Understanding the Self-Directed Checkbook IRA LLC Investment Structure
What is a self-directed IRA, a self-directed IRA really isn't any different than any other IRA every single IRA that you can hold with any different bank, or administrative custodial service is exactly the same in its DNA. So at its core, every single IRA is exactly the same, the difference is is what the actual administrator of that accouter, who you hold that account with will actually let you what they will actually let you invest in.
So people that you're most likely used to are going to be doing stocks bonds and mutual funds, they could actually do real estate and essentially, you know we could do brokerage, but we do real estate, well. They do those things well and either one of us would do each other's business very well.
If we tried so each person in this industry has their own specific function, really does have the ability to properly do the things that they're looking to do, for people looking to do real estate people looking to do private equity, things that are closely held need someone with the experience like the advantage of properly do that, and have the efficient workflows to help get those types of investments done.
The simplest term is that you have the full control in order to make the types of investments that you would like to do, without having to only be locked into a certain list that you're picking from something like stocks and mutual funds. There really isn't any difference to being to getting started with a self-directed IRA versus any other type of IRA. Most people like to use the term transfer and rollover interchangeably, but something, I do like to put out to everyone is that there is an inherent difference between those types of movements of cash and asset and the differences are very important.
So, just a little bit of a record of definitions to get started with this if you are looking to move money into. An IRA the cleanest and easiest way to do that is a custodial transfer, so if you have a light type of account with one administrator. Let's say, a traditional IRA and you'd like to move it to another traditional IRA administrator, what you do is called a custodial transfer.
We submit the request to the resigning custodians they directly to us there are no tax implications, there's no reporting of the cash movement. It simply goes from one administrator to the other it is the simplest and the cleanest way in order to move money. Now, the other term that a lot of people like to interject and interchange into this is what's called a rollover a rollover is a very specific type of movement of cash and assets between two tax-qualified plans.
The difference between that and a custodial transfer is that a direct rollover or a rollover does have tax reporting, the resigning custodian is going to actually be issuing form 1099-r to the IRS indicating that you have done a distribution of cash from that type of plan. Now the technical way that they make sure that this is not reported taxable to you is called code g meaning “a qualified rollover to a qualified plan” but you do need to make sure is that unlike the traditional rollover that you do have tax reporting with this.
You will be getting 1099 from the resigning custodian and tax reporting qualifying the rollover from the people that are receiving it. Now people might ask well why doesn't everyone just do a transfer well the rollover has a specific place insofar is that if you have a 401 K 403 B governmental 457 Armed Forces Thrift Savings Plan large pension etc, You will need to use a rollover it's the only way to go directly from a non-like a type titled account. So less your safe for my 401 K into a traditional IRA without paying any taxes or penalties.
It does have its place it is something that is very specific and I just like people to know that there are other options out there and sometimes even options that will simplify it with regards to getting started with self-direction or any type of IRA for that matter. It's just some good things to know, I hope people got a little bit out of we're going to give you much more information, but that is a very good thing to notice the difference between one a transfer which is non-taxable, non-re-portable, and a direct rollover which is not taxable. But is a re-portable movement of cash so now what types of accounts are out there the next slide we're going to cover is going to be the different types of plans for the most part that we handle and for the most part that most people out there are going to be using in order to do self-direction now.
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