Convert Existing IRA to Self-Directed IRA LLC | Self-Directed Solo 401k vs. IRA LLC

QUESTION 1: What criteria are there for allowing me to convert my existing IRA over to a self-directed IRA so I can get check book control?

ANSWER: To convert an existing IRA to a self-directed IRA with checkbook control the following is required:

A self-directed IRA custodian (e.g., IRA Services Trust Company) to hold the self-directed IRA LLC;

An IRA LLC containing specific language surrounding the IRA regulations is required;

The self-directed IRA subsequently purchases the member units of the new IRA LLC; and

Subsequently, a checking account is opened in the name of the LLC, which is then used to place the alternative investment purchases.
QUESTION 2: I have heard of “self-directed IRA LLC and solo 401k is there a difference?

I appreciate your insight, Karen from Connecticut

ANSWER: To open a solo 401k, you must be self-employed in some capacity. Unlike an IRA with checkbook control where an LLC is required in order to gain checkbook control, the solo 401k allows for checkbook control from the beginning (i.e., an LLC is not required to gain checkbook control over the solo 401k plan).

Other differences between the Solo 401k and self-directed IRA LLC include the following:

The solo 401k allows for higher annual contributions (for example, the solo 401k allows for $53,000 for 2015 plus $6,00 if age 50 or over  whereas  the the IRA contribution limits allow for  $5,500 ($6,500 if you’re age 50 or older);

The solo 401k allows for life insurance investments;

The solo 401k allows for solo 401k loan (you can borrow from your own solo 401k);

The Solo 401k does not require an LLC to gain checkbook control over your retirement funds whereas the IRA does.

The solo 401k investment in real estate that uses debt financing is generally not subject to UBTI.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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