Real Estate IRA - Asset Protection

[Ramon DeLeon]

My real estate IRA (PENSCO TRUST) owns seven properties between Sacramento & Redding CA. I'm wondering what options I have to minimize the liability of one property from other properties. Can I LLC those properties individually within my real estate IRA? Title is individually listed under PENSCO TRUST with me as beneficiary. Will opening a real estate IRA with another company protect those owned by PENSCO ? Any input appreciated. Thanks

[Brian Eastman]

@Ramon DeLeon

You could establish a LLC owned by the IRA that holds one or more properties to segregate into groups. Pensco will require the LLC operating agreement be drafted in a specific way so as to be compliant with IRS guidelines for this type of structure. Unfortunately, LLC entities in California are not cheap to maintain. Just making sure you have quality insurance coverage may be a better way to go.

You could move some of the properties to a separate IRA held by a different custodian, or even a separate IRA account held by Pensco and achieve some asset segregation in that manner as well.

In addition to asset segregation, a LLC would provide you with checkbook control, so you would not have to submit paperwork to Pensco for each and every transaction.