If you are considering using a self-directed IRA for real estate or alternative investments, this call is a great place to start.
In this session, Jack Kiley, CPA and principal at MidAtlantic IRA, walks through how self-directed retirement accounts work, how to structure investments properly, and what common mistakes investors need to avoid.
Watch the full replay below, then review the key takeaways summarized underneath.
Understanding Where Self Direction Fits
Self-directed accounts allow investors to use their existing investment knowledge inside a tax-deferred or tax-free retirement account. Instead of being limited to stocks and mutual funds, you can invest in assets such as real estate and private lending.
Jack explains that self direction should be part of a broader wealth building plan. Many investors divide their holdings into three general categories: concentrated assets, flexible investments, and safety assets. A self-directed IRA can serve as a powerful tool within that framework when used intentionally.
Real Estate Strategies Inside An IRA
Real estate is one of the most common uses of a self-directed IRA. Rental properties and rehabbing projects are typical strategies. Wholesaling is generally discouraged due to structural and legal limitations.
A critical point covered on this call is that the IRA must be properly titled as the buyer in any transaction. Early communication with the acquisitions team can prevent errors and delays. Planning ahead is essential since retirement funds are finite and every deal must follow IRS guidelines.
Partnering Personal Funds With IRA Funds
If your IRA does not have enough capital to complete a deal, it may be possible to partner personal funds with IRA funds. This is often done through an LLC where ownership percentages are clearly defined, such as 60 percent IRA and 40 percent personal.
All income and expenses must be split strictly according to ownership. Proper legal structuring is important to avoid prohibited transactions and compliance issues.
LLCs, Trusts, And Compliance
Jack also addressed the differences between LLCs and trusts, noting that usage often depends on state level costs and preferences. Regardless of structure, investors must understand disqualified persons rules and prohibited transaction guidelines.
Most investment strategies can be adapted for self-direction when structured correctly, but early consultation is strongly recommended before signing contracts.
Estate Planning Considerations
Self-directed IRAs also offer estate planning advantages. Assets pass directly to beneficiaries outside of probate. In certain cases, such as with Roth accounts, beneficiaries may receive distributions tax-free under current rules.
Continue Learning
Self-direction is not about making quick investment decisions. It is about aligning your strategy, understanding the rules, and using tax-advantaged accounts intentionally.
Be sure to watch the full webinar above for detailed explanations and examples. For upcoming educational sessions on self-direction and tax preparation, visit MidAtlantic IRA and review the events calendar.