Self-Direct your IRA at Premier Trust
An IRA is a personal savings plan that allows one to save for retirement in a tax advantaged way. Self Directed IRAs provide the flexibility to include alternative investments into retirement planning.
What makes Self Directed IRAs unique is the available investment options. Most IRA custodians only allow approved stocks, bonds, mutual funds and CDs.
A truly Self Directed IRA custodian, such as Premier Trust, allows those types of investments and more. For example: real estate, notes, private placements, etc.
Things to Know
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
Self Directed IRAs FAQs
A Fair Market Valuation (FMV) is the assignment of value to an asset. An FMV of each non-traditional or “hard-to-value” asset held in your IRA, must be submitted to Premier Trust on a yearly basis. *If your IRA holds publicly traded stock listed on a national market, you will not be required to tell us what the market value is.
The IRS requires that IRA Custodians and Trustees report the FMV on Form 5498 for each account annually.
If you have a Premier Trust IRA, Roth, SEP or SIMPLE account holding non-traditional assets, you will be required to complete a Fair Market Valuation Form for each. It is up to you to tell us what the market value of those non-traditional assets prior to December 31st.
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/non-traditional assets in your IRA. As a directed custodian, Premier Trust does not give tax, legal or investment advice. Instead, it is our responsibility to fulfill IRS reporting requirements by providing Form 5498 to the IRS annually. This records the total Fair Market Value of your IRA for the prior year. This will require you to give Premier Trust the value of each of the assets in your Self Directed IRAs. Your account’s FMV is determined by taking the value of each asset including any cash balance, as of December 31st.
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
Real Estate– An appraisal is acceptable but only necessary for accounts subject to Required Minimum Distributions (RMD) and for a distribution or Roth Conversion request. A qualified real estate professional who is strictly “arm’s length” from both you and the investment may provide a comparative market analysis to meet the general annual valuation requirement. We understand that real estate agents may not provide appraisals, but they are qualified to determine the market value of a property.
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. If you need further guidance on how to determine the value of the LLC, consult your tax/legal advisor.
***K-1’s 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 must contact the manager of the private placement and ask how you can obtain a value on the 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.
The IRA does. If your IRA does not contain sufficient funds to do so, you will have to make an annual contribution (if eligible) or transfer funds from another IRA.
No. This must be done by the IRA holder using the method they deem most appropriate. You are strongly encouraged to talk to your tax and/or legal advisor in order to make the decision on what needs to be done.
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
Disqualified persons to your plan are:
- Your Spouse
- Your Ascendants
- 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
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.
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.
FMVs must be submitted to us no later than December 31st each year
- 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 form
- Must be received at Premier Trust no later than December 31st
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.
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