SD IRA help

[Wayne M.]

I am wanting to move an IRA rollover into a self-directed IRA and I have a couple of questions I need help with.
By the way, I am thinking of using it for tax liens and/or private lending.
1) Do I need to set up an LLC in the IRA?
2) the two custodians I am looking at are Sunwest Trust and Equity Trust, which of these two is the better all-round option, for ease of transactions, fees, customer service, etc.

[Jerry K.]

Wayne,
Jon's correct, you don't need an LLC for IRA tax lien investing. But you need to check with the custodians on how long it takes for the custodian to issue the deposit check(s) you'll need for purchasing the liens, and also the procedures for issuing the final payment check for any liens you won.

Issues you can run into are that the custodian needs several days notice to issue the deposit check. Then they have fees for processing and issuing funds for your tax lien purchase. Those fees are outside of the annual account and setup fees.

I just looked up ETC fees for investing in Tax Liens - They have a $50 expedited fee if you need the check processed in one business day from when they receive your request (10:00 AM Eastern time). Since most counties want cashier's checks, ETC has an $18 fee for overnight service (they say all cashier's MUST be overnighted) and they have a $10 fee for each cashier's check you need. Some counties want a separate check for each lien - check the rules for the county in which you are buying liens. http://www.trustetc.com/forms/taxliendoi.pdf

I personally am going the route of the SDIRA with a specialized LLC where I'll be the manager and have a checkbook. I invest in tax liens only in counties that do online tax lien auctions. The counties I use require the deposit be sent to them through their website via and ACH transfer. (That may require a fee from ETC but I don't even see the ACH option in ETC's website.) With a checking account, that ACH transfer is free, the funds arrive in minutes.

I can do the same ACH the next day for paying the remaining balance for the liens I purchased and meet the county deadline for 24 hour payment in full for liens purchased.

Note, it will be up to you to keep excellent records of how every penny is spent in that checking account (where it goes, what it was for) and also you need to have reports (spreadsheet) of every lien you purchased in the LLC. The custodian lists only the LLC as the investment. But the IRS wants to know what the LLC bought and how every penny of the checking account is accounted for. Some custodians will require you provide the report of investments (tax liens) you made with the checking account in the LLC.

The IRS wants to make sure you don't spend the money on yourself or prohibited investments. You can't combine your own money into the LLC investments or checking account.

But having a "Checkbook IRA" makes it easier to invest in Tax Liens and other real estate, while keeping all the fees and charges to almost nothing.

TIP - get the checking account through a credit union so that you have no checking fees. My credit union only requires I pay $7.00 for a box of paper checks. No monthly fees, no minimum balance, no other fees. I do have to keep $5.00 in a savings account along with the checking account.

Jerry