Self-Directed IRA Services
An alternative asset may be allowed in an IRA but the deal may still be prohibited. The issue may be the seller, personal guarantee, compensation, family involvement, work you perform, or a benefit you receive separate from the real estate, private-company interest, note, or fund itself.
KLB Benefits Law Group provides self-directed IRA services for account owners considering alternative investments or questioning a completed transaction. The firm examines the parties, ownership, control, contracts, financing, money flow, services, and personal benefits involved in each transaction. That analysis addresses issues a custodian’s administrative approval does not decide under federal tax law.
The Asset May Be Permitted Even When the Transaction Is Prohibited
A self-directed IRA is an IRA whose custodian allows a broader range of investments than most banks and brokerage firms offer. These may include real estate, private placements, promissory notes, certain precious metals, and privately held business interests. Federal tax rules prohibit IRA investments in life insurance and most collectibles.
The asset is only one part of the analysis. Sales, leases, loans, services, guarantees, and transfers involving a disqualified person may be prohibited, even when structured through an entity. A custodian’s willingness to process the transaction does not confirm that it complies with the rules.
Legal Review for Self-Directed IRA Transactions
Proposed Investment Review
KLB reviews purchase agreements, subscription documents, financing terms, custodian forms, ownership records, and intended use before IRA funding begins.
Disqualified-Person Analysis
KLB maps the owner, beneficiaries, relatives, service providers, co-investors, companies, partnerships, and trusts to identify direct or indirect restricted relationships involved.
Deal and Funding Terms
Title, deposits, capital calls, expenses, debt, guarantees, indemnities, fees, and distributions are traced to show who personally gives or receives value.
Entity and Control Issues
KLB examines IRA-owned LLC terms, management authority, bank control, compensation, co-ownership, and related-party dealings, while distinguishing them from separate ROBS arrangements.
Existing-Transaction Assessment
When funds have moved, KLB reconstructs dates, payments, property use, services, compensation, guarantees, transfers, and valuations to assess the result.
Tax and Reporting Coordination
KLB identifies unrelated business taxable income, debt-financed income, Form 990-T filing, valuation, and reporting questions for coordination with custodians and tax professionals.
Review the Deal Before the IRA Commits Funds
Reviewing the deal before funding leaves room to change financing, remove a personal benefit, revise a service role, separate personal and IRA expenses, or reject the transaction. Some options disappear after funding. The analysis should cover every party, payment, guarantee, ownership interest, and side agreement, not only the custodian’s direction-of-investment form.
If an owner engages in a prohibited transaction, the IRS reporting instructions treat the IRA as distributed from the first day of that tax year. The result depends on the account type, taxed amounts, owner’s age, and exceptions. A later reversal does not automatically restore the account.
Why Clients Choose KLB Benefits Law Group
Benefits-Law Focus
KLB concentrates on ERISA and employee benefits law, including retirement plans, business transactions, corrections, fiduciary duties, and prohibited-transaction questions under federal law.
Prohibited-Transaction Work
Dorothy “Doll” Lank focuses on prohibited-transaction law affecting qualified plans and self-directed accounts, including owner, fiduciary, service-provider, and business-investment relationships in transactions.
Business-Deal Perspective
Before benefits law, Doll practiced business law involving entity formation, mergers and acquisitions, real estate, and land use. That background informs IRA transaction reviews.
Ownership Analysis
KLB also handles related-employer analysis involving ownership, voting power, and service relationships, experience relevant when separate entities may have indirect legal connections.
How KLB Reviews Alternative IRA Transactions
1. Define the Transaction
KLB first identifies the asset, transaction stage, account type, custodian, contracts, financing, expected income and expenses, and the owner’s planned role.
2. Map the Relationships
Each person and entity that sells, leases, lends, guarantees, manages, receives compensation, provides services, or shares ownership is mapped.
3. Trace Value and Control
KLB traces payments, expenses, income, signatures, personal credit, unpaid work, compensation, capital calls, and control to identify transfers or benefits.
4. Address the Result
KLB identifies changes needed before funding or, after closing, account consequences and questions for custodians, tax professionals, appraisers, or counsel.
Discuss a Self-Directed IRA with KLB Benefits Law Group
Before you fund real estate, a company, fund, note, or IRA-owned LLC, KLB can examine the parties, documents, financing, and personal benefits. If the transaction has closed, KLB can reconstruct what occurred and identify the rules.
Contact KLB Benefits Law Group with the custodian statement, agreements, entity documents, financing terms, ownership information, payment records, and a list of everyone involved. Those materials let the discussion focus on the specific transaction and the decisions now required.
Self-Directed IRA FAQs
What can a self-directed IRA invest in?
The account may hold a wider range of assets than many conventional custodians permit, including real estate, private-company interests, promissory notes, private placements, and certain precious metals. Federal law bars life insurance and most collectibles, while a custodian may impose added restrictions. A permitted asset can still be acquired through a prohibited transaction, so asset eligibility and transaction compliance require separate answers.
Who is a disqualified person for an IRA?
Disqualified persons generally include the IRA owner acting as the investment fiduciary, beneficiaries, the owner's spouse, ancestors, lineal descendants, spouses of lineal descendants, IRA service providers, and certain entities owned or controlled by those people. The definition does not treat every relative identically. Indirect ownership and side benefits can also matter, so a family label alone does not settle the analysis.
Can I use an IRA-owned LLC for checkbook control?
An IRA may own an LLC, but checkbook control does not create an exception to the IRA rules. The operating agreement, manager's powers, bank account, expense payments, compensation, and dealings with related parties all require review. The owner should not treat the LLC's money as personal money, personally guarantee its debt, or assume that a payment is acceptable merely because it passes through the LLC.
Does custodian approval mean my transaction complies with IRS rules?
No. Custodian acceptance usually means the asset and paperwork fit the custodian's administrative requirements. It does not mean the custodian has ruled on prohibited transactions, personal benefits, tax exposure, investment merit, promoter legitimacy, or the accuracy of a valuation. The IRA owner remains responsible for the investment decision and should obtain legal and tax advice on the specific arrangement before funding it.
What happens if I completed a prohibited transaction?
If the IRA owner or beneficiary engages in a prohibited transaction, the account ceases to be an IRA as of the first day of that tax year and its assets are treated as distributed. Income tax and an additional tax may follow, depending on the account and owner. Gather the contracts, statements, payment records, ownership details, and dates promptly; the legal analysis turns on the complete transaction.