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IRA's moved into LLC's?
Old 09-13-2021, 03:21 PM   #1
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IRA's moved into LLC's?

As I've posted before I'm currently invested ~90% equities with my IRA monies. A good portion of non-IRA money is invested in real estate (trust deeds). I would like to diversify a portion of my IRA money into trust deeds and there are a couple of companies (they work together) who claim to have the ability to make that happen by setting up a LLC enabling you to move your IRA monies into the LLC then giving you "checkbook access" to invest in (mostly) what you'd like. Below is a summary of their pitch. I'm skeptical ... but interested. Anyone have any experience with this?


THE GIST OF IT
We are two companies - under one roof - making magic happen.

Broad Financial
Sells a legal product [which is] built into an LLC.
This "LLC" is established using your home address and includes our proprietary legal framework.
That is in essence - our product.

Madison Trust Co (MTC)
You will establish and fund a new IRA with our charted, licensed custodian MTC. MTC will than turn around and "invest" those funds on your behalf into an asset - an LLC.
This LLC is already in your hands and, once funded, it (the LLC) exists as the sole asset in your IRA account.

Voilà! Your IRA funds are now under your direct and autonomous control (inside the LLC that you purchased) while their tax-sheltered status remains intact through the custodian.
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Old 09-13-2021, 03:26 PM   #2
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Originally Posted by Broland View Post
As I've posted before I'm currently invested ~90% equities with my IRA monies. A good portion of non-IRA money is invested in real estate (trust deeds). I would like to diversify a portion of my IRA money into trust deeds and there are a couple of companies (they work together) who claim to have the ability to make that happen by setting up a LLC enabling you to move your IRA monies into the LLC then giving you "checkbook access" to invest in (mostly) what you'd like. Below is a summary of their pitch. I'm skeptical ... but interested. Anyone have any experience with this?


THE GIST OF IT
We are two companies - under one roof - making magic happen.

Broad Financial
Sells a legal product [which is] built into an LLC.
This "LLC" is established using your home address and includes our proprietary legal framework.
That is in essence - our product.

Madison Trust Co (MTC)
You will establish and fund a new IRA with our charted, licensed custodian MTC. MTC will than turn around and "invest" those funds on your behalf into an asset - an LLC.
This LLC is already in your hands and, once funded, it (the LLC) exists as the sole asset in your IRA account.

Voilà! Your IRA funds are now under your direct and autonomous control (inside the LLC that you purchased) while their tax-sheltered status remains intact through the custodian.
I see that Broad Financial offers the "ultimate bitcoin IRA plan." That tells me everything I need to know.

Oh, and the fees? Yeah, I don't think so.

https://www.madisontrust.com/fees/fee-schedule/
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Old 09-13-2021, 03:28 PM   #3
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No experience with this particular outfit. But my rule is if I don't understand it, or it seems too good to be true, or just seems weird, I stay away. Far far away. That is what I would suggest in this case.

IRS rules on IRAs are hard enough to keep up with through things I do understand. Potential IRS disqualification of IRA tax deferred status is a too serious a consequence to entertain fringe questionable setups.

But, that is just my cautious opinion.
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Old 09-13-2021, 03:32 PM   #4
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I wouldn't touch it with a 10-foot pole... seems self-sealing to me.
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Old 09-13-2021, 05:33 PM   #5
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Madison Trust I am familiar with. My last job was as CFO of a privately held software company. Some investors in the company thought it a great idea to invest their IRA funds in the company. MTC is one of the few companies still offering custodial services for privately held stock. The IRA s held the funds directly.

One problem is I was asked to value their holdings on behalf of the company. This was difficult as the stock was not traded. And it was cleaner with no LLC involved.

The LLC would concern me as it would seem to add some self dealing risk if you have access to the funds that are in the LLC. If whatever you do in the LLC is deemed a business, it could trigger unrelated business taxable income (UBTI, look that up).

I would consider this a headache worth avoiding.
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Old 09-13-2021, 05:48 PM   #6
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Originally Posted by pb4uski View Post
I wouldn't touch it with a 10-foot pole...
+1
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Originally Posted by RetireeRobert View Post
...my rule is if I don't understand it, or it seems too good to be true, or just seems weird, I stay away. Far far away. That is what I would suggest in this case. ...
+2

Actually, seeing "making magic happen" would be enough to make me instantly click away. The magic is almost certainly a significant transfer of your money to them, but I wouldn't be around long enough to even investigate how that was being done.

William Bernstein on retirement saving and investing: “Make no mistake about it: The object of this particular game is not to get rich – It’s to not get poor.
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Old 09-13-2021, 06:04 PM   #7
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This smells real bad. Don't touch it, if you do lawyer up!
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Old 09-13-2021, 07:30 PM   #8
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My IRA is already under my direct and autonomous control and I can already invest in whatever I want to (publicly traded securities). If you need this arcane LLC construction in order to invest in something you cannot do directly in an IRA, it probably means the investment is 1) highly illiquid; 2) highly speculative; or 3) highly lucrative to whomever is selling it. Not for me but YMMV.
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Old 09-13-2021, 08:12 PM   #9
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Quote:
Originally Posted by Broland View Post
...
Broad Financial
Sells a legal product [which is] built into an LLC.
This "LLC" is established using your home address and includes our proprietary legal framework.
That is in essence - our product...
If you speak to them, I suggest you ask them how this does not violate the existing rules on IRA Prohibited Transactions.

https://waysandmeans.house.gov/sites...btitleISxS.pdf

Quote:
To prevent self-dealing, under current law prohibited transaction rules, an IRA owner cannot
invest his or her IRA assets in a corporation, partnership, trust, or estate in which he or she has a
50 percent or greater interest. However, an IRA owner can invest IRA assets in a business in
which he or she owns, for example, one-third of the business while also acting as the CEO.
I didn't dig through IRS Pub 590A to verify this, but I would expect the House Ways & Means Committee to know what they're talking about here since they're specifically trying to tighten this rule.
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Old 09-13-2021, 08:45 PM   #10
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Originally Posted by timbervest View Post
My IRA is already under my direct and autonomous control and I can already invest in whatever I want to (publicly traded securities). If you need this arcane LLC construction in order to invest in something you cannot do directly in an IRA, it probably means the investment is 1) highly illiquid; 2) highly speculative; or 3) highly lucrative to whomever is selling it. Not for me but YMMV.
and 4) maybe illegal anyway!
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Old 09-14-2021, 12:18 PM   #11
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Originally Posted by Montecfo View Post
Madison Trust I am familiar with. My last job was as CFO of a privately held software company. Some investors in the company thought it a great idea to invest their IRA funds in the company. MTC is one of the few companies still offering custodial services for privately held stock. The IRA s held the funds directly.

One problem is I was asked to value their holdings on behalf of the company. This was difficult as the stock was not traded. And it was cleaner with no LLC involved.

The LLC would concern me as it would seem to add some self dealing risk if you have access to the funds that are in the LLC. If whatever you do in the LLC is deemed a business, it could trigger unrelated business taxable income (UBTI, look that up).

I would consider this a headache worth avoiding.
yeah, I don't see any way to avoid UBTI on this type of account setup.

bet they don't tell their clients just how bad taxes on UBTI can be!
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