Tony Unkel: Hello, everybody! Thank you for joining us for today's webinar. We will be discussing Ira Llcs. The pros, the cons, and the essential rules.
Tony Unkel: Before we get started. I do have to read a quick disclaimer. The entrust group does not provide investment, advice, or endorse any products. All information and materials are for educational purposes only. All parties are encouraged to consult with their attorneys, accountants, and financial advisors. Before entering any type of investment
Tony Unkel: in today's agenda. We're going to cover, how Ira Llcs. Work the benefits of an Ira Llc.
Tony Unkel: Setting one up the right way the 1st time
Tony Unkel: key tax rules, compliance tips, and what to watch out for and actionable tips to navigate the investment process.
Tony Unkel: My name is Tony, uncle, I will be your host today. I've been with the entrust group going on 8 years, and I pride myself in educating investors and professionals on tax preferred retirement accounts and alternative investments
Tony Unkel: a little bit about the interest group. We are self, directed Ira administrators. We have knowledgeable staff with many with the Cisp certification, and we hold monthly educational webinars.
Tony Unkel: The entrust group has a little over 5 billion in assets under administration, with 24,000 plus active investors, 40 plus years service, and we operate off of the one single point of contact business model meaning depending where you are in the region, you will have a specific office assigned to you, where you'll be assigned to a specific office for all your needs regarding self directed, investing
Andrew Crawford: Thank you, Tony Bernard, if you could pull up your presentation. Thank you so much.
Bernard Reisz: Good afternoon, everybody, or good morning. Depending where you are.
Bernard Reisz: Before I keep going. You just let me know. Is my screen visible
Andrew Crawford: Yes, Bernard looks good. Thank you.
Bernard Reisz: Wonderful so thank you so much for that introduction, and I've got to say, as a professional
Bernard Reisz: that devotes a substantial amount of time to assisting Sdira investors. It is an honor to be here hosted by the intrust group, and it is always a pleasure working with the interest group. As Tony mentioned, you know, even as a service industry service provider. It's great to have that single point of contact
Bernard Reisz: business model. So when we collaborate. You know, we're always talking to people that we know
Bernard Reisz: that also know, you know, our mutual clients.
Bernard Reisz: You know, let's get into today's topic. Obviously, we're not gonna be able to
Bernard Reisz: cover everything about this topic that is both
Bernard Reisz: broad and deep. But the goal is to provide
Bernard Reisz: the key pros cons and essential rules.
Bernard Reisz: so that you know where to start and have a thought process. With regard to Ira Llcs.
Bernard Reisz: With that, let's take it away we're gonna follow very much exactly what this was advertised to be.
Bernard Reisz: And we're gonna go through those points.
Bernard Reisz: That being said, let's start with, you know how Ira Llcs work at a high level.
Bernard Reisz: and then we'll get into some further, you know nuanced aspects of it.
Bernard Reisz: Once we have that foundation, the
Bernard Reisz: you know. The key thing to understand is that when you get into self, directed Ira, investing
Bernard Reisz: you have to have a custodian very much like you have to have a custodian. If you're investing in stocks, there's only one kind of Ira that the tax code recognizes.
Bernard Reisz: and those are self-directed. Iras.
Bernard Reisz: When you go to a brokerage, Ira, you're effectively, so to speak, artificially constrained and limited.
Bernard Reisz: by what the brokerage offers on their platform. Iras, you know, self-directed Iras are not a separate type of Ira, not a separate section of the tax code. There's only one type of Ira and an Ira has got to have
Bernard Reisz: a custodian that that's hard coded in the tax law governing Iras. A financial institution custodian is required.
Bernard Reisz: Now, to the extent that all you're buying is stuff that's available on a custodian platform.
Bernard Reisz: You know, there's the custodian is, almost.
Bernard Reisz: you know, completely negligible. Right, you can buy stocks in a brokerage account at Schwab, inside of your Ira
Bernard Reisz: with the same ease that you can buy stocks in a non Ira brokerage account. So the
Bernard Reisz: the custodian is kind of there in the background, but you don't even notice them at all.
Bernard Reisz: Both. Contrast that with how things work. If you'd like to invest in
Bernard Reisz: something that's not on the platform.
Bernard Reisz: And that's what the Sd Ira world is about. It's about, hey? We don't have anything to sell you. We're going to provide you an Ira.
Bernard Reisz: We're not going to sell you investments. We don't hold investments. We don't have real estate to sell you. We don't have stocks, bonds, and mutual funds and etfs to sell you. The world is your oyster, and you bring your own investment. So when you're investing off a platform now, suddenly the fact that there's a custodian there?
Bernard Reisz: While crucial to the tax benefits of the Ira.
Bernard Reisz: Now the question is, okay, how can we simplify this, how can we take
Bernard Reisz: an Ira that's investing off a platform.
Bernard Reisz: and somehow do that with the same ease? As buying stocks
Bernard Reisz: on a brokerage platform where you barely notice. You wouldn't even know that you have a custodian.
Bernard Reisz: How can we get that same level of flexibility, control and freedom?
Bernard Reisz: When investing off a platform like you do in the self directed world, and the solution for that
Bernard Reisz: is the Ira Llc.
Bernard Reisz: With an Ira Llc. The money ends up in a bank account that is under the control
Bernard Reisz: of the Llc. Manager.
Bernard Reisz: So what are the steps to this? The basic steps are the Ira
Bernard Reisz: Acquires the ownership of an Llc.
Bernard Reisz: So in the Ira Llc. Structure, the owner of the Llc. Is the Ira. It's not the Ira account holder. The actual owner of the Llc. Is the Ira itself.
Bernard Reisz: thereby making the Llc. Effectively an extension of the Ira.
Bernard Reisz: once the Llc. Is an asset of the Ira, and the Llc.
Bernard Reisz: Is then funded by the custodian moving funds to the Llc's bank account, just like any other Llc. Has a bank account. This Llc. Will have a bank account.
Bernard Reisz: Once that Llc. Bank account is funded.
Bernard Reisz: the Llc. Is managed and run much like any other Llc. Is run, so in an Llc.
Bernard Reisz: The Llc. Documents will dictate who makes decisions
Bernard Reisz: who executes transactions on behalf of the Llc.
Bernard Reisz: In the case of an Ira owned Llc. The one executing transactions for the Llc. Will typically be the Ira account holder.
Bernard Reisz: So once this is in place, the money that was sitting in the Ira custodians
Bernard Reisz: account, you know. Escrow account. Has now been moved and under their control and outside the control
Bernard Reisz: of the Ira account holder. That money is now inside of an Olc. Bank account that is controlled
Bernard Reisz: by the managers of the Llc. Who can execute transactions directly and without having any direct interaction
Bernard Reisz: with the Ira custodian
Bernard Reisz: on an on a transaction by transaction basis. So when an investment opportunity arises, there's no need to get the custodian involved, there's no custodian paperwork to do
Bernard Reisz: it's just you fund the investment via
Bernard Reisz: the bank account via check Ach, or wire, just as you would do if it was not an Ira. So to recap briefly in the Ira Llc structure. What catches the benefit is effectively getting a self-directed Ira to the same place that a brokerage account Ira works you get to invest seamlessly, efficiently, quickly.
Bernard Reisz: And the, you know, almost barely noticing the fact
Bernard Reisz: that there's a financial institution custodian in the background.
Bernard Reisz: Very importantly, and we'll get back to this in a bit. But you know gotta say it now, just in case anybody drops off the call, the Llc. Is still subject to all the rules that the Ira is subject to.
Bernard Reisz: So we're going to talk more about that. But the key thing to know is, it's effectively an extension of the Ira, and it can do whatever the Ira can do, and it should not be doing whatever the Ira itself should not be doing
Bernard Reisz: it's just a matter of having more flexibility control and some other benefits that we're gonna get to. But all the prohibited transaction rules
Bernard Reisz: all those rules must still be adhered to, followed.
Bernard Reisz: So that is the Ira Llc. Structure at a high level.
Bernard Reisz: I will move in and move forward to some of the details.
Bernard Reisz: So here we've got a diagrammatic representation of it.
Bernard Reisz: along with some of the benefits which we'll elaborate on.
Bernard Reisz: as you can see in this diagram
Bernard Reisz: in the Ira Llc structure. We've got the custodian acquiring the entity
Bernard Reisz: from the custodian's perspective. The way this is viewed as much as if it bought any other company so it's effectively investing in a company
Bernard Reisz: which incidentally is controlled by the Ira account holder. So when you request the funding
Bernard Reisz: from the Ira custodian from the entrust group. What you're going to be funding is a private company. And self directed. I, Iras.
Bernard Reisz: invest in private companies all the time on a brokerage platform. You can't do it, but it's Sd, Ira
Bernard Reisz: can do that and so what what's the happening here is is you're creating a private company which the Ira is going to be investing in
Bernard Reisz: acquiring.
Bernard Reisz: And then you can see in the diagram.
Bernard Reisz: You know this, you know, we've highlighted 6 investments. So several tax lien investments, real estate investments, private lending, you know, Bitcoin and cryptocurrency.
Bernard Reisz: there are. You can acquire
Bernard Reisz: an infinite number of assets inside of a single company. From the Ira perspective. All that your account is gonna hold is a single asset which is the Llc.
Bernard Reisz: We've highlighted some of the benefits here, but I'm gonna scroll down.
Bernard Reisz: you know, and we'll talk about them in a bit more, you know, in depth.
Bernard Reisz: So what are the benefits of an Ira Llc.
Bernard Reisz: You know we've spoken a lot about the freedom, flexibility, and control but it also
Bernard Reisz: an Llc in this case is gonna do all very much what an Llc. Will do
Bernard Reisz: outside of an Ira. I do find it interesting that so many investors buy assets, particularly real estate
Bernard Reisz: and they would never consider doing so without an Llc. When investing outside of an Ira.
Bernard Reisz: But when investing within an Ira within a self, directed Ira. People acquire real property and many other assets without an Llc.
Bernard Reisz: And there's really no reason there's no not much distinction
Bernard Reisz: between investing inside or outside of an Sdira with regards to asset protection and privacy.
Bernard Reisz: So you know, while what drives a lot of you know, the attraction
Bernard Reisz: of Ira Llcs is the freedom and flexibility.
Bernard Reisz: The reality is.
Bernard Reisz: these Llcs should be used just as they would be used outside of an Ira. So if your Ira is buying real estate, you definitely want to use an Llc. There.
Bernard Reisz: and I think for the majority of investors, you know, that's a no brainer. There's no there's no question as with regard to using an Llc outside of an Ira
Bernard Reisz: and same holds for privacy and anonymity. It's important to distinguish between asset protection
Bernard Reisz: and anonymity. Sometimes these get used interchangeably. But they're 2 very distinct concepts. We talk about protection. We're talking about the legal protection that's provided.
Bernard Reisz: you know, under.
Bernard Reisz: you know, State law for assets that are in a liability limited liability company. So, assuming perfect knowledge, assuming everybody knows who owns what?
Bernard Reisz: that you may have assets in an Llc. And those assets are indirectly yours.
Bernard Reisz: There's limited liability provided by the State statute
Bernard Reisz: privacy and anonymity is something entirely different. But it is also important in the asset protection cons construct. So it's not really about a protection that's provided. But
Bernard Reisz: you know you're better off if folks don't know what assets you have
Bernard Reisz: if you're gonna do the investment directly with an Ira, say, you're buying real estate.
Bernard Reisz: there's going to be Titling. There's going to be a deed.
Bernard Reisz: and that will have your name on it. Yes, we'll have the custodian's name on it.
Bernard Reisz: but it will have your name as well.
Bernard Reisz: Using an Llc. Again lets you, gives you the ability to take your name, keep your name out of the public domain. Much as you can do with an Llc. Outside of an Ira
Bernard Reisz: now, giving you even greater control and access to your investable funds. We've spoken about that
Bernard Reisz: reduce reducing frictional Sd. Ira costs a self-directed Ira is very different than your brokerage. Ira
Bernard Reisz: in the sense that in 2 very important ways. Number one. The Sdira world is very much manual
Bernard Reisz: and trust has fantastic software but it's still not automated and can't be automated the way
Bernard Reisz: a brokerage platform can be automated.
Bernard Reisz: So it's, you know, fairly costly
Bernard Reisz: from custodian perspective to process. Every transaction and every transaction is is unique.
Bernard Reisz: Of course, you know.
Bernard Reisz: Broadly speaking, you know, real estate deals are real estate deals but nonetheless, every transaction has its own paperwork needs its own review. And human beings have a part of the process. And some amount of
Bernard Reisz: human manual input is required.
Bernard Reisz: Secondly, the custodian, whereas a brokerage platform effectively uses an Ira just as a way to get assets on their platform.
Bernard Reisz: And they're looking to profit from the assets that are on the platform. They're not really in the Ira business. They're really in the asset business. And you're buying assets on their platform, which they restrict you to and that isn't, you know, and those you know. The revenue they get
Bernard Reisz: from your investments covers the costs, whatever costs they do have.
Bernard Reisz: contrasting that with a self, directed Ira, where
Bernard Reisz: there are no assets being sold to you by custodian. They don't make any money on your assets. So those manual inputs.
Bernard Reisz: Those costs of that need to be covered.
Bernard Reisz: For that reason. Sdiras fees that you pay and now, honestly, those fees are.
Bernard Reisz: you know, certainly with the interest group. Those fees are very, very reasonable, especially considering all that goes into this.
Bernard Reisz: But from the perspective of the investor, if you could somehow mitigate those transactional fees or eliminate them completely. That would be very, very, very attractive.
Bernard Reisz: And that's another benefit of the Ira Llc.
Bernard Reisz: So when you get the money inside of the Llc.
Bernard Reisz: Now, when it comes to doing transactions.
Bernard Reisz: The sdra custodian is not processing those. So whereas
Bernard Reisz: without the Ira Llc you'd be incurring fees for every transaction.
Bernard Reisz: once the transactions are done at the Ira Llc. Level, you have completely eliminated those transaction fees and those transaction fees can add up, you know, depending on the nature of your investments. So having an Ira Llc can, you know, typically will provide cost savings
Bernard Reisz: number 2 number 4. Here is eliminating custodian transaction processing paperwork really in time.
Bernard Reisz: So if the investments are being processed by the custodian that means all the deal docs have to be submitted to the custodian for review custodian has to sign off on them, process them.
Bernard Reisz: So it's a whole. And in addition to the actual deal or or transaction paperwork that has to be done. You have to do all the custodian paperwork to get your transaction process. So this adds time
Bernard Reisz: to get things done, and it also, adds a substantial paperwork burden back and forth. Typically, there are multiple parties to a transaction.
Bernard Reisz: And the custodian, you know if there's something that's problematic.
Bernard Reisz: So they kick it back
Bernard Reisz: and then it takes some time to get it back to the custodian. So all that back and forth. Can be eliminated by using the Ira Llc, so you can have much less paperwork to deal with.
Bernard Reisz: And and you don't have the time lag
Bernard Reisz: and a self-directed Ira world. You know many investments are very time sensitive.
Bernard Reisz: and so shaving off days or weeks of processing time.
Bernard Reisz: Is incredibly valuable.
Bernard Reisz: Number 5 is enabling enabling you to invest in
Bernard Reisz: asset classes that actually cannot be
Bernard Reisz: access through an Sdi or a custodian. So what are we referring to here? What's this all about? So the S self directed Ira custodians do not place artificial
Bernard Reisz: restrictions.
Bernard Reisz: You know what you can do.
Bernard Reisz: But nonetheless there are going to be certain. Investments cannot be effectively accessed
Bernard Reisz: through. You know, when a custodian is holding your funds.
Bernard Reisz: some of those are going to be, you know.
Bernard Reisz: assets that are being auctioned off
Bernard Reisz: where you have to be able to present funds.
Bernard Reisz: you know, when you bid some amount of funds at the time that you bid on an asset at a share of sale
Bernard Reisz: or an reio reo auction. That's a real estate owned so bank owned properties.
Bernard Reisz: Then there's foreign assets so certain assets that a custo, you know that Ira custodian won't directly hold on their platform or process.
Bernard Reisz: So as much as they would love to do it. There are
Bernard Reisz: obstacles to the custodian doing that.
Bernard Reisz: and you know, cryptocurrencies. That's also, you know, this has been evolving space. But if you want to get direct access to cryptocurrency, exchange
Bernard Reisz: and without paying ridiculous fees.
Bernard Reisz: you want to access, you know, digital assets through a self, directed Ira, and not incur
Bernard Reisz: fees and asset based fees and be able to access, you know, a really the full world of crypto assets
Bernard Reisz: again, the custodian is not able to do that directly.
Bernard Reisz: So the solution for all these is to have an Ira Llc. The custodian funds, the Llc.
Bernard Reisz: And then the Llc. Is able to directly access these investments. So the use of an Irl. Llc.
Bernard Reisz: Will give you the ability to get to investments that custodian
Bernard Reisz: would love. You know Sd. Custodian would love to be able to give you access to, but because of
Bernard Reisz: limitations are unable to. You're able to bypass those limitations with the use of
Bernard Reisz: an Ira owned. Llc, so you've highlighted about 5 benefits here.
Bernard Reisz: And this highlights a bit more, you know, expands a bit on the asset protection and anonymity.
Bernard Reisz: and it's a good point to opportunity to touch upon.
Bernard Reisz: Let's broaden this a little bit
Bernard Reisz: so much as an investor outside of an Ira
Bernard Reisz: you know, if they have multiple properties, may choose to put them in separate Llcs to segregate them for asset protection purposes.
Bernard Reisz: The same concept would apply when using Ira, Llc.
Bernard Reisz: you could have a single Ira Llc. Own a dozen properties.
Bernard Reisz: But if we're really gonna take us kind of reorient ourselves and recognize that an Ira
Bernard Reisz: investing in real estate is effectively the same thing as myself investing in real estate.
Bernard Reisz: Much as I would choose to have more than one Llc.
Bernard Reisz: To hold multiple properties in. My, you know that I own outside of an Ira
Bernard Reisz: I would most likely want to make you know. The same thought process
Bernard Reisz: applies inside of an Ira. Now that gets to be subjective. You know how many properties should be in a single entity or no absolute you know definitive
Bernard Reisz: responses to that.
Bernard Reisz: But again, just as you would consider it outside of an Ira. That's something that you definitely should be giving thought to
Bernard Reisz: inside of an Ira.
Bernard Reisz: Let's see moving on to setting one up the right way.
Bernard Reisz: There is an incredible amount that goes into setting up an Ira Llc.
Bernard Reisz: it's much of it happens in the background.
Bernard Reisz: But there are so many things that have to be taken into account when making choices for establishment
Bernard Reisz: of an Ira Llc. We're gonna talk about.
Bernard Reisz: I think the more basic ones. But there really are a myriad of considerations.
Bernard Reisz: So what are some of the things you're gonna be thinking about?
Bernard Reisz: And you have to think about this
Bernard Reisz: thoroughly and comprehensively when you're setting it up.
Bernard Reisz: Because, once set up, it's not easily undone so with anything related to self, directed Iras.
Bernard Reisz: You want to get them done optimally and correctly, compliantly, from the get go, because once.
Bernard Reisz: if mistakes are made they are either very difficult to undo or not undoable at all.
Bernard Reisz: So the typical Llc basic considerations are going to be cost.
Bernard Reisz: You know the cost of
Bernard Reisz: getting it set up and the cost of maintaining it. You know. So what are the the costs? To initially set up the Ira Llc.
Bernard Reisz: and they're going to be a different inputs into that, you know, into that cost factor. And those are gonna vary from state to state.
Bernard Reisz: and domicile to domicile. You know what are the hard dollar costs?
Bernard Reisz: To the States and to service providers for the structure
Bernard Reisz: number 2 is filing requirements
Bernard Reisz: Llc. Filing requirements vary both initially and ongoing very
Bernard Reisz: extensively. There are drastic variations across states.
Bernard Reisz: With regards to filing requirements
Bernard Reisz: for Llcs. So it's important to distinguish between cost.
Bernard Reisz: You know dollar cost dollar expenditures.
Bernard Reisz: and then just the again, the nuisance
Bernard Reisz: of dealing with the filings, and more than the nuisance. What happens if those get neglected? Which sometimes happens in the life of an Llc.
Bernard Reisz: Filings are missed. And what are the implications of that? So it's it's doing the filings.
Bernard Reisz: And perhaps, more importantly, what happens if a file that gets missed?
Bernard Reisz: What are the implications of that? And these will vary across Llc domiciles?
Bernard Reisz: Number 3. Privacy.
Bernard Reisz: The ability to, you know, retain your privacy. Anonymity when using an Llc.
Bernard Reisz: Also bear is very much across Llc. Domiciles.
Bernard Reisz: And I guess that should be in d
Bernard Reisz: asset protection. So the asset protection rules
Bernard Reisz: for Llcs again vary across domiciles. There are more things to take into account, but these are the 4 that will apply across the board. And our basic concepts that any investor
Bernard Reisz: should be thinking about and making choices about.
Bernard Reisz: When setting up an Ira Llc. And very importantly, you have to be thinking about the immediate term intermediate term
Bernard Reisz: and the long term
Bernard Reisz: investing plans to the extent. You know, you have information about that, or have very solid
Bernard Reisz: expectations about the long term.
Bernard Reisz: Now, something that we get very, very often is, people
Bernard Reisz: somehow seem to, you know, know definitively
Bernard Reisz: where they want to put their Llc.
Bernard Reisz: There are certain states that are the chief offenders
Bernard Reisz: and investors are like, okay. I just need to get my Llc. Set up. Set up Wyom, my Wyoming. Llc.
Bernard Reisz: I would say, in the overwhelming majority of cases those investors do not have complete information.
Bernard Reisz: in the majority of cases a domicile that they may think is the one they should be in
Bernard Reisz: is not the best choice for them. Sometimes it's not the best choice, and sometimes it's a very clear
Bernard Reisz: wrong choice
Bernard Reisz: so there are. In some instances you have complete flexibility in choosing where your Llc. Will be domiciled. And in other cases it's very much a function of
Bernard Reisz: the nature of the asset you're going to be investing in. Your personal profile where you reside, where your investment is. So there are a myriad of factors to take into account when choosing the domicile for the Llc.
Bernard Reisz: And it is critical that you work with a provider.
Bernard Reisz: That I'd say there are 2 key things. Number one
Bernard Reisz: is that they actually are knowledgeable about
Bernard Reisz: Llcs. In every domicile there are 51, Us. Domiciles.
Bernard Reisz: right, 50 States, and DC. Has its own so you need to work with somebody that has knowledge and is comfortable and experienced working
Bernard Reisz: all of those because there are incredible amount of unknown unknowns
Bernard Reisz: when it comes to dealing with Llcs in every state and number 2 is.
Bernard Reisz: it's not just about having the knowledge. It's also about, hey, what's the business model? So there are certain providers out there that basically want to put every Llc. In this in the same domicile. Everybody goes to Nevada.
Bernard Reisz: Every. They basically want every one of their clients to be in Wyoming, every one of their clients to be set up in Texas.
Bernard Reisz: the business model there is really, hey? We can just
Bernard Reisz: pump out, you know, these Llcs. We just know how to. You know, we can have
Bernard Reisz: clerical people that just know how to fill out this one document and do it thousands of times.
Bernard Reisz: And they're keeping their costs extremely low.
Bernard Reisz: And keeping their margins very high because they're they're just pumping out Llcs in that particular domicile. And of course, in order to do that, they're gonna try to make that domicile sound very, very appealing, like, okay, let's all be in Nevada because Nevada has this list of
Bernard Reisz: 50 benefits.
Bernard Reisz: That business model is gonna lead people to the sub optimal choices. So it's not just that the whoever you work with should have a knowledge of all of that.
Bernard Reisz: It's that the role that they look to play is to assist you and guide you
Bernard Reisz: and not just to sell you the one thing they have there, you know, clerks doing
Bernard Reisz: at scale.
Bernard Reisz: And so you should be, you know. Extra caution should be exercised.
Bernard Reisz: you know if somebody is telling everybody to be in a certain domicile. And then this is a rule that's true, really, across the financial and tax
Bernard Reisz: world. If any service provider is having, you know, it's
Bernard Reisz: basically taking a 1. Size fits all approach
Bernard Reisz: and we know one size fits. All can't possibly fit everybody so that tips you off to the fact that you know their model is to.
Bernard Reisz: you know. Be a, you know. Get.
Bernard Reisz: you know, do the one size fits all.
Bernard Reisz: and not really to guide and advise but rather to, you know, turn it into a product, and sell everybody on the same thing.
Bernard Reisz: So to recap
Bernard Reisz: there is no best Llc domicile. There's gonna be the best one for you.
Bernard Reisz: And the particular investment you are pursuing.
Bernard Reisz: You know, some amount of that decision is objective, and some amount of that is, gonna be subjective. Because, you know, like, say, cost
Bernard Reisz: is a fact is, is a factor that's the 1st one we listed. Well, if you're doing a you know, to what extent do you care about costs
Bernard Reisz: that varies from investor to investor.
Bernard Reisz: and there's no right or wrong.
Bernard Reisz: Number 2. If somebody's making a $500,000 investment.
Bernard Reisz: they're going to be less cost sensitive about spending another few $100 on the Llc.
Bernard Reisz: Whereas somebody that who's in making a $10,000 investment
Bernard Reisz: will be much more cost sensitive, and neither one of those is wrong. Those are logical and reasonable.
Bernard Reisz: Same for filing requirements. And then dealing with ongoing filing.
Bernard Reisz: Again. It varies from investor. There's no right or wrong privacy, asset protection. There's each of these have a completely objective component. Knowing the facts. And knowing at least what the rules dictate you have to do. But once there's usually narrowed down to a few choices.
Bernard Reisz: it gets to be subjective, and every investor different investors may choose.
Bernard Reisz: you know, different Llc. Domiciles for the same investment.
Bernard Reisz: Moving down this list.
Bernard Reisz: selecting an appropriate name for the Llc.
Bernard Reisz: There.
Bernard Reisz: This is something where we see people, you know, making mistakes.
Bernard Reisz: Sometimes it's technical mistakes, sometimes it's
Bernard Reisz: just not having the experience of having done this long term
Bernard Reisz: dealing with thousands of investors and over the life cycle of an investment.
Bernard Reisz: So, knowing the name of the Llc.
Bernard Reisz: And it's Number one, it's understanding what the name requirements are and aren't, and understanding
Bernard Reisz: the requirements at the Llc. Level by the domicile. Understanding Irs name conflicts. So getting the name done.
Bernard Reisz: you know, seems like a small thing. Well, some people don't make much of it. Some folks get very sentimental about it.
Bernard Reisz: Neither one is right or wrong. But it's something that benefits from input, from somebody that's.
Bernard Reisz: you know, knows what you should or shouldn't do, and has seen many investments run their life cycle
Bernard Reisz: number 3 once the Llc. Domicile is selected. And the name is selected. It's a question of actually getting the Llc. Set up
Bernard Reisz: and set up properly. I see Llcs that are set up incorrectly all the time.
Bernard Reisz: It happens in particular. The key thing to understand is Llc rules across domiciles
Bernard Reisz: basically overlap about 95% of the way
Bernard Reisz: there are different Llc model rules. Some States have adopted
Bernard Reisz: you know, model laws that are out there. Some adopt them with some variations. Some are a different, you know, adopted one model law, but update it for the next model law. And
Bernard Reisz: so while there's a lot of overlap. There are also important distinctions across domiciles.
Bernard Reisz: And so getting it set up as it should be set up within the Ira Llc. Structure.
Bernard Reisz: Getting it done correctly is important.
Bernard Reisz: and you want to make sure that it's done correctly based on the domicile in which the Llc is being formed. And mistakes happen. See this fairly often. Even with attorneys setting it up. You know they have experience in one state, and they're setting it up in a different state, and especially because very often attorneys are actually outsourcing it.
Bernard Reisz: and a clerk do it.
Bernard Reisz: It gets, you know they're having.
Bernard Reisz: you know the mistakes are made so Llc. Rules are.
Bernard Reisz: You know, there's a lot of overlap for the most part. You know, rules across. Domiciles are very much the same. But there are important distinctions.
Bernard Reisz: Then there's the operating agreement.
Bernard Reisz: So the operating agreement, you know, got the word here compliant.
Bernard Reisz: But what is what do we? What type of compliance are we referring to?
Bernard Reisz: So there are 2 2 components to this.
Bernard Reisz: and most investors are not really gonna pay much attention to their operating agreement.
Bernard Reisz: You know we have clients that do read it thorough through.
Bernard Reisz: That's great. We think you know it highlights many important aspects of running an Ira, Llc.
Bernard Reisz: But it's important for 3 reasons.
Bernard Reisz: Number one.
Bernard Reisz: Your sdra custodian wants certain things in the operating agreement.
Bernard Reisz: Again, they're not paying attention to every line of that. And they're very explicit. They're not giving legal advice, and they're not gonna be reviewing
Bernard Reisz: thoroughly reviewing the operating agreement.
Bernard Reisz: But there are certain things that they want and need, otherwise they won't fund the investment.
Bernard Reisz: Number 2.
Bernard Reisz: If you're running this as an Irlc
Bernard Reisz: in the event that anything is ever audited, something we hope never happens.
Bernard Reisz: You need it to look right.
Bernard Reisz: And you need, you know, some of it is optics is that, hey? You're you're doing this in a way that has
Bernard Reisz: you know where your all your Llc documents address all aspects of Ira, Llc. Compliance
Bernard Reisz: and number 3. There are certain
Bernard Reisz: operating agreement items that may very strongly impact
Bernard Reisz: whether or not the Ira olc is actually compliant.
Bernard Reisz: So there are 3 reasons why you would want to. You wanna make sure you know 3 aspects
Bernard Reisz: of a compliant operating agreement. Perhaps you should put compliant in quotation marks. Because there some of it is.
Bernard Reisz: there's more about optics. Some of it is about the custodian, and some of it is about the irs
Bernard Reisz: correctly obtain an ein very much the same
Bernard Reisz: in the same vein as mentioned earlier. All these other items. Getting the in is not a terribly complex item but we've definitely seen people go about it. We've seen an incredible amount of errors. You know, people that have done it on their own.
Bernard Reisz: you know, or even hired folks that do not have experience with this you know, or don't know, the correct way to do it.
Bernard Reisz: and Number 6 established compliant bank account.
Bernard Reisz: Like every step of Ira Llc.
Bernard Reisz: Setup, there are compliance items with regard to setting up a bank account.
Bernard Reisz: And we again routinely encounter questionable
Bernard Reisz: transactions or setups with the bank account.
Bernard Reisz: Again, none of this means anything. If nobody is audited or ever challenged.
Bernard Reisz: But as the repercussions of getting something wrong.
Bernard Reisz: Are severe within an sdira.
Bernard Reisz: May as well get it right.
Bernard Reisz: So they're
Bernard Reisz: stepped going further on in this in the steps. Once we've been through that we've selected Llc. Domicile.
Bernard Reisz: We've got our name. We've got the Llc. Established. We've got the operating agreement. We've got the ein.
Bernard Reisz: Now you want to establish a bank account for the Llc.
Bernard Reisz: And once we're at this point you would like to have the Custodian
Bernard Reisz: Fund the Llc. Bank account.
Bernard Reisz: Once. That's funded, you're able to start investing with all the freedom, flexibility, control, and cost effectiveness.
Bernard Reisz: Of an Ira Llc.
Bernard Reisz: And moving on to key tax rules, complying tips, compliance tips, and what to watch out for.
Bernard Reisz: So we've touched on some of this already.
Bernard Reisz: The most important item that we cannot possibly emphasize. Enough is that the Ira rules?
Bernard Reisz: That apply to? So to every Ira right? Just as you know, if you got a brokerage, Ira
Bernard Reisz: at Vanguard.
Bernard Reisz: All the rules that we talk about in the sdra context apply there as well. Private transaction rules apply to every Ira.
Bernard Reisz: but you know, so long as your assets are in vanguard and you can't touch them, and you can't buy real estate. You can't have access to it.
Bernard Reisz: Those rules were kind of move because your hands are tied.
Bernard Reisz: And there's no, you know there's you don't. You're never going to encounter a transaction in which those rules, you know, become applicable
Bernard Reisz: in the self-directed Ira world. Suddenly your you know, your encounter. You can encounter transactions
Bernard Reisz: on which these Ira rules become applicable.
Bernard Reisz: Now, when your assets are at a custodian, there's a bit of a barrier between yourself
Bernard Reisz: and the money means that number one. If you try to process a transaction that is obviously prohibited.
Bernard Reisz: The custodian will not process it.
Bernard Reisz: so a custodian will will stop any transaction that's clearly prohibited and spare you from prohibited transactions.
Bernard Reisz: Number 2. The custodian holds it. It also means you can't do anything instantaneously. Right? So there can be a time lag. You have to submit paperwork. Gotta get paperwork back. So you've got to do a lot of paperwork, and you gotta wait a couple of days.
Bernard Reisz: So all that, you know, if we're gonna end up, you're trying to do a transaction that's questionable.
Bernard Reisz: You know that those barriers to transacting.
Bernard Reisz: you know, will save you. Because you may recognize throughout that process at some point that hey? Maybe I shouldn't be doing this. Maybe this prohibited transaction here
Bernard Reisz: and there are prohibited transactions that are not obvious
Bernard Reisz: and so custodian can process the transaction. That's prohibited. Because, you know, custodian again, they're not. Their role is not
Bernard Reisz: to assess and analyze thoroughly analyze every transaction. They will ask you several questions.
Bernard Reisz: That will, you know, eliminate, engaging in any clearly obvious prohibited transactions, but it won't catch everything.
Bernard Reisz: So there are. And you know I've seen these, you know, transactions prohibited transactions that are funded by custodians, and frankly, there is no way for them to have known.
Bernard Reisz: You know, that the transaction was prohibited, so
Bernard Reisz: when the absence of an Ira Llc. Every transaction takes time and effort during that.
Bernard Reisz: while you're spending that time and exerting that effort, you may recognize that, hey? This is a transaction that maybe you shouldn't do with the Ira Llc.
Bernard Reisz: You know you can execute it basically as fast as you can think it.
Bernard Reisz: So you definitely want to be aware
Bernard Reisz: of the rules that apply to the Iras
Bernard Reisz: because they apply at the Llc level.
Bernard Reisz: and you've got to be cogious to them because there is there is nobody that's gonna stop you
Bernard Reisz: other than yourself.
Bernard Reisz: So that's the most important. Item, to mention
Bernard Reisz: some of the other items here.
Bernard Reisz: okay, cost so in this context, you know, it's about weighing, hey? The cost of the Llc. Versus the cost of having the custodian minister it.
Bernard Reisz: So this will.
Bernard Reisz: This is again subjective, but somebody that's doing a single transaction.
Bernard Reisz: They're not owning a hard asset.
Bernard Reisz: you know. They're probably better off foregoing.
Bernard Reisz: The the Ira Llc.
Bernard Reisz: But for somebody that's gonna have multiple transactions, multiple assets.
Bernard Reisz: Now, what's the cost? Gonna be of having the custodian minister everything versus
Bernard Reisz: having the Llc. The cost of the Llc.
Bernard Reisz: And the freedom and flexibility of of executing those transactions. So cost is not everything. Of course, you mentioned privacy, anonymity, asset protection, access to investments. But cost is definitely an important part of it of the equation.
Bernard Reisz: And so you wanna weigh the cost of the Llc
Bernard Reisz: versus the cost of having
Bernard Reisz: the custodian assess it. And now to truly know the only hurdle here that I see to truly know the cost of the Llc. You really have to answer some of the other questions, where's where's the Llc. Going to be domiciled? So some of these things are a bit of you know iterative and the
Bernard Reisz: questions kind of feed into each other questions and answer. You know you need to, you know. Consider, get answers to some of the questions
Bernard Reisz: about where your potential Llc. May be before fully understanding the cost.
Bernard Reisz: The the reality is, though, if you're dealing with a provider that's not looking to sell you stuff.
Bernard Reisz: The you know, the Llc structure. Will most likely not add substantial costs, and in most cases
Bernard Reisz: you'll come out ahead certainly over time.
Bernard Reisz: Can't emphasize this. Enough.
Bernard Reisz: The Ira Llc. Is not the Ira.
Bernard Reisz: so the Llc. Is for investing.
Bernard Reisz: But any Ira Rollovers transfers Ira contributions and distributions
Bernard Reisz: must be done by the Ira account.
Bernard Reisz: They cannot be done directly via the Llc. Checking account.
Bernard Reisz: The Llc. Is a way to get control of the Ira money a way to get asset protection for Ira assets.
Bernard Reisz: But it's not the Ira itself.
Bernard Reisz: We bolded this. I think we've said this enough times already today.
Bernard Reisz: The prohibited transaction rules
Bernard Reisz: apply to the Ira Llc. And the prohibited transaction rules. I don't think you know, be it's not a uniquely. Ira Llc topic. It applies to every self deductor. Ira
Bernard Reisz: so you won't belabor that point today. Suffice it to say that the prohibited transaction rules that apply to
Bernard Reisz: every Ira are going to apply to the Ira, Llc.
Bernard Reisz: An extension of that is that
Bernard Reisz: you should not be taking any compensation from the Llc.
Bernard Reisz: You wouldn't want to say, hey, you know what I'm operating this. I'm running this company. I should take compensation if I was running some other company.
Bernard Reisz: I would take compensation, you know. Maybe you've got a business, and you've got an Llc.
Bernard Reisz: You know you take money, as the
Bernard Reisz: you know, as the business owner or an employee of the business, depending how your entity is set up.
Bernard Reisz: and so somebody may. Somebody might say that. Hey? I'm I'm running this.
Bernard Reisz: I should get compensated.
Bernard Reisz: Well, if you're the Ira account holder, and you're running this Llc.
Bernard Reisz: You should not take any form of compensation.
Bernard Reisz: Another item that we can't ex, you know, opens a Pandora's box.
Bernard Reisz: We don't want you taking physical possession of untitled assets.
Bernard Reisz: You know. You don't. 1 of the things you'll come across
Bernard Reisz: is gold. This is a great example of precious metals.
Bernard Reisz: Be very careful with precious metals and Iras.
Bernard Reisz: That's been a particular area that's been rife with issues.
Bernard Reisz: All sorts of issues from Ira, compliance to fraud, and everything in between.
Bernard Reisz: You do not want to take
Bernard Reisz: physical possession of those you know of precious metals.
Bernard Reisz: No credit cards, if you're you know, you may get all sorts of offers.
Bernard Reisz: You know, you know us being that we've you know we're running thousands of Lls. Not running, but we're involved with thousands of Llcs.
Bernard Reisz: I think, for every Llc. We set up we we get it.
Bernard Reisz: You know enough junk mail that you think the Amazon rainforest was chopped down for it.
Bernard Reisz: So every entity that's set up, you know, inevitably.
Bernard Reisz: There are. Gonna be at some point. Credit card offers.
Bernard Reisz: No credit cards, debit cards.
Bernard Reisz: Can be okay. There's a bit more to know about that.
Bernard Reisz: But again, you want to be very cautious. There are some folks that push, you know, some companies that are out there very aggressively promoting.
Bernard Reisz: you know, debit cards, and what we say is, if you don't really need it, don't get it.
Bernard Reisz: because it's just too easy to inadvertently make a mistake,
Bernard Reisz: and engage in a prohibited transaction.
Bernard Reisz: So while it sounds great to have a debit card.
Bernard Reisz: and it really is great in many cases, many folks for the nature of their investments that they're doing with the self directed. Ira
Bernard Reisz: will benefit from a debit card.
Bernard Reisz: But if you don't need it, and you have no really good reason to have one.
Bernard Reisz: We tell people skip the debit card.
Bernard Reisz: Let's move on to some actionable tips to navigate the investment process.
Bernard Reisz: It's always important to understand the different roles.
Bernard Reisz: So when an Ira Llc is used, understanding
Bernard Reisz: your role, understanding the role of the custodian
Bernard Reisz: understanding the structure of an Llc. So understanding and when you execute transactions.
Bernard Reisz: understanding who has to go on title understanding who has to sign
Bernard Reisz: and in what capacity they're signing.
Bernard Reisz: So it's important to know who the understanding who the Llc. Member is, understanding who the Llc. Manager is
Bernard Reisz: and understanding, and all paperwork, or any deal documents, a transactional paperwork to properly reflect the roles
Bernard Reisz: of whoever is signing the document
Bernard Reisz: right? So the investing entity is going to be the Llc.
Bernard Reisz: The Ira custodian is there in the background?
Bernard Reisz: And if you're signing the documents and you're the you know you're doing that, not because you own the Llc. You're doing that because you're the one that is authorized to execute on behalf of the Llc. You're not the member, you're not the owner. That flows back
Bernard Reisz: to the Ira.
Bernard Reisz: Another one is understanding that any financing, because
Bernard Reisz: Iras and Ira Llcs can obtain debt, financing but any debt financing must be non recourse
Bernard Reisz: to the Ira account holder.
Bernard Reisz: Otherwise we're looking at a prohibited transaction.
Bernard Reisz: and lastly, the last item on our list here is.
Bernard Reisz: and you know we really should have put this up, you know, maybe even at benefits we're talking about. This is a kind of a double edged sword, something that is a wonderful benefit.
Bernard Reisz: Of an Ira, llc, but something with that with regard to which caution is needed.
Bernard Reisz: You can pool funds for an investment, and
Bernard Reisz: it's, you know, syndications. All forms of asset funds. Pooling is done for many, many investments.
Bernard Reisz: And now suppose you want to pool your Ira's funds with somebody else's funds.
Bernard Reisz: or perhaps with your own funds, non ira funds, or funds of another Ira that you control or funds of the Ira of your spouse.
Bernard Reisz: These things are typically best facilitated via use of an Llc.
Bernard Reisz: However, having disqualified persons, sharing an Llc.
Bernard Reisz: Does substantially increase the possibility of having some sort of prohibited transaction over the lifetime of the investment.
Bernard Reisz: So there are many ways to pull money.
Bernard Reisz: One of those is with using a single Llc. To pool funds from multiple investors. But there are other ways to pool funds as well.
Bernard Reisz: So it's very important. To number one. Know that this is doable, but number 2
Bernard Reisz: know that there are certain amount of compliance.
Bernard Reisz: Risk associated with it.
Bernard Reisz: And number 3 know that there are other options.
Bernard Reisz: and I'd say, number 4 is, you want to get a thorough analysis of the way to go, the different possibilities and options, and how they relate
Bernard Reisz: to what you're trying to get done, because not everything that
Bernard Reisz: can be done should be done. Sometimes there are preferable or better or safer routes
Bernard Reisz: that can be taken.
Bernard Reisz: So partnering is often best facilitated through a multi-number Ira, Llc. But caution is advised.
Bernard Reisz: and a thorough analysis of every situation is needed.
Bernard Reisz: And that kind of brings us to
Bernard Reisz: the conclusion of the items that are in this presentation.
Bernard Reisz: and I'm gonna stop the share and hand it over to Tony and Andrew
Andrew Crawford: Thank you, Bernard, and just as a reminder, everyone our presenters do have to jump here in about 1015 min, so we will get to as many questions, live as possible, but know that any questions we do not cover. I will make sure they are, answered Offline, and I'll personally send you them within 48 h. Thank you very much.
Tony Unkel: Thank you, Andrew. Before we get to the questions, we do have a couple of more statements we have to make, so let's wrap it up.
Tony Unkel: What's next? We will be sending you a replay and additional resources. The follow up email has the video replay slides and much more education.
Tony Unkel: and please make sure to register for April's webinar making sure hoas don't ruin your real estate investment.
Tony Unkel: If you need any more information on self-directed Iras, feel free to contact me directly. Or you can visit our website and learning center. And please remember to follow us on all socials for media updates.
Tony Unkel: time for questions
Tony Unkel: before we hop into the question. Just please know we can't answer any tax related questions. Those will have to be answered offline, and anything there. It involves any type of return on investment or fee structure. Please contact Bernard Bernard directly offline as well. We will keep both of our contact information on the screen during the QA. Process?
Tony Unkel: 1st one that we have is actually a tax question which can be answered by Bernard Bernard. Do they need to file an annual fed income return at 1065 for the Ira Llc.
Bernard Reisz: That will vary whether depending on the number of members. In the Llc. That's a very important point, because that's gonna depend on how many owners there are?
Bernard Reisz: you know. If there's a partnership created, then 1065 will be needed.
Tony Unkel: If somebody purchases a rental property funded by their Ira through the Llc. That Reshore sets up, can that individual use the equity in the property for future purchases.
Bernard Reisz: The answer is, Yes.
Tony Unkel: When making alternative investments. What ein is used to completing the W. 9 entrust ein or the Llc's ein, I can tackle this one. The entrust does not provide eins for single member Llcs. So in this specific case you would have to apply for an ein for your Ira on the Irs website. We would provide you step-by-step instructions and the link to do so, and the application takes no more than 5 min to complete.
Tony Unkel: Are there any disqualified parties to act as a manager of the Llc. If your Ira is the owner of the Llc. You, the Ira owner, or the manager, the Ira manager cannot be compensated. It is best practice to name yourself as the manager of the Llc.
Tony Unkel: Can this also be done in a Roth Ira? Yes, any self-directed Ira retirement account can also
Tony Unkel: own a single member. Llc.
Tony Unkel: Would the Irs consider an arm's length transaction if you are purchasing real estate property as an investment through your self-directed Ira Llc. If you are listed member manager of the Llc.
Tony Unkel: So in the Llc. The Ira is the listed member. You individually are the listed manager. The Llc. Is the buyer of the property, and you are still arm's length. You cannot provide any type of sweat equity to any of your Ira investments, meaning you cannot go in there and cut grass. You cannot go paint, you cannot
Tony Unkel: change light bulbs. All that does have to be contracted out. Once you perform one of those tasks that no longer becomes an arm's length transaction.
Tony Unkel: Bernard, this individual has a both a Roth, Ira, and a traditional Ira. Should they create an Llc. For each, or can they partner those Iras in one Llc.
Bernard Reisz: Yeah. And so that's kind of what we touched on towards the end of the presentation.
Bernard Reisz: There's no one size fits all answer to that. And it's gonna come down to a case by case
Bernard Reisz: basis.
Bernard Reisz: And so there's it's it's impossible to kind of say yes or no, or do this or do that? At least, you know, in this context
Tony Unkel: Just keep in mind with both Roth and traditional Iras. You have pre-tax money and post-tax money. You'll have one bank account, so you will have Pre and post tax money commingled in one bank account which is going to make record keeping extremely difficult.
Tony Unkel: Next question, what financial institutions allow one to open an Ira Llc. Checking accounts, big banks, national banks, or specialty banks that operate in this space. Our experience is pretty much any bank that you have a banking relationship with.
Tony Unkel: We'll open in a checking account for the Llc.
Tony Unkel: I don't think I've ever crow come across one of our clients mentioning that a bank would not do so for them.
Tony Unkel: When opening a bank account to the Llc. The bank asks what the purpose of the business is. Have you done this yourself. What is the answer to that question? I have not done it myself, but I would say, it's for a real estate purchase.
Tony Unkel: Major Banks decline the application if it's set for investing. If that's sometimes that does happen. If you just say real estate purchases.
Tony Unkel: it's not an incorrect statement you are purchasing real estate doesn't need to be known, that is, for investment purposes.
Tony Unkel: Can this be done as a Roth Ira, or a traditional Ira? It could be either or or both.
Tony Unkel: If I deposit a payment made for me for a loan payment held in my Llc. Ira to my personal account, I quickly deposited into the correct amount and put a note on file to explain what happened. Is there anything else I should do?
Tony Unkel: whoever asked this question, please contact me directly afterwards, and I can definitely dive deep into this, because that's a very long answer.
Tony Unkel: Bernard. Do they need to add a domicile for, say Indiana. If they want to lend money in Indiana. If they live in Illinois
Tony Unkel: well, they need Indiana, Llc. If they live in Illinois, to land in Indiana.
Bernard Reisz: That. Yeah, that's a tricky question. And again it falls outside. What can be done here? And the rules for that somewhat vary
Bernard Reisz: across, you know, from state to State. What determines nexus for 2 2 items.
Bernard Reisz: There's both the question of tax nexus
Bernard Reisz: and the definition of doing business in the State.
Bernard Reisz: And those vary
Bernard Reisz: across states, you know, any specific questions, you know, my guess are fall outside of what we can do here
Tony Unkel: So for further answers, please contact Bernard Crow Media after the webinar. His information is on the screen.
Tony Unkel: Names of owners of Llcs is public information in some States are there states where this is not the case?
Bernard Reisz: That's for me. Yes, the there, those vary from State to State, and in some States you can have privacy, some States. It's more difficult. Typically, there's always a way to achieve privacy.
Bernard Reisz: But some States make it more difficult than others.
Bernard Reisz: And this is one area which there's a lot of misinformation about.
Bernard Reisz: But yes, there definitely are states that make it very easy, and it may not be the States that are highly touted and promoted, but it is certainly doable, and that's going to be one of the factors to consider when setting an entity. But it's far from the only factor. And there are other factors that might be more important
Bernard Reisz: than that
Tony Unkel: Or fees deducted from the Ira, or paid externally, all fees will be paid externally.
Tony Unkel: If the Llc. Is a disregarded entity, how are taxes handled if flowing into an Ira. Please contact Bernard offlines for in-depth answer on that question
Tony Unkel: can I operate a business out of the Llc. For example, rental arbitrage, where I rent a property and turn around and rent to someone else.
Tony Unkel: Give you that one, Bernard
Bernard Reisz: Okay? So the the short answer would be, Yes.
Bernard Reisz: the longer answer is that one of the prohibited transactions is providing services to your Ira.
Bernard Reisz: And now what rises to the level of these services?
Bernard Reisz: Nobody knows the answer to that.
Bernard Reisz: So
Bernard Reisz: there, while certain things are, you know, with certainly an Ira Llc. You'll have the ability to do this very, very easily
Bernard Reisz: when it comes to
Bernard Reisz: certain kind of businesses that are require more active involvement, and, so to speak, running the business.
Bernard Reisz: You might number one, be run into what we call what you referenced earlier. The sweat, equity.
Bernard Reisz: or something, might be rise to the level of providing services, the challenges. There are no footprints in the sand.
Bernard Reisz: We don't really have a lot of guidance as what constitute services.
Bernard Reisz: In a way, that's a good thing. That means that, you know. There hasn't been.
Bernard Reisz: you know. Nobody's gotten in trouble for that.
Bernard Reisz: But it's a bad thing, because it means we don't have absolute clarity. As to what rises to the level of being services
Tony Unkel: In a situation like this. This is where we would suggest you speak with an attorney before entering into that transaction, and get a clear understanding of the law.
Tony Unkel: Can you give some examples of a business purpose of an Ira Llc. That Banks have approved and opened for them a bank account. And which bank was it? We don't want to promote any specific banks again. We haven't rarely heard of a bank denying an account for an Llc. Although I'm sure it has happened sometimes.
Tony Unkel: and the business purpose of the bank is just real estate purchases, or, you know, whatever asset class you're looking to go into.
Tony Unkel: Here's a good one for you, Bernard.
Tony Unkel: Suppose I have a Roth traditional Hsa.
Tony Unkel: And my all goes into an Ira Llc. Now they need to either use the Hsa for medical, or do you have to withdraw from the Ira? Is that doable?
Tony Unkel: So there's a lot to follow there. You're gonna have multiple accounts as members of an Llc.
Tony Unkel: If there obviously there won't be any liquidity in the Hsa. To cover the medical expense. But if you have liquidity in the Llc. You would have to send funds back from the Llc. To the Hsa. So then entrust, can distribute or send those Hsa. Funds to you to pay for your medical expense.
Tony Unkel: What do you think, count? A little bit
Bernard Reisz: Yeah, I the it definitely should not be. I don't know. I'm not sure which point. The questioner is focusing on.
Bernard Reisz: But they certainly cannot take Hsa distributions directly from the Llc.
Bernard Reisz: And this is, you know, can be one of the areas where
Bernard Reisz: you know where that highlights.
Bernard Reisz: Why, having multi-member Llcs and create complications.
Bernard Reisz: So you know, if there's we'd say that's a great structure for somebody that you know the user.
Bernard Reisz: you know an Hsa as sometimes a stealth. Ira is a term that's used
Bernard Reisz: where, if they're not really using it to pay medical expenses, they're just using it as another tax advantage bucket
Bernard Reisz: for somebody that's actually uses their Llc. Their Hsa.
Bernard Reisz: To fund medical expenses on ongoing basis.
Bernard Reisz: Multi member Llc. Is probably not a good idea for them.
Bernard Reisz: Again, it's doable. But they definitely would have been better off exploring
Bernard Reisz: alternatives to see this, to achieve the same
Bernard Reisz: objective too many compliance issues can arise when you constantly have to take money out
Tony Unkel: Do you offer services to set up the Llc. Ein and bank account? If so, what is your fee? Is it done by your company, or a 3rd party who handles the filings, who has control of the bank account what are prohibited transactions? So we can say, yes. Bernard does help set up the Llcs and do the eins
Tony Unkel: for anything fee related. Please contact him directly, offline
Bernard Reisz: Yeah, I say that we do
Tony Unkel: Go ahead. Sorry.
Bernard Reisz: No, we do. We do offer
Bernard Reisz: you know, a very comprehensive and discounted service.
Bernard Reisz: For and trust clients specifically.
Bernard Reisz: We have great experience working with Tony and everybody else on the team and trust.
Bernard Reisz: And it's definitely a service that we
Bernard Reisz: offer and are happy to offer to entrust clients.
Bernard Reisz: and we offer it at a discounted fee for, and trust investors
Tony Unkel: Who has control the Llc. Bank account. You, the manager, the Ira owner, manager of the Llc. Has full control of the bank account.
Tony Unkel: What are prohibited transactions. Prohibited transactions fall under Irs code 49, 75 feel free to reach out to me afterwards, and I can go through each one with you.
Bernard Reisz: Okay, I'm gonna be hopping off momentarily. Tony, do you spot any questions? That stick out to address before I hop off
Tony Unkel: Yep, not a problem.
Tony Unkel: Llc. S. Corp, C. Corp, is there a difference before you answer that I can go to the S. Corp. Section S. Corp. Investments are one of the prohibited transactions within an Ira. So S. Corps are out.
Tony Unkel: Bernard. Difference between an Llc. And a C Corp. We'll leave this as your last one. Then you can go on your way.
Tony Unkel: Okay,
Bernard Reisz: The primary difference is that a pack purposes, and Ll. A single member, Llc. Is a disregarded entity. Multi member Llc. Defaults being a partnership.
Bernard Reisz: C. Corp is a taxable entity. It's not a pass through entity. It pays tax at the C Corp level.
Bernard Reisz: Determining which, while the majority of Ira Llcs
Bernard Reisz: are not gonna be C corps. There's certainly C corps have their place. And can be part of
Bernard Reisz: well thought out strategy within Sd. Iras. But the overwhelming majority
Bernard Reisz: Ira Llcs are not going to be C. Corps. And again, we do address you know typically the name to address these
Bernard Reisz: when we set up Ira Llcs. The way we do it, we have a unique link for, and trust
Bernard Reisz: clients is that it's not the service is not just setting up the Llc. It includes discussion, time
Bernard Reisz: to address all these questions. So who is determining
Bernard Reisz: which domicile, you know. Should a C. Corp election be made? Whatever else goes into making choices
Bernard Reisz: about the entity structure?
Bernard Reisz: You know we aim to address those during the discussion time
Bernard Reisz: that then informs how the Llc. Actually gets sets up, set up and it's all part of a single
Bernard Reisz: flat fee service that's available to entrust clients
Tony Unkel: Thank you very much, Bernard. I know you have to run. Hope you enjoy the rest of your day. I can stay on for a little while longer and tackle some more questions. We do have quite a few more, and then anything we can't get to in our allotted time, as Andrew mentioned, we'll be emailing out to you guys within 48 h. But I would like to thank Bernard for taking time to educate us, providing this great insight. Thank you, Bernard.
Andrew Crawford: Thank you, Bernardo
Bernard Reisz: Thank you.
Bernard Reisz: Thank you, Andrew. Thank you, Tony. And thank you all for joining and participating.
Bernard Reisz: Best of all.
Tony Unkel: Take care. Now, alright. Next question is, I use my Llc. Roth Ira to
Tony Unkel: account to purchase pre Ipo. Okay for this one. This is an in-depth answer, please, please contact me as soon as this webinar is over, and I can cover all this for you.
Tony Unkel: When do I need return the Ira Llc. Profits back to entrust.
Tony Unkel: One of the benefits about that Llc. Is you can build that Llc. Bank account up over a period of
Tony Unkel: weeks, months, or years. You can use that money for reinvestments when it comes time to take a distribution.
Tony Unkel: or when you want to close down your Llc. That is, when the money will have to be sent back to entrust, in order to properly close down the Llc. Or close down your Ira, or process a distribution. You do have to report the fair market valuation of your Llc. To entrust on an annual basis. We send that request out in November, and that request is due back by January 30, th so the proper values will be updated on annual basis. But the actual flow of money between the Ira and the Llc. Can be done at your convenience.
Tony Unkel: Can the self-directed Ira own another Llc. Outside? I'm assuming you're referring to an Ira Llc. Own another Llc. Yes, an Ira Llc. Can invest in another Llc. But you do have to follow the Irs rules and make sure you are not committed to prohibited transaction under self dealing or disqualified persons for that Llc. In which the Llc. Is investing? In
Tony Unkel: what is the process for rental property transactions? Can you deposit rental income pay for expenses via the Llc. Checking account. Yes, absolutely. Every dollar in every dollar out flows through that Llc. Account. So you're purchasing the property with the Llc. And then your tenants will be paying your Llc. On a monthly basis. You're paying all of your expenses out of that Llc. Account.
Tony Unkel: It was mentioned that you should get an ein for your Ira. If you are subscribing to a fund a hedge fund, for example, with an Ira Llc. Do you use the ein for the Llc. Or the ein for the custodian.
Tony Unkel: If you are doing a private equity investment directly out of your Ira without the use of an Llc. The custodian's ein is used for the k. 1.
Tony Unkel: If you are us utilizing a single member Llc. And then going into a private equity investment at that time you will need to apply for an ein for your Ira.
Tony Unkel: These have to be single member Llcs. I presume
Tony Unkel: you can partner with them. But, as Bernard was saying, it does get a lot more complicated. There are more filings when there's more than one but typically it's a single member manager managed Llc.
Tony Unkel: Can we sign escrow paperwork and loan paperwork as the manager? Or does the interest group have to sign?
Tony Unkel: Once that investment is made in the Llc. You are free to make the investments as you see fit. As long as you're following the Irs code
Tony Unkel: custodian does not get involved within any of the transactions within your Llc. So the manager is able to sign on behalf of the Llc.
Tony Unkel: I got through some of these in my prior answer. One member, Ira, Llc. Yes, single member manager manage Llcs. Bernard touched on this. Do I need to set up 2 Llcs. If I have Roth and regular. It is best practice. But I'm sure there's a way that Bernard could make it work for you
Tony Unkel: best to contact him, offline to get the ins and outs of how to do that
Tony Unkel: I have one. Ira Llc. With entrust is the entrust fee based on one asset fee? Or is it based on the total asset value.
Tony Unkel: Please contact me offline. We can go through your fees. I don't know which fee schedule you're on, so I won't be able to appropriately answer that question for you right now.
Tony Unkel: if I need to finance some assets, or there's special banks that you need to go to to get a non recourse loan. Yes, so the only way to get financing is through a non recourse loan. You cannot take out a mortgage. Mortgages are personally guaranteed Iras cannot personally guarantee loans. So there are non recourse lenders. If you visit our website, we do have available non recourse lenders throughout the country.
Tony Unkel: I'll be inheriting a 401 K. And have to transfer to an inherited Ira. Can this be used to invest in real estate? Yes, absolutely. You would just need to establish an inherited Ira with interest. We call it a beneficiary, Ira.
Tony Unkel: and then we can accept that 401 k. Rollover, and then from there you can direct those funds into real estate
Tony Unkel: caution against using all of your Ira funds to purchase a real estate investment, since it's not liquid, especially if you're the age where R. And D. Is required.
Tony Unkel: I'm guessing you would suggest keeping some liquidity available.
Tony Unkel: Now. We can't guide you one way or the other on how much liquidity keep available. But if you do know, you have an Rmd. Coming up that year.
Tony Unkel: you could always make some cash available in the Ira to process that Rmd, you can also pull your Rmd. Out of a different retirement account. If you have others, you don't need to pull out your Rmd. From each account you just total total Rmd. For that year, and as long as that's withdrawn from any of your retirement accounts, you will meet the requirements of the Rmd.
Tony Unkel: There's also a way of taking what's called an in kind distribution to meet your Ra requirement as well.
Tony Unkel: We're happy to talk about that offline.
Tony Unkel: Can your Ira Llc. Invest or loan money to another non-ira Llc. If you are also the manager owner of the second Llc. Entity. That's a clear cut. Prohibitive transaction called self Dealing Irs Code 4,975 you are, and also under disqualified persons. Ira cannot interact with the Ira owner. You cannot buy, sell, or exchange an asset with something that you personally own.
Tony Unkel: What if there is you bit income in a single member. Llc. You will have to file a return.
Tony Unkel: Always speak to your accountant about specific tax, but whenever ubit is required, ubit is paid for by the Ira.
Tony Unkel: Can the Llc. Checking account be linked to a savings Mma. Account, also owned by the Llc. I would assume that's up to the bank.
Tony Unkel: If I have an Llc. Created already for my business, can that Llc. Be converted to an Ira Llc. Or do I have to create a new one? It has to be a brand new Llc. Goes back to the previous transaction.
Tony Unkel: purchase sale or exchange of an asset with an Ira owner and the Ira
Tony Unkel: did. Did I just say you get an ein for the Ira itself? Or did you mean use the ein for the Llc. For the Ira an ein for the Ira itself.
Tony Unkel: So if there's ever a requirement for the member ein for that Llc, you will need to apply for an ein for your Ira on the Irs website. We provide you guidance on how to do so.
Tony Unkel: Can you deduct setup fees and record keeping for the self directed Ira. No, fees are not tax deductible.
Tony Unkel: I already have investment through entrust. Can I move an existing investments into the new Llc. Yes, absolutely. It's called an exchange. So we need a bidirectional letter with exchange. We'll exchange the current asset that you have to the Llc. Ownership, and then, whatever your current investment is, the dead Dyms will need to be sent out to the investment documents. Changing the investor from the entrust group to your newly formed Llc.
Tony Unkel: And I think that's gonna be all, for today we'll go through the rest, and from there we will shoot out answers again. Our contact information is on the screen. Please feel free to reach out to us. Should you have any questions or comments
Andrew Crawford: Thank you. Thank you all for joining us today.