How is the Money Handled if I Invest with My Self-Directed IRA?

By April 21, 2016 Blog No Comments

With a self-directed IRA account with Preferred Trust Company, your money is ensured through the FDIC. Like most IRA accounts, you will receive a minimal gain from federal interest regardless if you use the account to invest with. Once you have opened and funded your account, you will have the opportunity to invest your funds in alternative investments. However, once your money is invested, it is no longer ensured as the funds are no longer in the possession of the custodian i.e. Preferred Trust Company.

Any and all documents that are related to an investment must be titled in the name of your IRA, it can not be titled to you personally. For example, if you invest in real estate, the title of the property would be: Preferred Trust Company FBO (your name) IRA

Upon the completion and verification of the paperwork being accurate, Preferred Trust Company will than process the investment and the the funds will be sent from your IRA for the investment based on your specifications. All records pertaining to the investment (such as real estate deeds, original notes, operating agreements for LLCs) are retained by Preferred Trust Company.

Once your IRA owns the investment, all expenses and profits that are related to the investment must come from and return to your IRA. When you are ready to sell the investment, please ensure the paperwork is accurately filled out; as the account owner you will approve all documents. The original documents must be sent to Preferred Trust Company for final signature. Once everything is completed, the funds from the sale of the investment return to your self-directed IRA tax deferred or tax-free.

Remember, your self-directed IRA investments are not guaranteed. Only cash balances that are held in the IRA account are FDIC insured. For this reason self-directed investing may not be for everyone. Most successful investors feel that the investment risk in alternative assets they know and understand is much less than that associated with investing solely in traditional investments tied to the market.

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