If you want to set up a self-directed IRA or you already have an account, you may be able to improve it for quicker investing and bill payment. You can make this happen without waiting for your custodian to direct your bills and investments with checkbook control.
Checkbook control, also referred to as IRA LLC, is simple to set up. To help you learn more about this feature, we’ll cover how a checkbook IRA works and how to set up a self-directed IRA LLC with checkbook control.
What Is Checkbook Control of an IRA?
A checkbook IRA is a retirement account that offers the account owner greater control. Checkbook control allows you to perform investment activities via a physical checkbook linked to your IRA. When you have a checkbook IRA, you can write checks or wire funds from your self-directed IRA Limited Liability Company (LLC) to make investments. Your transactions are withdrawn and deposited into your account.
What Is Checkbook Control for a Self-Directed IRA?
Checkbook control for a self-directed IRA lets you conveniently and quickly buy an asset, pay expenses or pay for investment upkeep. As the manager of your checkbook IRA, you can act promptly on exciting investment opportunities. A self-directed IRA LLC lets you skip the delays associated with waiting on a custodian, so you can act as soon as an investment opportunity presents itself.
Being able to purchase assets using your self-directed IRA without custodial interference enhances the self-direction of your account. A self-directed IRA LLC also permits you to make investments in alternative assets that you may not be able to invest in with a traditional retirement account.
Since the IRA owns the LLC, you can enjoy the tax advantages that come from the LLC. The LLC is a tool in the IRA, which means it retains the tax-free or tax-deferred benefits. The manager of the LLC has some responsibilities, such as filing tax returns and annual reports. Filing IRS reports like 1099s may also be necessary.
Who Uses Checkbook IRAs?
Investors who want to manage their IRA investments closely may benefit from checkbook control. A self-directed IRA LLC is also typically a good option for investors who want to make investments in alternative assets, including:
- Tax liens
- Real estate
- Precious metals
- Promissory notes
Self-directed IRAs with checkbook control are best suited to savvy, experienced investors who are unsatisfied with the diversification or returns available through traditional investments. The ability to make investments in alternative assets can offer the potential for greater returns, though they can also come with higher risk.
A self-directed IRA LLC works best for the following investors:
- Investors interested in real estate investment
- Investors who want signing authority over their investments
- Investors who want checkbook control of their retirement funds
- Investors who are teaming up with a spouse or business partner
- Investors with a high net worth or income who want to make investments in alternative assets
Why Use Checkbook Control?
Checkbook control can offer you a number of benefits, such as investments in alternative assets, lower costs and a fast, easy process.
1. Ability to Diversify With Alternative Assets
One of the most significant benefits of an IRA LLC is the ability to make investments in alternative assets you may not be able to purchase with a standard account. When you open a self-directed IRA LLC, you may be able to invest in the following:
- Tax liens
- Real estate
- Private loans
- Private equity
- Precious metals
- Foreign currency
Conventional IRAs may limit your investments to traditional assets like stocks and mutual funds. You can diversify your portfolio by using your self-directed IRA LLC to invest in other assets.
2. Lower Costs
A self-directed IRA LLC may also appeal to investors who want to reduce IRA custodian involvement along with the associated custodian fees. Since you are directing the IRA funds yourself, you don’t need to pay as many transaction and administrative fees to a custodian.
This reduction of IRA custodian fees is possible because you’ll be able to avoid the processing fee from the custodian processing the investment purchases. You also bypass your IRA custodian’s review of the relevant paperwork. Skipping these steps can ensure you process your investments in a timely manner.
Your custodian or administrator may charge you only for the LLC rather than all of your investments. Low annual account and custodian fees can make checkbook control advantageous for you.
3. Fast, Easy Process
The process of gaining checkbook control is typically fast and easy, though it may vary based on your state and the custodian who holds your retirement funds. At Accuplan, our team can reduce the time and cost of setting up checkbook control for your IRA. Since you are in control, you’ll be able to complete your investment sales and purchases much more quickly. This streamlined process makes an IRA checkbook especially appealing to investors.
How Does a Checkbook IRA Work?
First, you’ll need to establish an LLC that you manage, and the IRA owns. Next, the custodian can transfer the IRA owner’s funds to the IRA LLC bank account. You’ll have the authority to make investments for the IRA and the ability to write checks for investments from your IRA LLC bank account.
The following are the steps involved in how a checkbook IRA works with us at Accuplan:
- We will consult with you to identify your objectives for self-direction.
- We will establish a new IRA and separate LLC.
- You roll over your existing 401(k) or IRA.
- You establish investment and banking accounts for the LLC.
- American Estate & Trust purchases membership in the LLC on behalf of your IRA.
- You act as the LLC manager and direct your investments.
Open a Checkbook Control IRA With Accuplan Today
At Accuplan, we offer self-directed IRA administration. We pride ourselves on being an integral part of our clients’ success and exercise the utmost discretion and care in each interaction with them. We manage more than $2 billion in assets and with our secure products, we can deliver both expertise and a personalized touch.
The investors we work with have a variety of different needs and goals. We leverage our experience with countless investors to hone our unparalleled knowledge of self-direction. Contact us to learn more about how to set up a checkbook IRA or open a checkbook control IRA with us today.
Author: Nick Barker