More Business with IRAs Keller Williams - Blue Bell, PA January 2012 Investing In Traditional & Non-Traditional Assets Using Self-Directed Retirement Plans (IRAs/401Ks)
DisclosureCAMA Self-Directed IRAs, LLC, does not provideinvestment advice or endorsements.All information and materials contained areprovided for educational purposes only. Allparties are encouraged to consult with theirattorneys, accountants and financial advisorsbefore entering into any type of investments.
Too Good to Be True?• Increase sales and commissions• Additional tools few others use• New clients you already know• Little or no cost to you• Bypass bank loan problems• Use your expertise to grow your wealth and your clients wealth
Agenda• What is Self-Direction?• Types of Assets or Investments Allowed• Plan Types & Why People Use It• Step By Step Summary• IRS Rules and Regulations• The Role of CAMA• Who Can Use Self-Direction?• What to do next? Push back?
What is a “Self-Directed” IRA?An IRA in which the IRA owner directs all investments in theaccount. There is no legal distinction between a “self-directedIRA” and any other IRA except with a truly self-directed IRA theaccount agreement allows the broadest possible spectrum ofinvestments.
Statement Comparison Assets: Cash Fidelity Freedom Fund Fidelity Growth Fund Assets: Cash Real Estate Secured Notes
Allowable Investments• Real Estate• Precious Metals• Notes/Mortgages• Private Placements• Other
Allowable Assets & InvestmentsReal Estate •Single family and multi-unit homes •Apartments •Condominiums •Commercial Property •Improved or un-improved land •Leveraged and un-leveraged property •Foreign property investments
Other Allowable Assets• Tax Liens• Commodities/futures• Securities, certificates of deposits, stocks, bonds• Mutual funds• Oil & gas rights• Contracts of sale• Accounts receivable financing• Auto/commercial paper• Other – Boat, car, trailer, sports tickets, etc.• Anything the IRS does not prohibit
Prohibited InvestmentsCollectibles & Life Insurance • Any Work of Art • Any Rug or Antique • Any Metal or Gem • Any Stamp or Coin • Any Alcoholic Beverage*Exception • US Government Minted Gold Or Silver Eagle, Gold and Palladium Bullion
Plans That Can Be Self-Directed IRAs Retirement Other Plans AccountsRoth IRA & 401Ks HSA (HealthTraditional Pre & Post Tax Savings Accounts)SEP & SIMPLE Defined ESA (Educational Contribution Savings Accounts)Spousal & Defined Benefit = Tax FreeCustodial
Types of Self-Directed Plans Tax Deferred Tax Free• Traditional IRA • Roth IRA• Spousal IRA• Simplified Employee • Health Savings Account Pension (SEP) (HSA)• Savings Incentive Match • Roth like 401k (2006) for Employees of small employers (SIMPLE) • Coverdell (Educational)• Defined Benefit Plan• Defined Contribution
“Invest in what you know, understand and can control” Vs. Using “Hope” as your strategy.Key Benefit of Having a Self-Directed IRA/401K
Account Comparison$2,500,000 $2,262,963$2,000,000 $1,584,074$1,500,000$1,000,000 $872,470 $748,723 $610,729 $50,000 $336,375 $380,613 $500,000 $50,000 $235,462 $50,000 $129,687 $193,484 $110,589 $98,358 $0 Start 10 yr 20 yr 30 yr 40 yr Tax-Free Tax-Deferred Taxable
Types of Money You Make Taxes Types of Money $60,000W2 – Salaries, 1099 Fed: 0—35% State: 0—10% Local: 0—4% SS/Med – 7.65% (you) + 7.65% (employer) = 15.3%Passive – Rent, Royalties, Interest, Dividendsand Capital Gains $75,000 0—49%Tax Deferred – Traditional, etc. $100,000* 0% - taxed when takenTax Free – Roth, HSA, ESA $100,000 0%
Disqualified People / Parties Business Parents Spouse Entitiesowned 50% or more You Spouse by a “Related Party” Kids Spouse
IRA Fiduciary “F” (includes IRA Owner)Member of F’s Corporation “C” if F 10% or Partnership “P” if F 10% or Trust or Estate “T” if 10% or Family owns more owns more F owns more (directly or indirectly) partner or (directly or indirectly) partner or (directly or indirectly) partner or 50% or more of vote or joint 50% or more of joint 50% or more of joint value of stock venture capital or profits venture Beneficial interest in venture F’s Spouse with C interest in P with P T with T F’s Ancestor Officer or Director of Person with Trustee of T C management or administrative functions of P F’s Lineal LD’s Highly Compensated Descendant Spouse Highly Compensated Employee of T (10% “LD” Employee of C (10% Highly or more of wages) or more of wages) Compensated Employee of P (10% or more of wages) 10% or more beneficial interest 10% or more owner of T shareholder of C 10% or more partner of P
Disqualified People/Parties• Cannot receive a current benefit from the IRA/401k investment – No personal use of property, assets or amenities – Payment to disqualified persons for services rendered• Considered contributions per the IRS – Personally performing repairs, maintenance, improvement that increase the value – Pay for services from any account other than IRA
IRS Rules and RegulationsProhibited Transactions Some examples of prohibited transactions between a disqualified person and an IRA are: • Selling, exchanging or leasing property to them • Lending money or extending credit to them • Furnishing goods, services or facilities Two key points with IRAs and real estate: NO self dealing and NO personal use!
What Does CAMA SDIRA Do?• The IRS requires you to use a neutral 3rd party to open a self- directed IRA – we provide that service.• No investment advice or products to sell.• We specialize in the legal (IRS-approved) use of tax-free and tax-deferred retirement and savings plans for traditional and non-traditional investments.• Relieve the administrative burdens associated with transactions.• Keep records of all transactions and report to the IRS.• Part of your professional advisory team.
Who are these untapped resources?• CD Holders returns• Retirees-baby boomers• Unemployed- with 401K’s• State and local government employees with pensions• GM, Chrysler, state of NJ, Delta, USAir, pension plan owners, etc• People in your REIA, network groups, etc• People scared of the market wanting control & better returns
What Next? (Free)• Talk to investors – let them know• Add information to your collateral material• Link to CAMA SDIRA website• Publish article in your newsletter – ask me for one• Put SDIRA collateral material in your office• Set-up a class with your investors• Give me your contact information and receive newsletter you can forward to clients.
What Next? (Minimal Cost)• Attend webinars, workshops, seminars – see attached• Invite your clients to attend classes.• Read books on the subject – see attached• Open an account ($50 one time)
Additional ReadingBooks• How to Purchase Real Estate with Your IRA/401K and Pay Little or No Taxes - Hubert Bromma• We Buy Houses Sometimes - Michele Gorman and Mark Halpern• How Not To Go Broke At 102 - Adriane Berg• Real Estate Investment Using Self Directed IRAs an Other Retirement Plans - Dyches Boddiford Quincy Long, George Yeiter
Additional ReadingCourt Cases – James H. Swanson, et ux. v. Commissioner, 106 TC 76, Code Sec(s) 4975; 7430 - LLC’s and checkbook control – Tax Court & Board of Tax Appeals Memorandum Decisions Joseph R. Rollins v. Commissioner, TC Memo 2004-260 , Code Sec(s) 4975 - Control and ownership of LLC’s• Adler Advisory Opinion Letter2000 - 10A ERISA Sec. 4975(c)(1) - Family ownership• Investing in Entities - General guidelines -- call CAMA for an emailed version
Sessions to Attend• Upcoming events - Webinars, Seminars, Meetings: – Every Wed at Noon: Webinars on multiple subjects – Mon & Thu 9:00am – Office visit and information exchange – Visit our website for other events recorded free For you or your clients
What does your advisor think?• Accountant/Financial Planner/Attorney/Spouse• About Self Direction – Legal? – Risky? – Complex?
IRS Info for the Doubtful• Publications & Regulations – Prohibited Transactions - IRS Reg. Sect 4975, Pub 514 – Unrelated Business Income Tax Pub 598 – IRA’s Pub 590 and 5305 – Retirement Plans Pub 560 – Education Pub 970 – Pub 969HSA, Form 8889 – Form 990T• Private Letter Rulings (www.camaplan.com)• Court Cases (www.camaplan.com)
Thank You!Contact Information: Carl Fischer, Principal toll free 866.559.4430 firstname.lastname@example.org.CAMAPlan.com -List of CAMA events and seminars. -Educational webinar recordings.