What determines if an IRA is Captive or Self-Directed?

by | Feb 27, 2017

Nearly all IRA’s are captive IRA’s.  If you have any doubt, ask your custodian these questions:

  • May I purchase real estate in my IRA?
  • May I purchase privately-traded companies in my IRA?
  • May I purchase a single-member LLC in my IRA?
  • May I borrow money in the name of my IRA to finance further IRA investments?

If the answer to any of those questions is “no”, then you have a captive IRA.  Some IRA’s are more captive than others, to be certain.  But an answer of “no” to any of those questions means that the custodian you’re questioning will not provide you with the full extent of authority available to your IRA under the law.

A final question to ask for ultimate clarification is this:

  • Will you ever restrict my IRA’s investment choices beyond insurance and collectibles?

If the answer to this is “yes”, then it’s a practical certainty that the custodian you’re dealing with offers (more or less) captive IRA’s.  For maximum flexibility, seek out a truly self-directed IRA custodian.

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