The self-directed IRA is a wonderful vehicle for diversifying IRA or other qualified funds into ‘alternative’ assets like real estate, private placements, notes, precious metals, and more. The whole structure of a truly self-directed plan is different than what most people are accustomed to with their current bank or brokerage company. Most people are more familiar with working with an advisor or appointed financial representative. With that structure, the advisor/representative helps the client determine what the IRA is going to invest in and when. With a truly self-directed IRA there is no advisor or representative. You take on that responsibility as the ‘self’ in the self-directed IRA.
You are the one in control of everything that happens with your IRA. We need your initiative to do anything with the account. We can’t (and won’t) do anything without your direct, written authorization. We are here and accessible to do whatever you need us to do. However, in order to ensure the full security of your account, we do not take any action except upon receiving your direct written request.
As a general rule, if you are a client and you are thinking to yourself: “I wonder who is doing such and such?”—the answer is probably YOU! You decide what your IRA is going to invest in. You put together the details of the investment. You provide us with the investment direction forms, and you approve everything before we process it.
The great thing about working with a local company like Entrust New Direction is that we are available when you need to reach someone. We always answer the phone when you call, and you are able speak with a representative in the appropriate department to help with whatever you need. Additionally we have a wealth of really good information on our website.
I am a visual person and I like analogies, so here’s an analogy for the self-directed IRA structure: Think of the IRA as a bus. You are the driver of the bus and Entrust New Direction serves as the wheels and sometimes the brakes. A bus without wheels is not going anywhere (you need a self-directed IRA administrator to provide recordkeeping and administration for the IRA), and a bus without brakes is extremely dangerous. Thus, our two roles are essential to the IRA. We will move when you direct the steering wheel of the bus in a particular direction and hit the gas. If you are clearly going the wrong way (i.e. towards a prohibited transaction) we will stop you.
If you are not an Entrust New Direction IRA client and are working with another self-directed IRA company that doesn’t utilize their brakes, you may want to ‘trade in’ for a better bus. If you find a company that blindly does whatever you ask, without requesting documents or asking basic questions, you may want to separate yourself from that company. Unfortunately there are companies in our industry that operate without ever utilizing their brake system.
It is important to note that, at the end of the day, you are responsible for your self-directed IRA. Entrust does not approve or endorse any investments. We are capable of telling you what the rules are, however when it comes down to it, it’s your IRA and you are responsible for it. We’ve been doing this a long time and we are very knowledgeable of the rules for self-directed IRAs.
We can’t give advice or ‘approve’ your investments, however, if you are forthcoming and honest with all the information and you have a general question about whether something that you are looking to do is a prohibited transaction or not, we can generally answer your questions (or at least direct you to the appropriate section of the Code to research the issue). If we happen to see that the investment you are trying to make is clearly a prohibited transaction, then we won’t fund that transaction (i.e. we will use our brakes). We don’t want our clients to get into trouble with the IRS, that’s not good for anyone. We don’t want ‘bad assets’ in our system, and we certainly don’t want our clients getting into trouble and telling their friends what a terrible experience they had with one of those ‘self-directed IRAs.’
Our goal is to provide our self-directed IRA clients with the broadest spectrum of investment options while at the same time helping them stay out of trouble and maintain their IRA’s tax deferred status. If you know what you want to do with your IRA, and need an administrator that will allow for the flexibility to do it, give us a call. We would love to work with you.
Photo Courtesy of Bill Ward.