Salt Lake City, Utah, Estate planning attorney Geoff Dietrich provides the following FAQ about IRA LLC.
Question: Can I form a limited liability company in which my IRA is a member and use all or a portion of my IRA funds to make self-directed investments through the LLC in various assets, including, but not limited to, real estate?
Answer: Yes, but there are some types of assets that cannot be acquired.
Question: Is it super expensive to form an LLC owned by an IRA (“IRA LLC”)?
Answer: No, we typically form IRA LLCs for less than $2,000.00.
Question: Is this a new law?
Answer: No. It has been allowed for many years. Few people seemed to know about
this option – or even care – until the stock market began
to decline. Financial institutions, meanwhile, had little incentive to
recommend something other than stocks, bonds or mutual funds, since these
provided a source for their fees.
Question: How do I know this is legal?
Answer: Discuss this strategy with your tax advisor. If he is unfamiliar with it have him consult resources such as The Journal of Taxation, the Journal of New York CPA’s and Trust and Estates magazine and other resources used by tax attorneys and CPAs.
Question: Can my LLC purchase real estate I already own?
Answer: No, not without filing for an exemption. Property that you or a disqualified person has ever owned is not eligible to be purchased by your LLC since this would be a prohibited transaction.
Question: Can I co-invest with the IRA of my spouse or other investors?
Answer: Yes, both IRAs can be owners of the LLC, in fact so can other individuals and entities as long as the other owners are not disqualified, persons. This is very useful for large investments.
Question: Can I buy vacation property?
Answer: Yes, but you can not personally use it. Neither you nor any other disqualified person can have any personal use or benefit of the property while it is held in your retirement account. The property must be purchased for investment purposes only. However, upon reaching retirement age you could take the property as a distribution.
Question: If I want to learn more about IRA LLC, what should I do next?
Answer: Contact Salt Lake City, UT, estate planning attorney Geoff Dietrich.
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