It is very important that you understand the rules related to Self-Directed IRA and 401k investing. I recently read an excellent article by the Wall Street Journal where someone was not familiar with the self-directed IRA rules related to self-directed IRA investing and their entire IRA became disqualified.
- Real Estate
- Hard money lending
- Precious Metals (Gold, Silver, Platinum)
- Private placements or offerings (oil & gas, real estate, etc)
- Foreign Real Estate
- Funding a business
- Trust deeds
- And Many Others!
With all the benefits that Self-Directed IRA and 401k allow it is important that you follow all the IRS guidelines related to making purchases inside your IRA or 401k. Below is the portion of what would be disqualified inside a Self-Directed IRA.
“Both ERISA and IRS rules prohibit certain transactions between a qualified plan and “disqualified persons.” The purpose of the rules is to prevent self-dealing and to minimize conflicts of interest that could adversely affect the plan. ERISA §§ 406-408 and Internal Revenue Code § 4975 detail these rules. Other regulations and notices issued by the DOL and IRS further refine and explain the rules. Since your plan is self-directed, it may be possible for you or another participant to purchase non-traditional assets with plan funds. Some of these transactions could violate the rules. Examples: using your plan funds to purchase a property you (or certain related parties) already own; having your plan purchase an investment property and then renting it to your child (even at fair market rent); receiving compensation from an entity in which your plan has a significant ownership; a relative providing sweat equity labor or other services to a business owned by your plan, etc..”
If you would like to speak with Accuplan about your specific situation feel free to contact me.
Author: Ben Barker