Will your Self-Directed IRA Self-Destruct?

Self-directed IRAs can be very complicated and are the most common type of IRAs where prohibited transactions occur. You must be extraordinarily careful if you have or plan to have a self-directed IRA.
Always make sure you consult with your personal advisors who are experts in this area. It is a mistake to assume that everything is okay simply because your self-directed IRA custodian permits you to engage in a certain activities. It is your responsibility to monitor your IRA activities and it is very easy to forget the rules.

Some examples of prohibited transactions are:

§ Loans/Lending Money

§ Furnishing Goods or Services

§ Self-dealing With Your IRA Assets

§ Receipt of Personal Payments or Benefits

§ Transfer or Use of IRA Income or Assets

§ Sale, Exchange or Leasing of Property A prohibited transaction is committed by “disqualified” persons. Who are considered disqualified persons?:

§ You, the IRA Owner

§ Your Spouse

§ Your Parents

§ Your Children

§ Your Son-in-Law or Daughter-in-Law

§ Your Investment Managers or Advisors

§ Your IRA Trustee, Custodian or Issuer

§ Any 50%+ Owner of a Business Connected to Your IRA

If your IRA is disqualified, it will be deemed fully distributed and become fully taxable! It may also be subject to a 10% penalty if you are under 59½ when the prohibited action took place. Remember, it is your responsibility to follow the rules, custodians and advisors are not on the hook for prohibited transactions, you, the IRA owner, are accountable to the IRS!