I Wish I Would Have Known Before...Be Informed!

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“How did I not know about you guys?” and…

"I wish I would have known about you guys before I purchased my real estate with the Self-Directed IRA." Oh yes, and, “This would have been perfect for me, but I can’t do it now as I’m stuck in a SDIRA and didn’t know it could be done this way!” We’ve heard these countless times from individuals inquiring about our program. As a family owned business that has been structuring IRA Real Estate plans since 1992 with the SAFE HARBOR® -Directed IRA™, it pains us when potential clients come to us unaware of the differences between the three IRA’s used to invest in real estate. More often than not, the conversations end with feelings of regret because they simply did not know that there is another way. Therefore, we've made a quick post highlighting the differences between the three IRA's used to invest in Real Estate:

Self-Directed (SDIRA): The title of the real estate is held in the name of the IRA, not in your name, therefore:

  • It is a prohibited transaction for the SDIRA owner or any of the owner's ascending/descending family members to occupy the real estate. Therefore, husband/wife, your mom/dad, daughter/son, granddaughter/grandson and so on and so forth could NEVER occupy the real estate. These restrictions eliminate your ability to use your IRA to invest in a residential, vacation home or a second home.

  • You or your direct family members cannot do any work or labor to the real estate. That means, anytime you want to freshen up with a coat of paint, or fix a leaky kitchen sink, you would have to hire someone to do it for you.

  • Violation of the IRS's rules for SDIRAs would cause the entire value of the SDIRA real estate investment to be taxable as additional income during the same year as a prohibited transaction. You would also incur early withdrawal penalties during the same year the violation occurred if you are under 59.5 years of age.

*SAFE HARBOR®-Directed IRA™ (SHIRA™): The title of the real estate is held in YOUR NAME, not by the IRA. Therefore,

  • There are NO prohibited transactions! You and your entire immediate family down the line and sideways could OCCUPY the real estate, which makes it a great option for a residential, vacation, and second home.

  • Leaky kitchen sink? Paint touch up? Save the money of hiring out and do it yourself!

  • Not only can your immediate family occupy the real estate immediately, your heirs will have Step Up In Basis on the real estate down the road.

  • Withdrawals from the SHIRA™ are taxable as additional income in the year withdrawn. If you qualify, all tax offsets can be applied against your normal income and your SHIRA™ tax liability. Any tax liability will be eliminated or minimized by normal real estate tax write offs.

*The SHIRA™ invests the owner's funds in a principal protected account with an upside potential, while buffering from downside risk in compliance with IRS Tax Shelter Inspectors. Those assets in coordination with non-IRA funds, can be structured to support the purchase of real estate. Again, with the completion of a SHIRA™ plan, you now own two investments. One is your SAFE HARBOR®-Directed IRA™, and the other is your real estate. One supports the other while the two exist legally as completely separate entities.


CheckBook IRA LLC (CBIRA): The title of the real estate is held in the name of the IRA, not in your name, therefore:

  • The Checkbook IRA does offer a little more flexibility than the Self Directed IRA. For instance, it grants its owner checkbook writing privileges, and the freedom to decide how, when and where to invest, as long as the CBIRA rules are followed. This type of IRA is owned by a LLC, which offers significant benefits, such as limited liability and asset protection (exceptions and limitations may vary from state to state, so be sure to check with a real estate lawyer).

  • It is a prohibited transaction for the CBIRA owner or any of the owner's ascending/descending family members to occupy the real estate. Therefore, husband/wife, your mom/dad, daughter/son, granddaughter/grandson and so on and so forth could NEVER occupy the real estate. These restrictions eliminate your ability to use your IRA to invest in a residential, vacation home or a second home.

  • You or your direct family members cannot do any work or labor to the real estate. That means, anytime you want to freshen up with a coat of paint, or fix a leaky kitchen sink, you would have to hire someone to do it for you.

  • Violation of the IRS's rules for CBIRAs would cause the entire value of the CBIRA real estate investment to be taxable as additional income during the same year as a prohibited transaction. You would also incur early withdrawal penalties during the same year the violation occurred if you are under 59.5 years of age.


A Better Way of Using Your IRA to Purchase Real Estate:

*Remember: the terms, “Checkbook IRA LLC,” “Self-Directed IRA,” and “SAFE HARBOR®-Directed IRA™,” are legally no different from any other IRA.

These terms are not technical or legal terms; they are rather descriptive terms that reveal how the IRA is managed. You will not find any of these terms in the IRS tax code, but you will find that the tax code allows you to structure these plans in legal ways.

It is so important to be informed about the options that are available to you. It is also important to inform your realtor when searching for real estate or the realtor who is representing your sale about the SAFE HARBOR® - Directed IRA™. For instance, many real estate transactions fall through because of Debt-to-Income Ratio. In other words, even if you have assets and money, but can't show enough or a steady stream of income, odds are you will be denied the loan because of DTI. At Lasaii Benefits, we can structure the SHIRA™ to show additional income in order to qualify for the loan.

Along with helping purchase real estate to occupy, you have a valuable opportunity to learn if you can use your IRA or other qualified retirement plans to:

  • Get help with existing house payments

  • Purchase an investment property to create income (commercial real estate included)

  • Structure your estate for tax advantages

  • Build an extension, guest house, or remodel

Check out the other innovative services Lasaii Benefits offers at: https://www.lasaiibenefits.com/ourservices


For more information about our program, or to receive news, alerts and unique financial analysis, please visit our website at www.lasaiibenefits.com.





Sources: Investment Company Institute, Federal Reserve Board, National Association of Government Defined Contribution Administrators, American Council of Life Insurers, and Internal Revenue Service Statistics of Income Division. See" The U.S. Retirement Market, Fourth Quarter 2010." Other Plans include private sector DB plans; federal, state, and local pension plans; and all fixed and variable annuity reserves at life insurance companies less annuities held by IRAs, 403(b) plans, 457 plans, and private pension funds. Federal pension plans include U.S. Treasury security holdings of the civil service requirement and disability fund, the military retirement fund, the judicial retirement funds, the Railroad Retirement Board, and the foreign service retirement and disability fund. These plans also include securities held in the National Railroad Investment Trust and Federal Employees Retirement System (FERS) Thrift Savings Plan (TSP).