A self-directed account is technically the same tax-advantaged account you may find at any brokerage firm, custodian, or bank.
The difference with a self-directed IRA is that you can invest in a wide range of alternative assets, such as real estate, promissory notes, and private equity in addition to traditional investments, such as stocks, bonds, and mutual funds.
Investment Options for Self-Directed Investors
As long as IRS guidelines are followed, investment options within a self-directed IRA are virtually limitless. Some of the most popular investments Equity Trust Company custodies include:
- Real Estate
- Promissory Notes
- Precious Metals
- Private Equity
- Mutual Funds
- Tax Liens/Deeds
- Countless Others
Additionally, investments made with self-directed IRA funds must be at arms length, which is most often defined as a willing buyer and willing seller coming together with no undue influence from outside sources.
Disqualified Persons Defined
Disqualified persons are individuals or entities between whom or which an IRA is prohibited (absent a special exception) from engaging in any direct or indirect sale or exchange or leasing of any property; lending of money or other extension of credit; furnishing goods, services, or facilities; or transferring to or permitting the use of IRA income or assets.
- Fiduciaries (which in the case of a self-directed IRA includes you, as the IRA owner).
- The following family members of the IRA owner:
- Grandparents and Great-Grandparents
- Children (and their spouses)
- Grandchildren and Great-Grandchildren (and their spouses).
- Service providers of the IRA (e.g., IRA custodian, CPA, financial planner).
- An entity (such as a corporation, partnership, limited liability company, trust, or estate) of which 50% or more is owned directly or indirectly or held by a fiduciary or service provider; also a partner which holds 10% of a joint venture of such entity.
NOTE: The term “disqualified person” under the Internal Revenue Code Section 4975 does not include siblings (brothers and sisters) or aunts, uncles, and cousins of the IRA owner.
Benefits of Self-Directed IRA
Tax-Advantaged Diversification and Control
You Are In Control
Self-directed IRAs allow you to invest in assets you know best. You direct your investment choices.
These powerful accounts combine the tax advantages of retirement accounts with nearly unlimited investment options to create a portfolio that truly works for you.
Investing with a tax-advantaged account, such as a self-directed Roth IRA or self-directed Traditional IRA, provides you with the potential opportunity for tax-free or tax-deferred profits.
Build Wealth for Future Generations
Certain self-directed accounts allow the beneficiaries to receive the account’s assets after the account owner’s passing with little to no tax.
Self-Directed IRA Investing Process
When you open a self-directed retirement account, you will find your own investments and perform the necessary due diligence to determine if the investment is the right fit for you.
Our partner Equity Trust, as directed custodian, processes all account-related transactions and fund disbursements at your direction, custodies your account’s asset(s), maintains records and completes required IRS tax reporting.