Private funding

[Hal Elarbee]

my sister inherited a lot of money and has it in a investments through a financial planner.
Is there anyway that she can remove a large portion of her Investment money out of that vehicle and make it available to me to pay her the 8 to 12% interest that she's not getting now without a IRS penalty for pulling it out. I've looked into real estate investment trusts and being a family member The rules don't allow for her to move her money into a real estate investment trust with me as a participant.
If not do you have a interesting way that it would beneficial for her to loan me money for flips in this situation?

[Jon Holdman]

She needs to speak with a CPA, not a financial advisor. There are rules that may FORCE her to start withdrawing this money right away or face additional penalties. Assuming this is a traditional IRA, she's going to HAVE to pay taxes in order to take the money out. IRAs have minimum withdrawal rules that apply to the owner of the IRA and also to the heir who inherits an IRA. Taxes are unavoidable on IRA money, and waiting may increase the taxes. A CPA can review the details of the situation (the age of person who died is a factor more so than her age) and advise her on minimizing the tax. The financial advisor may well have a vested interest in keeping the money in the existing account.

I wouldn't say it like that, but its true that siblings are not disqualified parties. There is a list of disqualified parties and siblings aren't on it. Ancestors and decedents are and certain other people with fiducial responsibility to the IRA, but otherwise "family" are fine.

So, the IRA could loan you money. Now, she will need to move it to a true self directed IRA. I've moved this thread in to the "Tax, Legal Issues, Contracts, Self-Directed IRA" forum which includes discussions of this topic. There are only a handful of custodians that allow this and there are a couple of threads that discuss the various ones.

The first step, though, is to get with a CPA and figure out the situation with required minimum distributions. If the person died in 2013, you're still OK. If they died in a prior year there may already be penalties.