Charlotte REIA April Monthly Meeting (Real Estate Investor’s Association)

Charlotte REIA



Jim Hitt, CEO of American IRA-a national Self-Directed IRA provider-will be in attendance at this information packed event and available to answer any questions attendees have about investing with their Self-Directed IRAs.

Event Location: Charlotte Executive Park

Address: 5700 Westpark Drive, Charlotte, NC 28217

Date: 4/3/2014

Time: 6:00PM – 9:00PM


Ron LeGrand on Quick Turning Real Estate for Fast Cash at the Crowne Plaza Charlotte Executive Park

Charlotte REIA Members & Guests Can Attend This Month For FREE if You RSVP Now!

Ron LeGrandCharlotte REIA is very excited to announce that real estate investing legend and millionaire maker, Ron LeGrand, will be speaking at our Charlotte REIA Main Meeting on Thursday, April 3rd at the Crowne Plaza Charlotte Executive Park located at 5700 Westpark Dr in Charlotte, NC (map) which starts at 6:00 PM. Ron has bought and sold over 2500 houses and helped create more millionaire real estate investors than anyone else on the planet and you can be one of them!

Come spend the evening with Ron where he will teach you how to “Quick Turn Real Estate for Fast Cash” and become a “transaction engineer” so you can kick start your real estate investing career and make this your most profitable year ever! You will learn about…

  • Update on Dodd-Frank Law – Ron will update us all on the new Dodd-Frank Law that went into effect in January and how that new law will or will not effect us as creative real estate investors.
  • Making Big Money With No Money Or Credit – Ron will show you where the big money is in real estate and how you can get it with NO money, credit or risk on your part.
  • Making Huge Profits On Over Leveraged Houses – Ron will show you how to control houses without ownership and make a minimum of $5,000 per house 3 to 4 times a month.
  • Getting Rich In Your IRA Tax Free – Ron will teach you how to use real estate to grow your IRA to a MILLION DOLLARS in less than five years without you ever personally contributing another dime.
  • Where To Find The Best Deals Even With Hot Competition – Ron will show you the best tool he’s ever used to absolutely ensure you never struggle to find deals and it only costs pennies to implement.
  • Where To Get The Money To Buy Bank-Owned Deals– Since banks require cash to purchase their properties, Ron will show you where to get the cash to buy bank-owned homes that won’t come from other banks or require credit or qualification.
  • Purchasing a Beautiful New Home for Your Family – Ron will show you how you can purchase a new home for your family in the next 45 days and never fill out an application, apply for a loan, or put up a down payment.

Cost: Free for members, $20 for guests

How to Avoid Getting Ripped Off When Buying Turn-Key Real Estate

This webinar will be presented by: Dan Doran

Date:  April 9th, 2014

Time: 7:00 p.m. to 7:30 p.m.

Click here to sign up for this free webinar.

Dan Doran has been a national speaker, trainer and coach to real estate entrepreneurs for over a decade.  He has trained thousands and created over a hundred training systems in the process.

In 2010 he was approached by a group of wealthy investors and asked to sell turn-key real estate to large groups, as that was all the rage at the time.  After investigating the industry, he was shocked to discover the massive problems that most promoters of turn-key real estate created by selling sub-par houses for inflated prices to unsuspecting investors.

To help others avoid these problems, Dan created a series of simple questions that any investor can easily ask any promoter before investing in any turn-key real estate program.  This webinar will arm you with those questions and you’ll understand the rationale behind them so you’ll never get ripped off when you invest in turn-key real estate.

“Passive Cash Flow from turn-key real estate is great”, says Dan.  “But you must ask a few simple questions; otherwise you’re at the mercy of the promoter”.

Don’t get ripped off.  If you have an interest in investing in turn-key real estate then this webinar is a must for you to attend.  It’s free, it’s informative and you can use it tomorrow to help you to make better investment decisions.

Click here to sign up for this free webinar.


Preserving Benefits for Inherited IRA

Inherited IRAOne of the primary benefits of saving in an IRA is the tax-deferred growth on earnings, which provides the compound effect of earnings-on-earnings.  You can benefit even more with a Roth IRA because these earnings can be tax-free.  Unfortunately, this tax benefit is often severely diminished by beneficiaries who make mistakes when handling inherited IRAs. Avoid these errors by taking some simple steps with any IRA that you inherit.

Avoid Unintended Distributions

One of the most common and costly mistakes made with inherited IRAs occurs when a beneficiary requests a distribution when the intent was to transfer the assets. This often occurs when the beneficiary completes the wrong type of paperwork or mistakenly believes that the amount can be rolled over. If you make an unintended distribution, the amount would be included in your ordinary income for the year and therefore would no longer be eligible for tax-deferred (or tax-free in the case of a Roth IRA) growth. The amount could also put you in a higher tax bracket, which may subject your other income amounts to a higher tax rate.

Solution:  When moving assets to your inherited IRA, ensure that the paperwork is for a transfer and not a distribution. Once the assets are distributed from the IRA, they are no longer eligible to be held in an IRA or other tax-deferred retirement account. An exception applies if you are a surviving spouse, as spouse beneficiaries can rollover these amounts to their own IRAs.

Take RMD Amounts

If the IRA owner died on or after reaching the required beginning date (RBD), a required minimum distribution (RMD) must be taken from the IRA for the year that he died. If he did not take this RMD amount, then you must withdraw that amount by the end of the year.  You may also be required to take your own “beneficiary” RMD for IRAs that you have inherited. Failure to take these RMD amounts by the applicable deadline will result in you owing the IRS a 50% excess accumulation penalty.

Solution: Ensure that all RMD amounts are withdrawn before the deadline. If you are unsure about whether you need to take an RMD, contact our offices as soon as possible.  If you missed the deadline due to reasonable causes, the IRS may waive the excess accumulation penalty.

Split Timely for Multiple Beneficiaries

Generally, multiple beneficiaries of an IRA are required to use the life expectancy of the oldest beneficiary when computing beneficiary RMD amounts. This can severely reduce the tax-deferred benefit for the younger beneficiaries, when the oldest beneficiary is much older or the beneficiaries include a non-person such as an estate or charity. For instance, a 45-year-old beneficiary’s distribution period can be reduced from 38 years to five years, if he is one of multiple beneficiaries of an IRA owner who died before the RBD, and one of those beneficiaries is the decedent’s estate.

Solution:  If you are one of multiple beneficiaries, segregate your share into a separate account by September 30 of the year that follows the year in which the IRA owner dies if one of the beneficiaries is a nonperson such as an estate or charity. The deadline is extended to December 31 of the year that follows the year in which the IRA owner dies if there are no non-person beneficiaries.

Work With an Advisor Who Understands IRAs

The rules by which IRAs are governed are many, varied, and often complicated. The assistance of a financial professional who is knowledgeable about IRA rules and regulations can help you to avoid irreversible errors and maximize your tax benefits.

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Self-Directed IRA and Traditional Retirement Savings for Your Children

Self-Directed IRARecent studies show that a large percentage of Americans feel they need to work past age 70 to be able to continue covering their living expenses. This underscores the need for individuals to improve their Self-Directed IRA and retirement-saving habits…for many this means starting to save at an early age. You can help your children by encouraging them to begin funding their retirement accounts as soon as they start earning eligible income. Consider the following when funding retirement accounts for your children.

The Child Must Have Earned Income

The required income rules that apply to adults also apply to children. A contribution cannot be made to a child’s IRA unless that child receives eligible income of at least the dollar amount of the contribution made for the year. For this purpose, eligible income includes wages, salary, and commission.

Eligibility Rules Apply

A child is subject to the same eligibility rules that apply to adults. This includes:

  1. The child’s contribution to IRAs for the year cannot exceed a total of $6,500 or 100% of eligible income, whichever is less.
  2. The child must have income within the limits for funding a Roth IRA, which means a Roth IRA contribution cannot be made for that child if his or her modified adjusted gross income (MAGI) exceeds:
  • $129,000 if single
  • $191,000 if married, and
  • $10,000 if married, filing separately
  1. If the child received benefits or contribution under an employer sponsored retirement plan, he or she might be considered an active participant and would be able to claim a tax deduction for traditional IRA contributions only if his or her MAGI does not exceed:
  • $70,000 if single
  • $116,000 if married filing jointly, or
  • $10,000 if married, filing separately

If the child is not an active participant but is married to someone who is, the MAGI limit is $191,000,

Most children will not have this issue of high income. But for those who might, it is important to pay attention to these limits to prevent tax filing and/or contribution errors.

You Can Pay Your Child a Salary – But Be Careful

If you own and operate your own business, you can pay your child a salary so that he or she is eligible to contribute to an IRA. Of course, such salaries must be done on a legitimate basis and be able to pass any IRS scrutiny. For instance, if you pay your child for providing administrative services such as filing and answering the telephone, that child must be of age to do so and you must have payroll records that satisfy statutory requirements.

Availability May Be Limited

Not all financial institution allow IRAs to be opened on behalf of children and, for those that do, the parent or legal guardian is usually required to be the authorized signatory on the IRA until the child reaches the age of majority as defined by the state of domicile. If you are the authorized signatory, you would be responsible for approving transactions such as distributions and investments. Once the child reaches the age of majority, then he or she would become eligible to be the authorized signatory on the account.

It Adds Up

Helping your child to start saving at an early age not only encourages good savings habit, it could lead to significant retirement savings. Consider that a savings of $1,000 per year for 40 years at a 4% return per year would amount to about $100,000. If the account is a Roth IRA, the entire accumulated savings would be tax-free when the child reaches age 59 ½, or sooner if it has been at least five years since the first Roth IRA was funded and he or she is withdrawing up to $10,000 for a first-time home purchase, he or she is disabled, or if the amount is being withdrawn by a beneficiary in the event of his or her death.

Professionals Can Help

Professionals can help you discover practical solutions for your child’s saving and retirement planning needs. It is never too early to start saving, but when you do, you want to start with the right type of account.


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Schedule Your Required Minimum Distributions (RMDs) Early

Required Minimum DistributionIf you are at least age 70½ this year, you must take required minimum distributions (RMD) from any Traditional IRA, SEP IRA, SIMPLE IRA, and Self-Directed IRA that you own. You may also need to take RMDs from any IRA or other retirement account that you inherited, and from amounts you hold under an employer-sponsored retirement plan. While your RMD for the year must generally be withdrawn by the end of the year, scheduling it in advance can help to make sure you meet the deadline by which it must be withdrawn.

Your Required Minimum Distribution (RMD) Deadline 

Generally, your first RMD must be taken by your required beginning date (RBD), which is April 1 of the year that follows the year in which you reach age 70½. This means that if you reach age 70½ in 2013, your first RMD must be taken by April 1, 2014. All other RMDs must be taken by December 31 of the year to which the RMD applies. As such, if 2013 is not your fist year for RMDs, or if you need to take an RMD from an inherited IRA, that amount must be distributed by December 31, 2013.

Note: If you have funds in an account under an employer plan, such as a 401(k), 403(b), governmental 457(b), or pension plan, and you are still working for the company which offers the plan, you may be allowed to delay starting your RMD past age 70½, until after you retire. Check with the plan administrator to determine the RMD rules that apply to the plan.

If you miss your RMD deadline, the RMD amount not withdrawn by the deadline is subject to an IRS assessed excess accumulation penalty of 50 percent. For instance, if your RMD for the year is $10,000 and you took only $2,000 by the deadline, you will owe the IRS a penalty of $4,000 on the $8,000 which was not taken by the deadline.

Calculating Your Required Minimum Distribution (RMD)

Your 2013 RMD amount is determined by dividing your December 31, 2012 fair market value (FMV) by your life-expectancy factor which is obtained from IRS provided Life expectancy tables. Your FMV must be adjusted by adding any outstanding rollovers, outstanding recharacterizations and outstanding transfers.

  • Outstanding rollovers are distributions taken from an IRA during one year and rolled-over to the same or another IRA during the following year.  For instance, a distribution taken in December of one year, and rolled over in January or February of the following year. These rollovers are required to be completed within 60-days of receipt.
  • An outstanding recharacterization is a Roth conversion that is recharacterized in the year that follows the year in which the conversion was done. For example: A conversion that is done in 2012 and recharacterized in 2013 is an outstanding recharacterization for your December 21, 2012 FMV.  Recharacterizations are required to be completed by your tax filing deadline, including extensions. If you file your tax return by the due date, you receive an automatic six-month extension, bringing the deadline to October 15 if you file on a calendar year.
  • An outstanding transfer occurs when assets are being transferred between two IRAs and the assets leave the delivering IRA in one year and are credited to the receiving IRA in the following year.

The Custodian that held your IRA as of December 31 of 2012 is required to provide you with an RMD statement for 2013, which must include your calculated RMD amount or an offer to calculate the RMD upon request. The RMD statement requirement does not apply to Inherited IRAs.

Even if your Custodian calculates your RMD amount, you should have a professional double check the calculation, as your Custodian is allowed to make certain assumptions that could result in inaccurate results.

Schedule Your Required Minimum Distribution (RMD) Now

Even if you do not want to take your RMD now, you may still consider making arrangements to ensure it is distributed by the deadline. This can be accomplished by providing instructions to your IRA custodian now, to schedule your distributions for a future date. Alternatively, you may schedule amounts to be withdrawn periodically throughout the year. In such cases, care must be taken to ensure sufficient cash is available to cover scheduled distribution amounts.


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What to Do if You Missed Your Required Minimum Distribution (RMD) Deadline

Required Minimum DistributionIf you are subject to the required minimum distribution (RMD) for 2013 and do not take your RMD amount by the deadline, you will owe the IRS an excess accumulation penalty of 50% of the RMD shortfall. The good news is that the penalty can be waived if the right steps are taken. The following highlights the RMD rules and the steps that can be taken if you missed your RMD deadline due to reasonable cause.

When is the Deadline for Taking an RMD?

Let’s start by determining the deadline by which an RMD must be taken from a retirement account.

If you are the Retirement Account Owner

The deadline for taking a required minimum distribution (RMD) is usually December 31 of the year to which the RMD applies. However, there are two exceptions:

  • If you reached age 70½ during 2013, the deadline for taking your 2013 RMD is April 1, 2014. All subsequent RMDs must be withdrawn by December 31 of the year to which the RMD applies.
  • If you are older than age 70½ in 2013, and have assets in a retirement plan that allows RMDs to be deferred past age 70½ until you retire, your first RMD for those assets is due by April 1 of the year following the year that you retire. This option can apply only to qualified plans, 403(b) plans and 457(b) plans, and cannot be made available to individuals who own more than five percent of the business that sponsors the plan (5% owners).

If You are a Beneficiary

If you own an inherited retirement account, you are required to withdraw beneficiary-RMD amounts by the end of 2013, if any of the following applies:

  • You are subject to the life expectancy rule and the retirement account owner died before 2013.
  • You are subject to the five year rule and the five year period expires at the end of 2013.

Under the five year rule, distributions are optional until the end of the fifth year, at which time the entire balance must be withdrawn from the account.

What to do if You Missed Your RMD Deadline

If you missed your RMD deadline, you owe the IRS an excess accumulation penalty of 50% of the shortfall. For instance, if the RMD for 2013 is $10,000 and only $2,000 is withdrawn by the deadline, you will owe the IRS an excess accumulation penalty of $4,000 ($8,000 x 50%). In such cases, you have two choices:

  1. Pay the IRS the penalty. This is calculated on IRS Form 5329 (under the section labeled “Additional Tax on Excess Accumulation in Qualified Retirement Plans (Including IRAs)” and reported in the ‘other taxes’ section of your tax return (Form 1040). Important note: You cannot file Form 1040A or 1040EZ if you file Firm 5329. Instead, you must file Form 1040.
  2. Ask the IRS to waive the penalty. The IRS will waive the penalty, if you can show ‘reasonable cause’ for not taking the RMD. If you feel that you qualify for a waiver, you should File Form 5329 and attach a letter of explanation to the IRS.

When applying for the waiver, you need to take the missed required minimum distribution (RMD) amount as soon as possible.

Professionals Can Help

If you need help with your RMD, you should consult with a professional who is proficient in the area of distribution-planning for retirement accounts.  While the calculation of your RMD might seem simple, there are factors that must be taken into account to ensure the calculation is correct. Professionals will help to ensure that these are not overlooked when handling your case.


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Avoid Tax Traps for After-Tax Self-Directed IRA Funds

Self-Directed IRAGenerally, distributions and Roth Conversion amounts from your Traditional Self-Directed IRA are treated as taxable income to you. However, if you have after-tax amounts in your Traditional Self-Directed IRA, distributions and Roth conversion of these after-tax amounts should be tax-free. You could mistakenly pay income tax on these amounts if the proper tax filing and reporting is not done.

Where Do After-Tax Funds Come From?

Your Traditional Self-Directed IRA will include after-tax funds if you made contributions and did not claim a tax deduction for all or a portion of the amount on your tax return. The deduction may not have been claimed because you and/or your tax advisor simply chose not to, or because you were ineligible to claim the deduction because you received benefits under an employer plan and your income exceeded a certain amount.

Your after-tax funds may also be attributed to a rollover of after-tax amounts from an account under an employer plan, such as a 401(k) or 403(b) plan, to your Traditional IRA.

Ensuring After-Tax Funds are Not Taxed

The IRS provides Form 8606 in order to track and report after-tax funds in your Traditional Self-Directed IRA. To this end, Form 8606 must be filed for any year that you make nondeductible contributions to your Traditional IRA. Additionally, Form 8606 must be filed for any year that you take a distribution or convert funds to a Roth IRA if your Traditional IRA has after-tax funds the year that the distribution or Roth conversion is done. By accurately completing and filing Form 8606, you keep track of the after-tax balance and share the information with the IRS.

Balance Aggregated and Pro-Rated for Taxation

Distributions or Roth conversion amounts from your Traditional Self-Directed IRA will include a pro-rated amount of after-tax and pre-tax funds as long as your Traditional IRA includes an after-tax balance. As such, you cannot select only after-tax or pre-tax funds when performing such transactions. Furthermore, all of your Traditional IRAs, SEP IRAs, and SIMPLE IRAs are treated as one when determining how much of a distribution or Roth conversion amount is not taxable.

For instance, assume that you have two Traditional Self-Directed IRAs: Traditional IRA #1 has a balance of $10,000 all of which is after-tax funds. Traditional IRA #2 has a balance of $90,000 all of which is pre-tax funds. If you take a distribution (or Roth Conversion) of $10,000 from Traditional IRA #1, only $1,000 will be tax-free and $9,000 will be taxable. This rule applies because, for IRS purposes, you took a distribution of $10,000 from an aggregate Traditional IRA balance of $100,000.

Caution: Determine Balance Formula

When determining the ratio of the taxable vs. nontaxable portion of a distribution or Roth conversion, the balance as of the end of the year in which the transaction is done is used. If the transaction is done in January when you had only Traditional Self-Directed IRA #1 with a balance of $10,000, and you rollover a pre-tax amount of $90,000 from your 401(k) to Traditional Self-Directed IRA #2 in December of the same year, your account balance used in the formula would be $100,000 (plus or minus interest or losses) .

The year-end balance is also adjusted by adding the following amounts:

  • Distributions taken from your Traditional Self-Directed IRA during the year and rolled over the next year within 60-days of receipt. For instance, if you took the distribution in December and did a rollover of the amount in January.
  • Roth IRA conversions done during the year and re-characterized the following year. Under Roth conversion rules, you can reverse a Roth conversion by doing a re-characterization of all or a portion of the amount by your tax filing deadline plus extensions.

Other distributions and Roth IRA conversions done during the year may also need to be included in the calculation.


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Annual Check Up for Your Self-Directed IRA

Self-Directed IRAYour Self-Directed IRA should be given a check-up at least once per year. A complete Self-Directed IRA check-up requires the assistance of a financial advisor who is also an expert in the Self-Directed IRA field. A Self-Directed IRA check-up process covers areas such as: estate-planning review, RMD determination, contribution error detection, conversion suitability, and whether you need to file tax forms to receive certain tax benefits for your IRA. These are highlighted below.

Estate-Planning Review

Have your professional check to make sure your Self-Directed IRA agreement and documentation are consistent with your estate-planning needs. This is especially important for beneficiary designations, and more critically so if you need to make special provisions for any of your beneficiaries.

RMD Determination

If you are at least age 70½ this year, you must take a required minimum distribution (RMD) from your IRAs. You may also need to take RMD amounts from any retirement account that you have inherited. Failure to take your RMD amount could result in you owing the IRS an excess accumulation penalty of 50% of the RMD shortfall. have your professional check to make sure that your correct RMD amount is taken from your IRA, so as to prevent you from owing this penalty.

Contribution Error Detection

If you made ineligible contributions, including ineligible rollovers, these amounts will be subject to IRS penalties and possibly double taxation unless corrected in a timely manner. Have your professional check your Self-Directed IRA activity to determine if any such errors occurred and work with you to make any necessary corrections.

Conversion Suitability

If you converted amounts from another retirement account to your Roth Self-Directed IRA last year, have your professional review the Roth conversion to determine if it should be reversed for reasons such as significant market losses. They should look at other reasons why a Roth-conversion reversal may make sense, and help you to determine if any of those reasons apply to you. The IRS allows Roth conversions for the previous year to be reversed as late as October 15 of the current year, if you meet certain requirements. If it is determined that the conversion should be reversed, have your professional work with you to have it accomplished properly and in a timely manner.

Filing Tax Forms

There are certain tax forms that may need to be filed in order for you to receive certain tax benefits, or to correct reporting done by your Self-Directed IRA custodian. Have your professional review your transactions to determine if these forms should be filed on your behalf.

Let us Help You to Take Care Of Your IRA

There are instances in which more frequent check-ups may be required. For instance, if you experience a life-changing event, such as a death of one of your beneficiaries or a marriage or birth that affects your beneficiary designation, your professional may need to conduct a review to determine if and what changes should be made.


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