You’ve taken the time to do everything else right. But there’s one item that seems to trip people up and sometimes causes some problems with Self-Directed IRA investing: Titling and vesting.
Here are some things to keep in mind:
You aren’t buying a property. Yes, you might be giving us the direction to execute a purchase, but you aren’t buying the property. Your IRA (or other self-directed retirement account) is.
It’s therefore very important to have all your IRA’s documents of ownership reflect that. Otherwise, the IRS could take a look at it and decide that the IRA doesn’t really own the asset. If you accidentally list yourself as the owner on the title, rather than your IRA or other account, they will likely deem that you have taken personal possession or ownership of the asset – and disallow the IRA treatment.
That could cost you big time in taxes, court costs, penalties and headaches.
So when you hold an IRA asset with us, don’t hold anything in your name, personally. Instead, you should title the asset as follows: American IRA, LLC FBO Client Name TYPE OF IRA/401k” OR “American IRA, LLC FBO Account Number”.
If there are multiple owners – for example, if the asset is held jointly with someone else, outside the IRA, your title should reflect that. Add the language “X percent, undivided interest,” with “X,” of course, representing the percentage of ownership interest your IRA has in the investment.
Note: Some states may have specific provisions on how property must be titled or vested. Make sure you consult with an attorney licensed in your state for specifics, as American IRA does not provide legal advice.
Do you hold property within an LLC in your IRA? Then the title doesn’t go in the IRAs name, but in the name of the LLC itself. If there is any doubt about how you should be titling assets, give us a call at 866-7500-IRA(472).
Remember that you are not the signature authority on Self-Directed IRA transactions, except under certain circumstances. Generally, you should not sign documents yourself, but simply note them as “read and approved.” You then forward them to us, American IRA, LLC, your third-party administrator, and we handle the rest – including the signature line. You must sign them and date them as “read and approved,” however. American IRA, LLC cannot make any buy or sell transactions, other than receiving payments, without your approval.
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