“Special Guest” Derreck Long with Quest Trust Company Joins Joe Varnadore for a Discussion on the Entities Used with Retirement Accounts. Should You Use a Trust, an LLC or Neither?  No. 207

Welcome to Water Cooler Wednesday!  In this episode, “Special Guest” Derreck Long with Quest Trust Company joins Joe Varnadore for a discussion on the entities used with retirement accounts. Should you use a Trust, an LLC or neither? 

Notes/Summary:

Introduction by Joe Varnadore. Special Guest Derreck Long with Quest Trust Company.

1:00 Gary Nie – Entities used with retirement accounts.

• 1:10 For those of you using multiple self-directed IRAs to invest in notes, are you using an LLC, Trust, splitting the ownership between the IRAs and listing each as a lender on the documents or simply limiting it to one IRA per asset? I would love to hear your thoughts, pros, cons, and experiences.
• 3:25 Derreck discusses the difference in an IRA buying the note directly or the IRA setting up an entity.
• 3:40 The pro to an IRA buying the note directly is that the custodian stays involved and takes on the audit risk. The con is that the custodian is charging you fees.
• 4:00 The IRA set up a trust or an LLC. The IRS is not dump. They look at your stuff more often. But it is cheaper.
• 4:35 If you are only doing one to two notes a year, then maybe it is best to let the IRA buy them directly. If you are buying 10 to 15 a year, maybe it is better to set up an LLC.
• 4:55 Derreck discusses when you set up the LLC and make the yearly contribution and what should happen to the funding. Attorney Jeff Watson and John Hyre give different answers.
• 6:37 Question: How could Gary have done his transaction differently to make it cheaper and/or better?
• 7:22 Gary clarifies what kind of fees he is experiencing with having two lenders involved.
• 8:10 The monitoring program with the servicer. You do not qualify for the program with two lenders.
• 8:37 Derreck discusses asset conversion. You could create the LLC now.
• 9:21 Gary talks about the other IRAs with the children and the HSA.
• 10:00 Joe summarizes for clarification. Combining multiple IRAs through forming a trust or an LLC.
• 10:55 Each IRA is its own entity. You can combine them to form an LLC that has its own bank account. The LLC would then actually be doing the investing.
• 12:32 Trustee for the Trust and a manager for the LLC.
• 13:00 Would you do use a trust or LLC? Which states are you buying your notes in? Some states do not recognize a trust as an entity.
• 14:15 An IRA cannot set up an S Corporation. An IRA can set up a C Corporation, but you usually lose the tax benefits of the IRA.
• 16:50 Question: How do you determine the percentage of ownership?
• 17:33 Question about using a Canadian account?
• 18:00 Question: What are the tax reporting requirements of a multi-member LLC where the members are IRAs? There are none.
• 18:20 Question: My IRA is in my personal name in Colorado. Is that a problem? If so, I have a trust in an LLC. Which is better? The IRA would have to set up the LLC. Funding discussed.
• 19:23 Derreck Long email: iraspecialists@questtrust.com. Indicate you are from NoteSchool.