Posted by patsears on May 13, 2005 at 20:42:15:
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Final Say on Self-Dir. IRA’s & Asset Protect? - Posted by patsears
Posted by patsears on May 11, 2005 at 19:03:47:
Hello,
I’m getting ready to roll a $50,000 401K into a self-directed IRA (Entrust) for the purpose of either flipping mobile homes or, most likely, buying late-model mobile homes and renting forever w/lease-option to build-up my mobile home portfolio over the next 20 years. I’ve ran the numbers and they look great-especially when selling the front-end of the income stream to magnify my returns with even more homes (yes, I know about UBIT-it still looks great.)
The only thing I’m concerned about is the possiblility of my IRA being stolen by some chump with a good lawyer. What’s the latest thinking about self-directed IRA’s and this concern? If it is a legitiment concern, is there anything that can be done to reduce the vulneralbility?
Thanks!
patsears
Self-Dir. IRA’s & Asset Protect? - Posted by John Merchantj
Posted by John Merchantj on May 12, 2005 at 12:38:45:
In this situation, the SDIRA would just be your “alter ego” and would be no more vulnerable to theft than any other deal you might do.
You’d want to direct the SDIRA custodian/trustee to buy insurance on the property naming the SDIRA as the beneficiary so if it were sued the ins. co. would have to defend and pay any meritorious claims.
The SDIRA is a legal entity and as such, it probably (?) is a liability limiting entity, but it’s always my preference to have the SDIRA buy shares of a new LLC, either with other money of the SDIRA beneficiary, or in a stand-alone LLC which shares belong to the SDIRA only.
Then any suit or claim would be limited to the assets of that LLC.
Also the LLC could accumulate the rents in its account and your LLC’s manager, who prferably is NOT you would manage the property and the account.
Re: Self-Dir. IRA’s & Asset Protect? - Posted by patsears
Posted by patsears on May 13, 2005 at 11:31:13:
Thanks John for the reply. Why is it important to have someone else manage the properties? I really prefer not to pay 10% (or more) of my income to some flunkie property management sevice who wouldn’t do half the job I would-especially if I live 10 minutes away from my properties.
Thanks!
SDIRA self-management - Posted by John Merchant
Posted by John Merchant on May 13, 2005 at 12:54:52:
Tax law & regs seem to say the beneficiary/owner of the SDIRA cannot manage his own IRA.
But the fairly recent tax court decision of Swanson vs. Commissioner ('96)seems to have partially eroded this wall and lets the IRA owner do some things that used to be thought to be prohibited.
Like having the SDIRA be a share holder along with the owner personally, in NEWLY formed (important to NOT be an old one that’s been owned by the individual himself)LLC where the SDIRA AND the beneficiary both owned an interest.
For benefit of all, just go into Google and enter Swanson vs. Commissioner and read that decision.
It’s current law, and apparently going to be that way for the time being. The IRS could have written some new tougher regs or sought to tighten and toughen the law on this, but hasn’t done either.
What I’m advising my clients to do is, when they own the asset in an LLC with the SDIRA owning all or part of that, to name somebody else, such as his lawyer or accountant as the manager, but then to personally actually manage the property, screen the tenants, make sure the rents are paid, etc.
The named manager is then just a figure-head and you’re doing all the work and managing.
Maybe like Jeffrey Taylor, “Mr.Landlord” says he does.
His business cards state that he’s just an Assistant Property Manager for XYZ Corp…when of course it’s all owned and run by him.