Presents: Assembling Your Private Bank: Leveraging Self-Directed IRAs David Duggan Senior Account Executive 855 -499 -1653 d. duggan@trustetc. com
Disclaimer • • This material is presented with the understanding that Equity Trust Company/Equity University (“ETC”), its representatives, officers affiliates and clients have not been engaged in rendering specific planning, investing, or professional services. Questions relevant to your specific tax, investment, accounting, legal, estate or planning needs should be addressed to practicing members of those professions only after fully disclosing all relevant and material facts regarding your specific situation. ETC does not endorse any speaker or presenter before you today. Nor does it endorse any printed materials belonging to any third party and provided herein. • The information, ideas, suggestions, and strategies contained herein have been developed from sources, including publications and research, that are considered and believed to be reliable, but cannot be guaranteed insofar as they apply to any Particular taxpayer or individual desiring to establish an asset protection, estate planning, investment, retirement, education or tax plan. Moreover, because of the technical nature of the material and the fact that the laws and the markets are never static, but ever changing, the assistance of a competent, qualified professional is recommended when implementing any ideas discussed today. • ETC and all its representatives specifically disclaim any liability, loss, or risk, personal or otherwise, incurred as a consequence directly or indirectly of the use and application of any of the techniques or contents of this material. • ETC, all its affiliates, representatives, officers do not provide any legal or tax advice. We provide education on topics, such as building wealth through Self Directed Retirement Accounts, and recommend that you work with a professional as to specific guidance for your investments.
What You Will Learn Today • 7 Tax-Exempt Accounts – Compounding Interest • Real Estate and Alternative Investment Options • Financing Options – Partnering Strategies • Assembling a Private Bank of IRA Investors • Getting Started – Transaction Process/Case Studies
www. IRS. gov
P = principal amount (the initial amount you borrow or deposit) r = annual rate of interest (as a decimal) t = number of years the amount is deposited or borrowed for. A = amount of money accumulated after n years, including interest. n = number of times the interest is compounded per year
IRA vs. Non-IRA Investing Tax Savings $141, 074 Calculator Access: www. Trust. ETC. com
The (7) Tax-Exempt Self-Directed Account Types Individual Accounts • Traditional IRA • Roth IRA Small Business Plans • SEP • SIMPLE • Solo 401(k) Alternative Accounts • Coverdell Education Savings Account (CESA) • Health Savings Account (HSA)
Alternative Investments REAL ESTATE • Single Family Homes • Buy and Hold • Rehab and Resell • Apartment Complexes • Mortgage Notes/Trust Deeds • Non-Performing Notes • Tax Liens/Deeds • Real Estate Options • Wholesaling • Subject-to’s
Alternative Investments • Commercial Real Estate • Vacation Rentals • Raw Land – Developed, Undeveloped and Pre-Developed • Mobile Homes • LLC LP, C-Corp - Real Estate or Non Real Estate • Private Placements: Debt and Equity • Oil and Gas • Precious Metals • Factoring • FOREX • Equipment Leasing • Show Horses
Traditional IRA Tax -Deferred Funding the Account: 1) Rollover from 401(k), 403(b), 457, ESOP 2) Transfer from an existing Traditional IRA 3) Out-of-pocket contribution 2014 • $5, 500 contribution when under 50 $5, 500 • $6, 500 when 50 and over $6, 500 Irrespective of earnings/rollovers/transfers Distributions for personal use may begin at 59 ½ - premature distributions result in a 10% penalty
Roth IRA Tax-Free William V. Roth , Jr. • Inception Year: 1998 • After tax Individual Retirement Arrangement (IRA) • Eligibility Requirements: • Earned Income Senator from Delaware • Modified Adjusted Gross Income (MAGI) : • Single Filer Phase Out: 116 k-131 k • Married Filing Jointly Phase Out: 183 k-1913 k • Solution: Contribute to a Traditional/SEP convert to the Roth IRA
Funding Your Roth IRA Contribution: - Cannot exceed $5, 500 when under 50 and $6, 500 when 50 and over (2014) Roth IRA Transfer: - Partial or full trustee to trustee transfer Conversion from tax-deferred account: - NO MAGI limits for conversions (100 k pre 2010) - Convert from Traditional IRA - Convert from 401(k) - Convert from SEP IRA - Convert from SIMPLE IRA
Roth. Conversion Transitioning Traditional IRA assets (taxdeferred) to a Roth IRA (tax-free) Traditional IRA/401(k) Roth IRA 20% effective tax rate $20, 000 $100, 000 Internal Revenue Service Please note: Amount converted is added to your ordinary income
Partial Conversion Convert In Stages Traditional IRA/401(k) Roth IRA 20% effective tax rate $10, 000 $50, 000 $100, 000 Internal Revenue Service Please note: Amount converted is added to your ordinary income
In-Kind Asset Conversion Traditional IRA/401(k) Roth IRA 20% effective tax rate $10, 000 $50, 000 Internal Revenue Service Please note: Amount converted is added to your ordinary income
Methods to Finance the Deal 1)Sole Ownership 2)Partner/Undivided Interest 3)Debt Finance – (Non-Recourse Loan)
Disqualified Persons and Prohibited Transactions • Your IRA cannot transact business with a disqualified person • What constitutes a transaction? Defined in the internal revenue code as a: Sale…, lease…, lending of money or other extension of credit…, furnishing of goods, services, and facilities…
Disqualified Persons IRC 4975 • Account Owner (Fiduciary) • Spouse • Decedents • Ascendants • Spouses of children • Entities - LLC, C-Corp, LP owned 50% or greater by disqualified persons • An officer, director, or 10% or more shareholder, or highly compensated employee (earns 10% or greater of the companies wages) of a company owned by the IRA owner or other disqualified persons
Jan - St. Louis, MO Wholesale • Placed property under contract for $105, 000 • May 16, 2013 - requested earnest money check for $1, 000 from her Roth IRA to open escrow • June 7, 2013 – sold property to an investor buyer she met at her local REIA • Jan’s IRA received a check for $38, 960. 93 (after expenses) • $38, 960. 93 - $1, 000 Deposit = $37, 960. 93 TAX-FREE • Duration of Investment: Less than 30 days
Wholesale Overview 16688 Kehrsgrove Placed property under contract for $406, 173 - Equity Trust Company Custodian FBO Act#ZXXXXXX, Roth IRA or Assigns to… July 11, 2014 – requested earnest money check for $1, 000 from my IRA to open escrow August 28, 2014 – sold property for $450, 000 to investor/buyer IRA received a check for $44, 589. 21 (after expenses) $44, 589. 21 - $1, 000 Deposit = $43, 589. 21 TAX-FREE Duration of Investment: less than 60 days
55 Ladue Estates Project Overview • July 24, 2013 – bought property for $310, 000 • July 29, 2013 to January 27, 2014 – scheduled 5 payments to contractor • June 13, 2014 – sold renovated property for $767, 000 • IRAs received $163, 806 (after all expenses) - duration of Investment: 11 months
55 Ladue Estates Purchase Gary’s Roth IRA – 55% EMD: $1, 650 $168, 705. 86 Jan’s Roth IRA – 42% EMD: $1, 260 $125, 829. 92 Brittany’s Roth IRA – 3% EMD: $90 $9, 202. 14 $306, 737
55 Ladue Estates Renovations Gary’s Roth IRA – 55% $163, 051. 35 5 Checks Jan’s Roth IRA – 42% $124, 511. 94 5 Checks Brittany’s Roth IRA – 3% $8, 893. 71 5 Checks Renovation Cost: $296, 457
55 Ladue Estates Sale Gary’s Roth IRA – 55% $421, 850 $90, 093. 30 TAX FREE Proceeds from Sale: $767, 000 Jan’s Roth IRA – 42% $322, 140 $68, 798. 52 TAX FREE Brittany’s Roth IRA – 3% $23, 210 $4, 914. 18 TAX FREE IRAs received $163, 806 (after all expenses)
CESA Coverdell Education Savings Account Contributions • $2, 000 Maximum (Non-Deductible) • Until Age 18 • Growth is 100% Tax-Free Withdrawals • Qualified Higher Education Expense (By Age 30) • Tax & Penalty Free • Accredited College, University, Vocational or Private Grade School
Bob – CESA Investment • Cincinnati, OH • Purchased using daughter's CESA account
Bob – CESA Investment • Purchased in daughter's CESA account in Dec 2012 for $5, 000 • Sold in February for $15, 600 with owner financing on a land contract with $695 down • $180. 84 PI/month for 10 years 8% interest ($15, 600 sale price $225 PITI) – $2, 170 Annually • IRR = 48. 57%
The (7) Tax-Exempt Self-Directed Account Types Individual Accounts • Traditional IRA • Roth IRA Small Business Plans • SEP • SIMPLE • Solo 401(k) Alternative Accounts • Coverdell Education Savings Account (CESA) • Health Savings Account (HSA)
Transaction Processing Step: 1 Open and fund an account (Rollovers/Transfers/Contributions) Step: 2 Identify and direct the investment (Such as a real estate purchase) Step: 3 Manage the investment (Expenses paid from IRA; Revenue returns to IRA)
To Be Considered For This Exclusive Program You Must FILL OUT THE APPLICATION Serious Inquiries Only • Tax FREE & Tax Deferred!
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