Corp is owned by, so you said, can the C Corp be operated by a primitive person. It's not so much operated, although that plays a part, it's the ownership.
bill neville: Does the prohibited person own the C Corp. If the answer. That is, yes.
bill neville: then an Ira can't be an investor, but you can't potentially through a 401 k. Under the rob structure following the Rollover for business startup structure.
bill neville: Okay. Next question, can one open a Roth, Ira, if they're not employed? Sure you can open a roth, Ira, if you're not employed. But if you want to make contributions to it, you have to have taxable income.
bill neville: So it's not a matter of opening it. The question is, is, can you make contributions? Not if you're not generating taxable income?
bill neville: And that's not just Roth. Iras, that's any Ira.
bill neville: You can't make contributions to an Ira unless you're generating taxable income.
bill neville: I'm getting ready to sell property in my Ira, held by interest to reinvest it. Is it possible for the new investment, the land to be owned by me personally, and the condo to be built is owned by the Ira. No, that's prohibited.
bill neville: If you want to build on land through the Ira. The Ira has to own the land or the land has to be owned by a non disqualified 3rd party. Since you're a disqualified person to your Ira.
bill neville: your Ira can't build on land that you own. Personally.
bill neville: if the Ira asset is a C Corp. And the C. Corp. Has financing.
bill neville: if the Ira asset is a C. Corp. And the C. Corp. Have financing without giving rise to unrelated business income tax.
bill neville: You know. I
bill neville: it's a good question. I would. I don't think so. I don't think that that's an example of something that would would be
bill neville: subject to unrelated business income tax. But honestly like. I don't know all the ins and outs of like everything associated with that right like I mean
bill neville: the again. This is part of the whole self directed thing. These are the kind of things that you need to know right. And so if this is something that
bill neville: that you want to know, like you would need to talk to a Cpa. Or tax advisor about something like that. But my my inclination is to say No, I don't think so, but honestly, I don't really know for sure on that one
bill neville: is a maintenance employee of a company owned by my wife, a disqualified person. Yes, your wife is a disqualified person to your Ira. So wait is a maintenance employee of a company owned by my wife, a disqualified person.
bill neville: He used to be an independent contractor, but got changed to an employee because of California law change. Well, no, the employee itself. The employee is not a disqualified person. Your wife is a disqualified person, because your employee works for your wife's company doesn't make that employee a disqualified person.
bill neville: You didn't sort of talk about what kind of transaction you want your Ira to do with that employee? But no
bill neville: if you're saying, would that employee be able to invest in your wife's company because he worked like it comes down to ownership. If it's just an employee with no ownership in the company, then that that employee is not a disqualified person to your wife's Ira.
bill neville: If the asset is partly financed, that is real estate.
bill neville: and the Ira take depreciation to reduce the no
bill neville: an Ira doesn't file taxes.
bill neville: so how would an Ira? I mean, yes, okay. So it files a 990 T. But there isn't any write-offs against it. The asset is partly financed real estate. Can the Ira take depreciation to reduce the unrelated business income tax to 0? No, it can't.
bill neville: If the financing is paid off
bill neville: before the asset is sold with any recapture. Again it it's just not applicable.
bill neville: Did my question about losses on real estate held in an Ira go through?
bill neville: I don't remember if I answered your question or not.
bill neville: If I'm at retirement age and make a Roth conversion, must
bill neville: I wait 5 years before before penalty? Free distributions.
bill neville: Yes, you have to have a roth for at least 5 years. So if you're converting to a Roth, and it's the 1st Roth you've ever had then. Yeah, it doesn't matter. You have to be both over 59 and a half, and have had a Roth for at least 5 years. So it's both of those things. So if this is your 1st ever Roth, yes, you're going to have to wait 5 years before it can be not just penalty free tax free?
bill neville: If I take a distribution from one Ira and wish to put it back.
bill neville: do I have to put it back into the same account, or can I put it into another account of the same type and still reduce the tax demands? Presuming I do this within 60 days? Yeah, you're talking about a Rollover. Yes, you can put it in a different account. You can roll it over. But note that you're only allowed to do Ira to Ira Rollovers once a year, once every 3, 65 days. So if you're if you take it out of one Ira and you roll it into another Ira with a different or to an Ira with a different custodian. And you do it within 60 days. That's okay.
bill neville: Just you're gonna have to wait another 365 days before you can do it again.
bill neville: If you roll over from a 401 k. To an Ira, there's no limitations. You can do as many of those as you want
bill neville: if you're required to pay requirement on distribution. But the Ira is invested in real estate and non liquid. Can you pay the Rmd. Amount personally
bill neville: and show it as a contribution to the Ira for that year?
bill neville: No.
bill neville: I would say. You know, that's actually a good question.
bill neville: so like, if you have to pay like $5,000, can you just pay it and call it a contribution? Now, I mean for us like to. We have to receive the contribution right like we as a as a you have to re like we have to report your contribution. We, as custodian.
bill neville: have to report the contribution to the Irs right like that, goes on a form 54, 98, like, there's a form that we file every year for all accounts. Not just us all retirement account custodians that report your Rollovers. It reports the fair market value of your account. It reports, contributions.
bill neville: and we have to be able to report the contribution. And
bill neville: we need you to actually contribute the money right? Like we need you to make the contribution like you can't just say, Hey, I just sent this to the Irs, and you know, can you just report this as a contribution for me? Unfortunately, we can't do that. So my answer to your question would be, no, you'd have to.
bill neville: You'd have to make the contribution. I mean. It seems silly, because what you're doing is you're making the contribution and then withdrawing it right to meet your Rmd.
bill neville: I get that. But it needs a proper paper trail right from a custodial standpoint like we need a proper paper trail
bill neville: for audit trail purposes. Can I invest in an Llc. That is, majority owned by my husband and his managing member. Huh!
bill neville: No, that's prohibited transaction.
bill neville: Does this make sense as a structure instead of does a real estate development personally
bill neville: instead of does a real estate development personally and paying a top marginal rate of 37% have a roth. Ira form a C Corp with the C Corp using borrowed funds to do the development so that the C Corp pays 29% tax with Ira owner paying either 10% or 0 on distributions.
bill neville: Talk to a Cpa.
bill neville: I don't have any. I can't answer that.
bill neville: I would recommend you. Talk to a tax advisor. What's the best way to open a self-directed. Roth
bill neville: asks for one's grandchildren. Okay, just you can open an account. So we have a way for guardians to open an account on behalf of their children, or in this case, grandchildren.
bill neville: where you know you fill out the account application and the kid in the child's name, and then we have a separate form where it lists the Guardians information, then we open the account on behalf of that child. Here's the thing, though, in order for you to make contributions to that account.
bill neville: The child has to be generating earned income right again, to make contributions to a retirement account. The the account holder has to be generating earned income.
bill neville: So opening the account isn't difficult. Question is, is there a way that you're generating great generating and reporting
bill neville: income for that for that child to enable them to then make contributions, or for you to make contributions to that kid's account on their behalf.
bill neville: Further, to the question about the maintenance employee, perform certain maintenance services for property owned by my Ira and my wife's company was paid.
bill neville: and then the employee was paid.
bill neville: Okay, you didn't continue with the question that I see here further to the question about the maintenance. Okay? So the maintenance employee perform certain maintenance services for property owned by my array and my wife's company was paid. Oh, I see. And then the employee was paid. I got you now. So yeah, I mean the fact that it's your
bill neville: your wife's company that's in, in a sense, in essence, doing the work, then that would be prohibited. Now, if you hired that maintenance employee if you hired them.
bill neville: you said, Look, come, do the work. I'm going to pay you directly from my Ira. That's fine. But the fact that your Ira is paying your wife's company first.st That's a prohibited transaction.
bill neville: Okay? So the employee itself isn't. The isn't a disqualified person as long as your Ira is paying them directly. But as soon as you pay your wife's company, you've created a prohibited transaction.
bill neville: If the contact person for an asset no longer is available.
bill neville: the content for no available. We have no idea, if went out of business, or what. How long should we wait before showing this as a loss on the Fmv form? I mean that's up to you.
bill neville: you know. I mean, if you're
bill neville: it's your call on that like there isn't. I can't give you a rule of thumb, or say you should wait a certain amount of time like it. Really, it really is up to.
bill neville: you know. Hopefully, you're talking to. You've reached out to.
bill neville: you know, maybe the Securities and Exchange Commission, or you're working with any kind of law enforcement to, you know. Try and find out a solution to this. But you know, here's the thing. If you're subject to required minimum distribution, then you might want to do that sooner rather than later, because that value of that asset is impacting what you are required to take as a required minimum distribution. So but I mean, if you're not subject to Rmd.
bill neville: I mean, it's up to you like how quickly you you feel like I mean also.
bill neville: bear in mind we do charge a fee right like it's not necessarily a lot of money, but we do.
bill neville: or at least an interest case. You know we have a a record keeping fee that we charge for any assets that we hold. So, you know, if you're paying us a fee, and you feel pretty confident the asset no longer has any value to it. Then, you know, removing it takes away our fee as well, so sorry that that happened.
bill neville: And I don't necessarily have a better answer to you, but I don't. I don't have a rule of thumb to give you. It's just a matter of you figure, you know what what you guys, when you guys decide you've given up on it.
bill neville: I believe the answer to Marlene's question conflicts with an earlier answer. My understanding is that the principal transferred from the traditional Ira to establish the Roth has already been taxed.
bill neville: and therefore can be withdrawn without penalty or tax.
bill neville: So when you made a contribution to a tradition, no principle transferred from traditional. Okay. So the way
bill neville: conversions work with a Roth Ira is, if you have for your retirement account.
bill neville: If you have a Roth, Ira and you have if you have
bill neville: like, let's say 50% of it is contribution, and 50% of it, or principal in the term you're using. And 50% is earnings, and then you take a withdrawal. You can't tell the Irs. Well, I'm just, only I'm only taking out my principal. I'm not taking out any of the earnings. If it's 50 50, then you have to pay 50% tax on the earnings. Part of it.
bill neville: Now, when it comes to conversions, I don't think principle applies right? Because you have a you're converting from a pre-tax account. You're not making a contribution. You're just converting from a pre-tax account. You you pay taxes on the full amount. Let me think about this.
bill neville: So you pay taxes on the full amount, then, whatever you take out.
bill neville: So you're saying, prior to prior to 5 years, if you take out. So if you convert $10,000, and then you decide that you want to take out that $10,000 prior to 59 and a half, or prior to having it for 5 years. You shouldn't have to pay
bill neville: taxes or a penalty, because it's
bill neville: you've already paid taxes on it. You might be right about that.
bill neville: because you only pay taxes on the earnings. Right?
bill neville: If you do it prior to 5, 59 and a half. So you might actually, now that you say that you might be right about that.
bill neville: But
bill neville: again, I'm not a Cpa. And so you'd want to talk to a tax advisor or Cpa. All I can tell you is when you take a withdrawal from your
bill neville: when you take a withdrawal from your from your account, we file a form 1099, right? Like we report that.
bill neville: Now, what? Ha! What impact that has on your taxes is kind of, you know, for you and your
bill neville: your tax advisor to figure out.
bill neville: But I mean you might be right about that.
bill neville: The principal rolled over, converted from the traditional Ira to establish that Roth has already been taxed, and therefore can be withdrawn without penalty or tax. You could be right about that. That makes sense.
bill neville: right? Somebody wrote Hi, Mr. Neville, and then didn't ask a question, so I'm giving it all right. Here we go.
bill neville: I just I must jump out from the mean. But definitely, we'll show you an email regarding okay? So that's it. That was the last question. I appreciate everybody joining us and make sure you join us again in January for the webinar on important dates and things to know for 2025.
bill neville: Thanks, again. Have a good one.