Posted by Entrust Orange County on Tue, Apr 06, 2010
Our clients invest in very diversified assets, and as such we like to share unique and interesting case studies whenever possible. Would you like to use your IRA to invest in something that you personally believe in? You can. Below is a case study you may find intriguing.
Scenario: A church is currently renting a small space to hold their weekly services and youth events. The church is outgrowing the space and is interested in moving into a larger property. Sadly, funds are an issue for the church, making it difficult to buy a property directly.
Various members of the community start a Limited Liability Company, or LLC, and use their Entrust self-directed IRA and personal funds to buy shares of the LLC in order to acquire real property. As the LLC is oriented to investments, the owners and manager of the LLC know when they find the right property. The church can then rent the property from the LLC. The investors using their self-directed IRA funds provide Entrust with a simple Buy Direction Letter, along with the LLC Subscription Agreement (in the name of their Entrust IRA), and Operating Agreement. They also submit instructions for where they would like Entrust to wire the funds to the LLC. Once the LLC receives all of the necessary funds, it is ready to move forward and close on the property. The LLC then enters into a rental agreement with the church.
It can be very rewarding to take control of your retirement accounts and truly diversify your portfolio. Imagine the possibilities if you can find an investment that you personally believe in and are passionate about, while building wealth for the future. That is true self direction.
By Jennifer L. Williams, Inside Sales & Client Services Manager
jwilliams@theentrustgroup.com
Posted by Chris Kramer on Mon, Mar 08, 2010
1031 exchanges are a great way to defer taxes and buy new
real estate. Did you know your IRA can partner with you in your next 1031 exchange?
I just worked on opening an account for an investor who sold a property and used a 1031 exchange. He wanted to build up his
ROTH IRA, so he decided to partner his ROTH IRA with himself. To achieve this, there are a few things you must pay close attention to and do correctly. First, you should have proper vesting from the beginning. What this means is that if your IRA is going to partner with you, or anyone else, the purchase contract must reflect proper vesting and percentages.
For example, the purchase will be made with $70,000 of 1031 money, and $30,000 from your ROTH IRA. The vesting should read, “Entrust Administration Trust FBO Joe Investor, Roth IRA, A/C #, as to an undivided 30% interest, and Joe Investor as to an undivided 70% interest.” If this is not done up front, the only way to fix this is to rip up the original purchase contract and write up a new one. Do you really want to mess with that? I am sure the bank has no interest in that either. If you have an interest in
self-directing your IRA, open an account immediately, so when something like this comes along, you can start the process right, with the correct vesting.
Lastly, remember when using your IRA, all expenses for the property must come equally from yourself and your IRA. So, for example, if the property needs $10,000 of rehab in this case, 70% of the money needs to come from your personal money and the 30% from your IRA. As long as you follow the rules from the start, using your IRA with a 1031 exchange can be a great opportunity!
By Chris Kramer, Business Development Manager
CKramer@theentrustgroup.com
Posted by Entrust Orange County on Mon, Nov 09, 2009
Do you ever wish you had started saving for your retirement years ago? Can you imagine if you had started saving when you were a freshman in college? Now imagine that you had started saving money your freshman year in an account that was tax deferred for life! Many of today’s college students can establish a
Roth IRA and do just that.
To understand how valuable
Roth IRAs can be, you first need to understand the difference between
Traditional IRAs and Roth IRAs. For Traditional IRAs, you put funds into the IRA on a pre-tax basis. All of the profit from any assets in the IRA grow tax deferred until you start pulling out the funds at retirement age, which can start at 59½ years old. You are taxed on the money you withdraw at the tax rate you are in at that time.
With a Roth IRA, you put funds into the IRA on a post-tax basis. Because you have already paid the tax, any profit from the assets in the IRA grow tax free. When you reach the age of 59½, and you have had the Roth IRA for at least five years, you can take withdrawals. You do not pay any taxes on the funds as you pull them out of the IRA.
If you qualify to have a Roth IRA, you can contribute up to $5,000 per year with post-tax funds (if you are over 50 years old, the amount increases to $6,000 per year). Now let’s assume you had put $5,000 per year into a Roth IRA just during the four years that you were in college. You then left the $20,000 in the Roth IRA until you retired at 65 years old while it earned about 7.5% interest a year. In this example, that Roth IRA would have grown to over a half of a million dollars.
Putting $5,000 per year into a retirement account might sound like a significant amount of money to a college student, but let’s talk about a couple of different creative ways students can come up with the funds without changing their lifestyle too dramatically. Students can put a small percentage of their summer job or part-time job’s salary into their IRA anywhere from once every paycheck to just once a year. Perhaps the student can let aunts, uncles, and grandparents know that they are trying to be financially responsible and save for retirement. Often, when a family member hears this information, they are willing to give money for birthdays, Christmas, and other holidays.
If the student had a
self-directed IRA with Entrust, they could really take control over their investments and truly
diversify their portfolio over the next 40 years until they retire. Can you imagine what that half a million dollars could do for their future?
By
Jennifer Williams, Entrust Financial Services
Jwilliams@theentrustgroup.com