When beginning a journey it is always good to determine how you will arrive at the desired destination. The other factor is what is needed to arrive safely and well equipped. Utilizing a guide of who knows the rules, knows the language and knows where the pitfalls are is always a good idea. This process is known as due diligence, the process of gathering data, discovery and making an informed decision.

Who’s who
When choosing a guide determines what capabilities and experience the guide has. Many people that come to us are confused as to the rules and what they can really do with their self directed IRA and with good reason.

Custodians or Administrators are generally where many start the investigation process. The adage that bigger is better seems to be the perception. Let’s look at the challenges that face the investor:

Challenge 1 Each custodian you talk to has different rules – An attempt to understand why they all have different rules can be perplexing but it really boils down to internal, policy, their interpretation of the code, how they deal with assets and of course, fees. Here is the evidence, below is an actual response from the IRS to an inquiry on what an IRA can invest in.
Are there any restrictions on the things an IRA can be invested in?

The law does not permit IRA funds to be invested in collectibles.

If an IRA invests in collectibles, the amount invested is considered distributed in the year invested. The account owner may have to pay a 10% additional tax on early distributions.
Here are some examples of collectibles:

• Artwork,
• Rugs,
• Antiques,
• Metals – there are exceptions for certain kinds of bullion,
• Gems,
• Stamps,
• Coins – there are exceptions for certain coins minted by the U.S. Treasury,
• Alcoholic beverages, and
• Certain other tangible personal property.

Check Publication 590, Individual Retirement Arrangements (IRAs), for more information on collectibles.

Finally, IRA trustees are permitted to impose additional restrictions on investments. For example, because of administrative burdens, many IRA trustees do not permit IRA owners to invest IRA funds in real estate. IRA law does not prohibit investing in real estate but trustees are not required to offer real estate as an option. (Italics, underlining and bold by Asset Exchange Strategies, LLC)

The Self Directed IRA Advisor Advantage – We only deal with the IRS code and what it explicitly says. No policy interpretation, no asset fees and no requirement to report back on the desired asset purchase.

Milestone 2 Protection from prohibited transactions. An investor has the same opportunity to commit a prohibited transaction with a custodian as they would if they were on their own. Why? Because on each and every custodial website states they do not and cannot offer advice. If the custodian offers advice they become liable and they’ll send you back to “your” advisor for help. And if you are like most people investigating self directed IRAs you have learned that there are very few “advisors” who understand the IRA rules.

Self Directed IRA Advisor Advantage – We will only provide to you what the IRS says you can’t do and under what circumstances. If desired a compliance review and confirmation of correct structure will be provided.

Milestone 3 You must obtain permission to execute your deal – With custodian involvement the investment decision is theirs not yours as to what can be bought. Now the possibility of missed investment opportunity is present.

IRA LLC Advantage – You make the investment decision. Not sure if it is a prohibited asset see the list above. Not sure if the structure is correct see Self Directed IRA Advisor advantage.

Milestone 4 Custodians have no responsibility for errors they incur. Custodians have no liability for errors incurred on your behalf. For example, if a check is incorrectly sent to the selling party and the check is cashed the only recourse you have is from the receiving party of the check. Your IRA is now that much smaller.

IRA LLC Advantage – You write the checks, if there is a processing error the only person at fault is in the mirror.

Milestone 5 Assets purchased through a custodian are limited in asset protection.

IRA LLC Advantage – The IRA LLC provides asset protection for both you the IRA and the structure. Don’t expect the custodian to provide any legal help or assistance.

Daniel Cordoba is a Certified Estate Advisor and Principal of Asset Exchange Group, LLC. Asset Exchange Strategies, LLC through its website http://www.MyRealEstateIRA.com helps investors gain greater control of their self directed IRAs.