Proper vesting of the investment property title is key
The title of the property is vested in the name of the IRA. The word “vesting” refers to the title and/or registration of the asset held in the self-directed retirement account. If your IRA is not partnering with personal funds, make sure the investment documents are titled in the name of your Real Estate IRA as the owner - not in your own name. Consult with your attorney or tax advisor to be aware of your state’s legal requirements and regulations on how to take title to the property, as there may be legal or tax obligations.
Entrust will review the investment documents to ensure that the contract has the correct title prior to processing the Buy Direction Letter and funding the transaction. The property must be titled with an “FBO” before your name, which means “for the benefit of.” The FBO designation helps maintain the administration chain for the IRA along with the asset ownership: The person for whose benefit the IRA custodian holds the money. An IRA-vested note will reference the custodian and account number as well as the IRA holder.
Proper vesting of the title:
- For IRAs, ESAs, HSAs: "The Entrust Group, Inc. FBO [Client Name] Account # [Entrust Acct. Number]
Example: The Entrust Group, Inc. FBO John Smith Account #12345.
If there is more than one owner: The Entrust Group, Inc. FBO John Smith Account #12345, [Percentage of ownership] % undivided interest.
- For Qualified Plans: [Trustee’s Name], Trustee of [Plan Name] FBO [Client’s Name, Entrust Acct. Number]
Example: David Smith, Trustee of Little Angels Profit Sharing 401K Plan FBO John Smith Account #12345.
If there is more than one owner: David Smith, Trustee of Little Angels Profit Sharing 401K Plan FBO John Smith Account #12345, [Percentage of ownership] % undivided interest
All documents must be noted “read and approved,” then signed and dated by you as the IRA holder before sending them to Entrust for signature. Do not sign the documents where a signature is required, as Entrust must sign all documentation for the purchase on behalf of your IRA.
You must submit documents to your county’s records office for recording before returning it to Entrust. Be sure to keep a copy for your records. Entrust also signs all documents on behalf of your self-directed IRA.