Self-Directed IRA Rules: Part 3 of 3 Questions To Ask Yourself

September 14, 2017  --  Episode #270

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The Definitive Guide to Self-Directed IRA's

Conventional financial media is fat with tales of woe and complication for users of self-directed IRA’s… but the prevailing truth is a very different matter.  Today, you learn question #3 of 3 simply questions to ask yourself so you’ll never run into the trumped-up problems THEY want you to believe to be the rule rather than the exception.  I’m Bryan Ellis.  This is episode #270.



Today, my friends, we finish out our look into the 3 simple questions you must ask yourself honestly before each self-directed IRA investment.  And, by the way, thank you for the exceptional level of interest in this topic and all of the kind email comments you’ve sent to me on [email protected]

And this is, of course, episode #270, so visit SelfDirected.org/270 for all of the goodies associated with today’s show… discussion, transcript, links & resources… the whole shebang… SelfDirected.org/270.

Thinking about making an investment using your self-directed IRA?  If so,

Then two episodes ago, you learned about question #1 to ask yourself to make sure you’re not running afoul of the rules.  That question was, of course:  Are you double-dipping?  Hehehe

If your next self-directed IRA investment passed that screen, then you were able to proceed onward to question #2 in last episode:  Is your IRA allowed to own the type of asset you want to buy?

You’re two key questions in with only one to go.  And if your investment idea passed muster with questions 1 & 2, then chances are very good you’ve got a winner.

But let’s not lie to ourselves, my friends:  There are definitely some gotchyas lurking in the deep, dark crevices of the tax code, just waiting to leap our and spray vile venom on the unprepared.

You, my friends, will not be among that unfortunate number by asking yourself this final key question:

Have you received a qualified legal opinion about your investment idea?

Yes, my friends, that means consulting with an attorney.  You should consult with an attorney before every single self-directed IRA transaction.

Well actually, there are 3 types of situations in which you should not consult with your attorney prior to investing in alternative assets.  Those situations are:

  1. Never
  2. The second Friday of every week, and
  3. Never

Other than that, you should ALWAYS get a legal opinion about self-directed IRA deals before you jump in.

But the question of whether you’ve received a qualified legal opinion is a loaded question, because it gives rise to these further queries:

  1. What should I ask of my attorney?
  2. What is a “qualified legal opinion”?

Fortunately for you, my friends, I have the answers to those questions for you.

Let’s begin with what to ask your attorney.

In my rather impressive work known as Self-Directed IRA’s:  The Definitive Guide, I include 3 questions you really should ask of qualified legal counsel for each self-directed IRA deal you contemplate.  And they are…

  1. Is any part of this transaction prohibited OR taxable?

Note that last part, taxable.  Sure, our primary objective here is to avoid prohibited transactions.  But contrary to popular opinion, there are some types of investments that can generate a present-day tax liability even for a self-directed IRA.  So do NOT fail to ask whether any part of your transaction is prohibited OR taxable.

  1. Are there any danger zones that would take my IRA out of compliance?
  2. At what milestones should I consult you again on this transaction?

That last one is pretty important.  For example:  On a real estate transaction, if your plan is to lease the property out, but at some point you decide to sell it via seller financing instead, that could change the answers to some of the other key questions.  So ask your qualified legal counsel to give you some guidance on the types of issues that would merit a return to him or her for further guidance.

Ok, got it?  That’s pretty simple.  And, by the way, those questions are listed, along with a FREE download link for the entire Definitive Guide to Self-Directed IRA’s, on today’s show page at SelfDirected.org/270.

By the way – if you’re listening to this and have a website or newsletter where you’d like to share some knowledge about self-directed IRA’s with your followers, feel free to point them over to SelfDirected.org/ira – that page is ALL ABOUT self-directed IRA’s, and it’s easily the single best page on the internet on that topic.

Now on to the other big issue to tackle:  Exactly who gives qualified legal counsel?

Here’s what the answer isn’t:  Any attorney who says they do self-directed IRA work.

There is an increasing population of attorneys who will tell you that they have the requisite knowledge.

Nearly all of them are, if not blatantly lying to you, at least self-delusional.

Now look, I’m not an attorney myself, but I’m somewhat well-qualified to address this topic.  After all, I do teach the law about self-directed IRA’s to lawyers through UCLA and the California CEB, so I know a thing or two about this topic.

And there are two pieces of advice I’ll give you on this question.

First:  Ask whichever lawyer you consider working with how many clients they’ve served with self-directed IRA issues, both in their entire careers and in the past 12 months.  If the total number isn’t in the hundreds, and the last 12 months isn’t at least in the dozens, you’re dealing with somebody who doesn’t have enough experience.

Tax law is a highly specialized area of law.  Self-directed IRA law is a highly specialized area of tax law.  Just because a lawyer is a tax lawyer doesn’t mean they know enough to keep you out of trouble with self-directed IRA’s.  Demand experience… there’s no acceptable alternative.

The second piece of advice I’ll give you is this:  Again, inside my highly respected work known as Self-Directed IRA’s:  The Definitive Guide, I include citation of several lawyers who I think pass muster in terms of knowledge and experience.

Number one on that list is, of course, the Great One, Tim Berry.  But there are a few others listed there as well, in case Tim’s calendar is booked up.

How do you get access to that list of great self-directed IRA attorneys?  Either you can send me a cashier’s check for $1 million dollars and a self-addressed stamped envelope… or if you’d rather have it for free, just visit SelfDirected.org/ira.  Hehehehehe

Seriously folks, I’d really love for you to check that out at SelfDirected.org/ira and let me know what you think.  It’s the single best guide to self-directed IRA’s anywhere, including both free and paid resources.  Check it out and share it with your friends, if you don’t mind… I’d really be grateful… and you’ll benefit profoundly from it.

Hey, if you’ve enjoyed this show, tell your friends, won’t you?  Thanks so much!

My friends, invest wisely today, and live well forever!


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Bryan Ellis

I am host of Self Directed Investor Talk, which I'm told is America's #1 podcast and for affluent self-directed investors. I'm also something of an expert in self-directed IRA's, solo 401k's and 1031 exchanges. You can find more of my writing in some cool places like TheStreet.com, Entrepreneur.com, ThinkRealty and even Forbes (that was always one of my goals!). I live in metro Atlanta, Georgia with my wife and business partner Carole Ellis(she's a real business partner... not just because she's my wife... I'd want to work with her if I wasn't married to her... and I'd want to marry her, too). I also have 4 children ranging in age from 2 to 20 (yes, you read that correctly). It's my goal to be the name everybody thinks of when they think of Self-Directed IRA's and Solo 401(k)'s.