This is one of those questions that most prospective clients ask when they call us for the first time. They want to set up a Check Book IRA LLC, but they don’t necessarily want to pay the setup fee out of pocket. The answer is yes; your IRA may pay the setup fees for the IRA LLC. In fact, that is the option that a vast majority of our clients choose. During the set up process, you would submit a form to the Custodian that instructs the Custodian to pay our setup fee using your IRA funds.
Some clients then ask us if it is better to pay the fee from their IRA or to pay it out of pocket. I usually tell them that I can’t answer that question for them because it depends on their situation. Some clients choose to pay the fee from their IRA because they don’t want to take it out of pocket, and others decide they don’t want to deplete the funds in their account and so choose to pay a different way. This tends to be the crux of the matter. Those with larger accounts tend not to worry too much about paying from their IRA because their accounts are large enough that it doesn’t really make a difference to their bottom line. On the other hand, some clients have smaller accounts, and don’t want to deplete the those accounts any more than they have to.
As you can see, it’s a case by case thing. Feel free to call or email us if you have any questions about which way you should go.
Invest intelligently. Enjoy the rewards.
For those of you that would like to have a personal conversation about purchasing metals with your retirement savings call 1-800-482-2760 or email us at info@checkbookira.com.
If I paid the setup fee out of my IRA funds, wouldn’t that be a taxable event?
Hi Andrew,
Paying our setup fee from your IRA would not be a taxable event. The fees paid by the IRA would be considered an expense of the account. Imagine if your IRA owned a number of properties, and a complicated valuation was required of the IRA. Whatever fee was due the tax professional who handled the valuation, would be paid by the IRA and considered an expense of the IRA.
In the case of an IRA LLC, essentially your IRA is paying us to form an LLC it will eventually purchase and own. As a result, the fee is an expense and is not treated as a distribution. Hopefully this makes sense. Let me know if you have other questions.
If I take an investment class as custodian of my IRA LLC, can the fees be paid by the LLC?
Alejandro,
Paying for an investment class with IRA LLC funds is a tricky business. I generally don’t suggest it to my clients as its difficult to make the argument that you personally are not getting some sort of benefit from taking the class. Its a difficult question, because the issue has never been addressed, so its in the grey area.
My suggestion is to refrain if possible.