Self-Directed IRA
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- Written by: API Manage
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Contrary to what you may have been told by your broker or banker, you can own almost any U.S. or non-U.S. investment in your retirement plan, from offshore mutual funds to all types of alternative and non-traditional investments. Adding international investments to your retirement account offers many potential benefits, including:
Investment diversification. Many of the world’s best investments and money managers will not do business with U.S. citizens directly. They simply have made the choice that it is easier to do business with the rest of the world than to comply with burdensome U.S. rules.
Currency diversification. You can protect your wealth against the falling U.S. dollar by holding other currencies such as Japanese yen or Swiss francs, and opportunities to invest in foreign currencies are plentiful.
Our market is growing because more and more people are concerned about the financial direction of the United States, and they are turning to Sovereign International Pension Services for solid solutions.
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There really is no such thing as an “offshore IRA”. The term really is used to describe investing one's IRA assets offshore. The IRA Custodian is still onshore as required. Over the years I've learned people confuse the term custodian from custody. Custodian is a legal term and is defined as follows:
“A directed IRA custodian serves as a passive, non-discretionary custodian of customer-directed, also known as self-directed, individual retirement accounts (“IRAs”), as IRA is defined in Section 408 of the Internal Revenue Code as amended.” RITA Retirement Industry Trust Association
Hmmm, that's clear as mud as they say. Let's see what the IRS says about this:
Publication 5909-A This publication discusses contributions to individual retirement arrangements (IRAs). An IRA is a personal savings plan that gives you tax advantages for setting aside money for retirement. For information about distributions from an IRA, see Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).
The IRS goes on further to say the Trustee or Custodian of an IRA "must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian.”
In more simple terms the custodian is responsible for the legal side of the IRA and all required reporting. They hold the legal title to the assets on your behalf. Where you decide to invest the assets of your IRA determines the actual custody. For example, you have an IRA and you open up a foreign bank account. Your assets are being held offshore, or putting it another way, the custody of your assets is offshore even though the Custodian is based in the states.
This gives you more investment flexibility and more protection than you may otherwise have. If you are interested in diversifying your IRA into things like foreign currencies, non-US real estate, then this is the way to move forward. Did you know an IRA or retirement plan may now be the best way to establish a foreign bank account! The new reporting requirements make this crystal clear.
It's MUCH, MUCH better to move your retirement assets offshore. Why? Because unlike personal assets that have draconian reporting rules with outrageous fines for failing to file these forms correctly, IRA's and Retirement Plans are exempt from filing. Wait, what did you say? They are EXEMPT.
Statement of Specified Foreign Financial Assets
- Certain financial accounts. The following financial accounts and the assets held in such accounts are not specified foreign financial assets and do not have to be reported on Form 8938.
- U.S. mutual funds accounts;
- IRAs (traditional or Roth);
- Section 401(k) retirement accounts;
- Qualified U.S. retirement plans;
Exceptions
IRA Owners and Beneficiaries. An owner or beneficiary of an IRA is not required to report a foreign financial account held in the IRA.
Participants in and Beneficiaries of Tax-Qualified Retirement Plans. A participant in or beneficiary of a retirement plan described in Internal Revenue Code section 401(a), 403(a), or
403(b) is not required to report a foreign financial account held by or on behalf of the retirement plan.
If you click here you can see a map of the world and a list indicating where our clients have invested.
It's important to remember neither SIPS nor it's employees give tax or legal advice. You should always seek the opinion of your own tax or legal counsel.
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Savvy investors know that diversification of their retirement plan is vital for asset protection and risk management. Yet many IRAs and other retirement accounts lack sufficient diversification to protect against volatile markets, lawsuits or what many expect to be sweeping changes governing retirement plans. Many clients have expressed concerns regarding the possibility of being forced to invest in assets they may not be comfortable with. Some even have used terms like nationalization or confiscation. While we feel the potential for nationalization is remote, we do think it is more than prudent to take steps allowing you not only to protect your plan but also to gain global investment flexibility.
IRAs offer you a powerful tool in your retirement arsenal – tax-deferred or, in the case of a Roth, even tax-free growth. At Sovereign International, we believe that you should protect your tax-advantaged retirement plans in the same way you protect your overall portfolio, through effective diversification and the proper and compliant use of international structures.
Internal Revenue Service rules actually prohibit very few investments. This allows you to add almost any kind of international investment to your retirement account, from real estate to precious metals. It takes experience to know how to set up an offshore trading account or add offshore investments to a retirement plan while complying with the IRS or ERISA rules, and that’s where Sovereign International Pension Services comes in – we act as your IRA consultant, informing you about the world of global investing and helping you invest overseas.
One of the keys is to set up a foreign LLC (limited liability corporation) and fund it through your self-directed IRA. You enjoy the tax benefits of an IRA and you save on fees since you are the manager of the LLC. And you can get started right away by rolling over an existing IRA, so you don’t need to have cash available.
Especially for those who have special expertise or interest in a particular asset class or region of the world, taking your IRA offshore can be very rewarding. You are in charge of your self-directed retirement account, and we act as your IRA consultant to help you invest safely anywhere in the world that makes sense to you.
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Why are Self-Directed IRA's so popular?
First of all it is up to you and you alone how the funds are invested, (keeping within the rules governing prohibited transactions of course). This becomes important when the participants, like yourselves, want to decide how their money should be invested. Maybe he or she wants a self-directed brokerage account because they trade their own investments and do a much better job than Wall Street. They may want to own real estate, precious metals, tax-lien certificates or any of the other so called non-traditional assets.
What makes our company unique?
What makes our business unique is we are one of the very few companies left that will allow clients to have their IRA or retirement plans held offshore. Our clients want to do things like have their IRA held at a foreign bank, establish an online offshore trading platform, hold precious metals in a vault in Switzerland or buy foreign real estate in addition to much much more.
Why do you need an IRA administrator?
It takes experience to know how to set up an offshore trading account, purchase foreign real estate, or make most offshore investments in a retirement plan while complying with the IRC or ERISA rules. We act as your IRA Administrator and consultant, helping you achieve your goals in a compliant manner. We've assisted clients in making hundreds of transactions overseas in an exciting variety of investments ranging from farms, reforestation projects, foreign real estate in exotic beachfront locations, precious metals, and foreign banking and trading platforms.
To read more, click here
How can I protect my IRA?
- Option#1: Move your funds to a Non-U.S. Bank
- Option#2: Purchase a Non-U.S. Annuity
- Option#3: Form an International Business Company or Foreign Corporation
- Option#4: Direct Foreign Investments
How do I buy Real Estate through my IRA?
- Open an account with Sovereign International Pension Services
- Arrange for transfer of funds
- Fill out a direction of investment
- Execute sales contract with help of administrator
- Apply for loan in the name of the IRA
- Close on transaction and reap tax-sheltered benefits
- Option to pay yourself an asset management fee (not a direct property management fee)
Another alternative:
- Purchase Real Estate through a Limited Liability Corporation (LLC). What is an LLC? A limited liability company (LLC) is a corporate structure whereby the members of the company cannot be held personally liable for the company's debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship.
Can I use my IRA to purchase property I already own?
No. This is considered a prohibited transaction
What is a prohibited transaction?
A prohibited transaction is a transaction between a plan and a disqualified person that is prohibited by law. Prohibited transactions generally include the following transactions:
- a transfer of plan income or assets to, or use of them by or for the benefit of, a disqualified person;
- any act of a fiduciary by which plan income or assets are used for his or her own interest;
- the receipt of consideration by a fiduciary for his or her own account from any party dealing with the plan in a transaction that involves plan income or assets;
- the sale, exchange, or lease of property between a plan and a disqualified person;
- lending money or extending credit between a plan and a disqualified person; and
- furnishing goods, services, or facilities between a plan and a disqualified person.
To read more, click here
What types of investments have your clients made?
Here are some of the types of investments I've seen clients make offshore. This list is by no means all inclusive.
- Foreign Bank Accounts. (According to the FBAR form, IRA's/Retirement plans are exempt from reporting a foreign bank account.)
- Non-US trading platforms for the do it yourself stock trader.
- Managed accounts in Switzerland, Denmark, Ireland, the Isle of Man, Britain and Canada.
- Foreign real estate including raw land, rental property, and commercial property in Mexico, Costa Rica, Nicaragua, Panama, Belize, Ecuador, Roatan Honduras, and most of South America.
- Precious metals held in Singapore, Hong Kong, London, Switzerland, and Panama. (You can take your existing precious metals and have them physically shipped to an offshore depository)
- Alternative Investments like Reforestation Projects, Coffee plantations, Coconut plantations, Mango farms and Teak.
What is the difference between a domestic (U.S.) LLC and a foreign LLC?
Simple. A foreign LLC is governed and protected by the laws of a foreign jurisdiction. This means that it may be possible to move any litigation surrounding a foreign LLC to a foreign country. This makes it very expensive for the plaintiff to pursue a foreign LLC. Not impossible, but expensive.
To read more, click here.
What is a Check-Book IRA?
There is NO such thing as a “check-book IRA”. That's right it DOESN'T exist. On the other hand someone deserves kudos for coining that term because it is a brilliant marketing tool.
Let me explain. An IRA is an IRA is an IRA. A bank account with a checking account is just another of the many alternative investment options available to an IRA holder. Of course you'll never be able to open an account like this unless you are working with an IRA Administrator like SIPS. We've helped our clients open bank accounts for their IRA's in many different countries
To read more, click here.
Can I buy gold in my IRA?
SIPS clients can self-direct their accounts into a wide variety of bullion products, including allocated lots of gold, silver, platinum, or palladium - single coins to multi-ounce bars - with worldwide storage options, low prices, complete liquidity, total security, limited reporting requirements, and access to a 24-hour buying and selling platform online.
To read more, click here
What is the most cost effective way to add physical gold to my IRA
Adding precious metals to your IRA is easy:
- #1- Open an account with Sovereign International Pension Services
- #2- If you have an existing IRA, transfer money to fund your gold account
- #3- Decide whether to buy coins, bullion or paper gold and instruct your IRA representative to make the purchase for you
To read more, click here
If my IRA invests in gold or other bullion, can I store the bullion in my home?
Gold and other bullion are “collectibles” under the IRA statutes, and the law discourages the holding of collectibles in IRAs. There is an exception for certain highly refined bullion provided it is in the physical possession of a bank or an IRS-approved nonbank trustee. This rule also applies to an indirect acquisition, such as having an IRA-owned Limited Liability Company (LLC) buy the bullion. IRA investments in other unconventional assets, such as closely held companies and real estate, run the risk of disqualifying the IRA because of the prohibited transaction rules against self-dealing.
