Self Directed IRA’s
Reports show over $7 trillion dollars are currently invested inside Individual Retirement Accounts (IRA’s). Many clients are looking for alternative investments outside of traditional stocks, bonds, and mutual funds. We can be custodian for your Self-Directed IRA in which you can hold non-traditional investments that cannot be held on a financial advisor’s traditional brokerage platform. Under certain conditions, you may invest your Self-Directed IRA funds in real estate, oil and gas, private placements, promissory notes, and many other illiquid investments.
We can act as custodian or trustee for any of the following:
- Traditional IRA
- Roth IRA
- Simple IRA
We can act as custodian or trustee for any of the following:
- Inherited/Stretch/Beneficiary IRA
- Rollover IRA
Prohibited Transactions and Self-Dealing – In additional to the excluded types of investments below, there are certain “prohibited transactions” and “self-dealing” that occur when an IRA owner engages in a transaction with a “prohibited person.” The IRS wants your investment to be a complete arm’s length transaction. The purpose of the investment is not to benefit the IRA owner, but to benefit the IRA only. The IRA owner and no lineal ascendants or descendants can directly benefit from the IRA. This includes grandparents, parents, children, grandchildren, brothers and sisters. These people are what the IRS refers to as “Disqualified Persons.” Prohibited transactions could cause the entire IRA to lose its tax-deferred status. Work with competent professionals to avoid violation of these rules.
Only three types of investments are excluded:
- Life Insurance Contracts
- Collectibles (artwork, jewelry, etc)
- S-Corp Stock
Fair Market Valuation (FMV) | FAQ
What is a Fair Market Valuation?
A Fair Market Valuation (FMV) is the assignment of value to an asset. A FMV of each non-traditional asset held in your IRA, must be submitted to Premier Trust on a yearly basis.
Why does Premier Trust need a Fair Market Valuation?
The IRS requires that IRA custodians report the FMV on Form 5498 for each account annually.
Who has to provide a Fair Market Valuation to Premier Trust?
If you have a Premier Trust IRA with non-traditional assets, you will be required to complete a Fair Market Valuation Form, and it’s up to you to tell us what the market value of those non-traditional assets are.
*If your IRA holds publicly traded stock, you are not required to tell us what the market value is because it is listed on a national market.
Why doesn’t Premier Trust just do it?
You have chosen the flexibility and benefits along with the responsibility of self-directing the investment of your IRA dollars. One of your responsibilities, as a self-directed IRA account owner, is to provide an accurate valuation of the non-publicly traded alternative assets in your IRA. As a directed custodian Premier Trust does not give tax, legal or investment advice. Instead, it is our responsibility to provide the IRS Form 5498 annually. This form records any contributions made to the account and the total Fair Market Value of the IRA. This will require you to give Premier Trust the value of each of the assets in your self-directed IRA. The FMV is determined by taking the value of each asset, as of December 31st.
Can I assign the value to my own assets?
No. To properly report the FMV of an asset, a qualified, independent third party should perform the valuation and then complete the FMV form. A qualified, independent third party may be:
A Certified Appraiser
A licensed Real Estate Professional
Knowledgeable Party (such as a CPA, Attorney, etc. who is strictly at “ arm’s length” to both you and the investment)
The Fair Market Valuation Form must be signed and dated by both you and the valuator.
Supporting documents must accompany the form
If you hold more than one non-traditional asset in your account you must complete one form for each asset
Who Pays for This Valuation?
The IRA does. If your IRA does not contain sufficient funds to do so, you will have to make an annual contribution or transfer funds from another IRA.
My Valuation was Rejected. Why?
There are several reasons a valuation may be deemed unusable. Some possible reasons may be:
- Lack of a signed valuation form
- Lack of documentation supporting the value
- Incomplete Valuation Form
- Valuation provided by IRA holder or another disqualified person
Who Sends my FMV to the IRS?
Premier Trust submits this information on your behalf to the IRS each year you hold account(s) with us and provides you with an IRS Form 5498 for your records
What if I do not Provide a Valuation of the Asset in my IRA?
Failure to provide a valuation may ultimately result in the distribution of your asset to you. Accounts that have shown no activity, including the valuation, cannot continue to be held by Premier Trust because we cannot meet the IRS requirement to update the value and file an accurate Form 5498 for your account.
What if my IRA holds Publicly Traded Stock?
If the account holds publicly traded stock, you are not required to provide a FMV for those assets as their value is listed on a national market.
What is the Process in Submitting FMVs to a Premier Trust IRA?
2017 FMVs must be submitted to us no later than 01/04/2018 for values as of 12/31/17
- One form is required for each asset held in your plan(s)
- It is critical that each form is signed by you AND the qualified person who performed the valuation of your asset(s)
- Any supporting documents (i.e., property appraisals, balance sheets, etc.) should be submitted with the FMV
- Must be received at Premier Trust no later than 01/04/2018
We are Here to Help
If you have any questions regarding FMVs, please contact us. While we cannot assist in determining the value of your assets, we can answer questions and explain the process and requirements to you. Email: FMV@premiertrust.com
Examples of Supporting Documents
Real Estate‐ There are two popular ways that people can find out the fair market value of their investment properties. The first way is to ask a licensed real estate professional in the area where the property is located to provide you with a comparative market analysis. This is the method that’s typically preferred by IRA custodians. An easier way is to use an industry website like Zillow or Trulia to determine fair market value (with this option, rather than have the appraiser sign and having notarized the FMV form, you would sign a “Hold Harmless Letter” to accompany your valuation). Another option is to get an appraisal from a licensed appraiser. If you IRA is subject to required minimum distributions, an actual appraisal is mandatory.
Single or Closely Held LLC‐ A value of each asset within the LLC is required in order to determine the value of the LLC. Real estate assets owned in an LLC must be evaluated by a third party using the same standards as if it were owned directly by the IRA. Other assets, such as bank or brokerage accounts should have year‐end statements proving their value. If you need further guidance on how to determine the value of the LLC, consult the asset manager / sponsor or your tax/legal advisor. K‐1s are not acceptable valuations because they represent the book value of the company which is based on historical cost less depreciation. There should be documentation proving that title to the LLC assets is in the LLC name. The valuation must be provided by a third party.
Private Placements‐ You can reach out to your fund manager or investment sponsor to request an updated valuation of your IRA investment. The value must be provided by a third party. Supporting documentation must accompany the form.
Precious Metals‐ Clients are not required to provide valuations for precious metal investments. Values are derived from BullionValues.org.
Brokerage Accounts and Cash‐ These do NOT need a valuation as these investment values can be easily determined by annual statements or with a set face value.
Who Are Disqualified Persons?
Disqualified persons to your plan are:
Your Direct Descendants
Your Direct Descendants’ Spouses
Certain fiduciaries (CPAs, Attorneys, Financial Planners, etc.
Any direct or indirect owner of 50% or more of the asset
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Thoughts from Professionals
I personally refer roughly 10 to 12 trusts a month to Premier Trust. I probably don’t need to say anything more than that, but I will. The people at Premier Trust are responsive and make the process as smooth as possible for our staff and our clients. I am constantly referring other estate planning professionals to them since I know they are in good hands!
Oshins & Associates, LLC
Las Vegas, NV
Premier is our go to Trust Company for clients who want good service, trust officers that care, solid professionalism, and making sure that i’s are dotted and t’s are crossed. That, along with very competitive rates for services rendered make it the best choice for a great many clients and advisors. Keep up the great work!
Gassman, Crotty & Denicolo, P.A.
Premier has proven incredibly responsive, flexible and helpful in handling a wide range of trust transactions. Their professionalism has helped me do a better job for my clients, get deals done under tight time deadlines, and creatively address unusual situations.
Martin M. Shenkman, PC
Fort Lee, NJ
As a tax and estate planning attorney I have many options of trust companies to work with, especially when my clients in jurisdictions like California wish to do long term asset protection planning for their families. In my years of experience I have worked with many different Trustees and Trust Companies and time and time again I come back to working with Premier Trust when clients want to use Nevada as their jurisdiction as they are excellent in what they do and have always delivered for me in every client situation that I have sent their way. I would highly recommend them to any estate planning attorney or other professional who is looking to set up structures in Nevada.
Ziebold Law Group