As the resident book-nerd of Check Book IRA, I’ve recently been devouring a narrative about Edward Stratemeyer; the genius behind the writing Syndicate who created the Nancy Drew series. The Syndicate was successful for years but relied heavily on Stratemeyer who kept its secrets very close to the vest. His unexpected death took his family by surprise and placed on them the enormous burden of running the business during the Depression while also trying to learn about the business they were steering. Spoiler – they succeeded, but not without heartache that could easily have been avoided by a little preparation.

Most of those who are self-employed have made some sort of arrangement for the financial well-being of their families and/or businesses. And IRA owners are required to have a beneficiary for their IRA. However, a large number of IRA owners with a self-directed IRA, haven’t clarified who will facilitate the investments for their LLC. Because here’s the kicker…. being a beneficiary to your Check Book IRA doesn’t mean that your beneficiary can simply take over your LLC investments or even access the LLC bank account; unless they are named as Successor Manager in the Operating Agreement.

So, a beneficiary inherits the IRA and all of the IRA assets (the LLC). However, in order to access the LLC investments, the LLC bank account, etc., they need to go through a bit of a drawn-out process in providing death certificates, updating the Operating Agreement to name themselves or someone else they trust to manage the LLC. If your investments include time-sensitive assets such as rental real estate, this could prove disastrous; not to mention emotionally draining to your loved ones during what will already be a difficult time. If they aren’t aware of the LLC or what a Check Book IRA is, it can be confusing as they try to educate themselves while steering the ship.

Making sure that either your IRA beneficiary is also a Successor Manager to the LLC or naming a Successor Manager who can work with your IRA beneficiary is enormously important. We highly recommend educating them about the Check Book IRA and making sure you have a Successor Manager for your investments.

For a review on how to update your Operating Agreement with a Successor Manager read here.