If are using a Self Directed IRA, then you are well aware of the benefits of retaining control of your investments. Most likely you are paying less, if anything, in advisor fees, transaction fees, annual fees, etc. You are able to invest in nontraditional assets such as property, tax liens or precious metals. For those who have found success with a Self Directed IRA; it is a relief to be out of the custodial racket that so often controls traditional retirement account markets.
However, it is also possible that the Self Directed IRA hasn’t quite lived up to your expectations. Perhaps, you have still found yourself on the wrong end of the weekend when requesting a quick turnaround on a transaction to close an important deal. Perhaps, you’ve waited on your Custodian to prepare checks, approve documents and still felt nickeled and dimed for each and every undertaking. It is possible that an investment in property appeals to you; but you fear that the delays and expense involves would be too restrictive. Overall, you feel that something is missing in your retirement account setup.
This is where the addition of the Check Book IRA or check book control can be the other half of the equation. You already have the freedom to invest in alternative assets; check book control can gain you the freedom to invest immediately when and where you want.
First, let’s define a Check Book IRA. A Check Book IRA is simply the addition of a LLC structure to a Self Directed IRA. It is sometimes called an Self Directed IRA LLC. You are not the owner of the LLC, you are simply the Manager. The LLC is owned by the IRA. It is in effect simply an asset. And you can use this asset to “write a check” or retain check book control over your investments.
Let’s see how this structure could be helpful to you. If you wanted to invest in a piece of property at auction, on the courthouse steps so to speak, here is how the scenario would play out for a typical IRA setup, a Self Directed IRA, and a Check Book IRA.
Typical IRA Setup with a Custodian: Ha! They won’t even consider it. Have fun watching others invest and reap their rewards.
Self Directed IRA: You do the leg work, research the properties, bid at auction and (and possibly lose out) while going back and forth with your Custodian on the details and paperwork, waiting while they cut you a check and charge you a handy fee as well. Hopefully, you can reach your account person before the close of the business day. Not to mention the fee you will now incur by increasing the assets of your IRA since many Self Directed IRA Custodians base their fee on the value of your account.
Check Book IRA: You do the leg work, research the properties, bid at auction, hand over a check from the LLC and sign the necessary documents in your capacity as Manager of the LLC. Now go out and celebrate with a nice dinner and congratulate yourself! With many Custodians; your annual account fees remain the same whether you buy one or ten properties and you will miss out on the transaction fees since you are facilitating the check yourself.
Obviously, when laid side by side; a Check Book IRA offers a far more direct approach to investing your funds. Using a Self Directed IRA is an excellent place to start reining in control of your financial future. But half measures can only take your investments so far. A Check Book IRA offers the final piece to the puzzle; allowing you to bypass needless fees, hassle and the uncertainty of missing out on financial opportunities due to the inability to contact your Custodian.
Although this structure may not be right for everyone; it is certainly worth investigating. For further reading (https://www.checkbookira.com/start/)
Your site is, by far, the most complete and comprehensible repository for answers and direction on Checkbook IRAs. Your provide a great service and I commend your ability to communicate complex information clearly.
My question pertains to the proper way to title property when purchasing real estate within a self-directed IRA. Is it proper simply to take title in the name of the LLC or should title also reference the IRA (e.g., “XYX, LLC for the benefit of ABC IRA”)?
Thank you for the comment, Mr. Rice. I’m always happy to hear the information on our site is helpful to both our clients, and others who use the IRA LLC structure.
In answer to your question, any asset purchased by the LLC should be titled in the name of the LLC. The IRA is the sole member of the LLC, but it does not show up in the title of the LLC’s assets. To use an example: say that you owned an LLC personally, and say that you were buying some rentals with that LLC. The properties bought by the LLC will be titled in the company’s name. Even though you’re the owner, the LLC itself is buying the properties, and as a result it is the LLC that the properties are titled to; your name would not appear on the titles.
I hope that makes sense, and if you have any other questions, please let us know.
After reading through your comment again, I realize I didn’t answer your question as I should have.
In my earlier answer I talked about how the property should be titled in the name of the LLC, but to avoid confusion, I should add that it depends entirely upon whether the IRA itself is purchasing the property, or whether the LLC is purchasing the property.
The short answer is that the property should be titled in the name of the entity that buys the property. If the IRA is making the purchase, then the property is titled to XYZ Custodian cfbo John Doe IRA. If the LLC is making the purchase, then the property is titled to the LLC.