Self Directed IRA Rules

Considering there are many different types of self directed IRAs, each account possesses a different set of self directed IRA rules and regulations. However, there are a few rules that apply to all self directed IRA accounts, which are as follows:

 

Do I Have to Hold My IRA Account With a Third Party Administrator and Custodian?

All IRA’s accounts must have an administrator and custodian. The IRS wants to ensure that the IRA owner is held at arms length from their IRA investments, and that the IRA account is expertly managed and follows all legal parameters of Individual Retirement Agreements.

 

Disqualified_PersonWho Are Disqualified Persons?

All IRA’s must follow IRS guidelines regarding disqualified persons and prohibited transactions.

The people/entities that are disqualified from directly or indirectly benefiting from your account are:

  • You
  • Your spouse
  • Your ascendants
  • Your direct descendants
  • Your direct descendants’ spouses
  • Certain fiduciaries (CPAs, Attorneys, Financial Planners, etc.)

 

For any questions regarding self directed IRA rules and disqualified persons, feel free to give us a call at 877-742-120 x155, or consult New Direction’s disqualified persons webpage.

 

What is a Prohibited Transaction?

In general, Internal Revenue Code Section 4975 defines a prohibited transaction as a transaction between a plan (your account) and a disqualified person.

Prohibited Transactions include:

  1. A sale or exchange, or leasing of property between a plan and a disqualified persons.
  2. Lending money between an IRA and disqualified persons.
  3. Furnishing good, services, or facilities between an IRA and disqualified persons.
  4. Transfer to or use by a disqualified persons of the income or assets of a plan.
  5. An act by a disqualified person who is a fiduciary whereby he deals with the income or assets of the plan in his own interests or for his own account.
  6. Receipt of any consideration for his own personal account by any disqualified person who is fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.

 

What Happens If I Have To Withdraw Funds Out Of My IRA For An Emergency?

If the emergency is in compliance with hardship withdrawal rules, you may borrow money from your IRA prior to the age of 59.5 without incurring the 10% penalty. You may withdraw funds from your IRA provided you repay the funds within 60 days of distribution

 

Can My IRA Be Sued?

Your IRA may be subject to legal action. IRAs are not always exempt from creditor claims, and are never exempt from federal or state taxing authorities. However, some states do not permit creditors to collect from IRAs.

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