IRA Checkbook Control



Posted: Monday, November 10, 2008

by
NAFEP

Having investors maintain checkbook control over their IRAs is abomination to the major financial institutions which custody the majority of IRAs. These companies want IRA owners to invest in company-run funds and securities and not so much in non-traditional investments where they have less control. When a traditional custodian does allow non-traditional investing, they usually attach so many fees that such actions are therefore deterred.

Restrictive plan documents and fees are the major reasons for the stringent air that surrounds IRAs, not federal tax law. With checkbook control of a self-directed IRA, an investor can avoid most of the fees charged by traditional custodians and most of the investment restrictions. Checkbook control simply means that the investor can write checks for investments and investment expenses directly from his or her IRA without an intermediary.

Checkbook control is crucial for investing in real estate. Real estate transactions (residential and commercial) usually involve all sorts of extra costs that must be paid directly from the IRA. If you generate custodian fees every time you pay one of these costs, your profits can take a serious beating. When you start looking for self-directed IRA providers, pay close attention to their fee structures.

Time, Real Estate, and Checkbook Control Real estate is all about location, location, location, but real estate investing is also about timing, timing, timing. Probate properties and tax lien properties (where some of the greatest profits lie) can go quickly and you may not have time to clear the investment with your custodian. With checkbook control, you can act immediately and hopefully before a bidding war starts.

Written By Scott Janko, The National Association of Financial and Estate Planning (NAFEP)

For more details on the Self Directed IRA click here.

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