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Every year, we get questions from clients about Self-Directing their IRAs – Basically owning non-publically tradable assets in their IRAs. There are many promoters out there touting that you can even own your lake house in your IRA. Before you go down that path, I have created the attached piece that discusses the income tax benefits of Self-Directed IRAs and possible landmines to consider before you move forward.
Bottom line, a self-directed IRA isn’t a different type of IRA, but rather it refers to an IRA that you direct the investments of your IRA Assets into non-traditional investments. Although many of the benefits sound attractive, especially for those of you that have most of your money in IRAs, there are a lot of costly tax mistakes that can be made when establishing a self-directed IRA. If you fail to follow the rules (both tax rules and the chosen IRA custodian’s rules), the IRS can disqualify the IRA and deem it a distribution subject to taxes and possible penalties.
The linked article on Self-Directed IRAs walks you through the process. Bottom line:
Bottom line, Self-Directed IRAs are completely legal and may be a good deal for you – if you know and follow the rules.
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