Self-Directed IRAs, Roth IRAs, SEP IRAs, Solo(k) Plans and the like are a huge untapped capital market for alternative asset investments.  Are you up to speed?  If you’re not, or you’re not sure, or you just want to brush up, you should attend: 

ADVANCED TRAINING IN SELF-DIRECTED RETIREMENT ACCOUNTS™

October 26, 2011, 8:30 AM to 4:00 PM

Presented by:

Frank L. Bridges, J.D.

Sponsored by:

HeritageDesign™ Law Group LLC

Special Luncheon Provided by:

PENSCO Trust Company

At The Learning Center, 199 Wells Avenue, Suite 302, Newton, Massachusetts.

This seminar is a must for:

• Registered Investment Advisors who want to help their clients invest retirement funds in alternative assets and learn how this untapped private capital market fits into their practice (even if they have a broker-dealer);
• Accountants who want to gain confident expertise to advise their clients in this developing area (Continuing education credits available);
• Real estate professionals who want to use this untapped capital source to facilitate real estate deals;
• Entrepreneurs and private offering organizers who want to learn how to attract and work with self-directed retirement account investors;
• Bankers who want to attract more business accounts;
• Investors who want to diversify their retirement savings with alternative assets.

Content Summary:

1. Part 1 – The basics – What you can do with a self-directed retirement account (e. g., types of accounts, investment policy and diversification, mechanics of setup…)
2. Part 2 – Rules of the Road (e.g., prohibited transactions, disqualified persons, plan asset rules, operating companies, co-investing and enabling, fiduciary duties…)
3. Part 3 – Successful Venture Design and Implementation (e.g., investment return and UBIT, management and governance issues, private offerings to SDRA™ investors, valuation and the “Supercharged” Roth conversion, practical considerations…).
4. Part 4 – Planning for SDRA™ Investors (e.g., special retirement and estate planning issues, business succession issues, buy-outs and business exit strategies)

Case studies will be used to illustrate key issues and solutions.

About Mr. Bridges:  Mr. Bridges, a nationally recognized expert on self-directed retirement accounts, offers years of case experience and, as an estate planner, a unique perspective on the topic.  You will especially enjoy his entertaining lecture style and his passion for the subject.

PENSCO Trust Company, one of the leading specialized custodians for self-directed retirement accounts, will provide lunch and information about their institutional platform for advisors.

SEATING IS LIMITED.  This seminar is limited to 20 participants, so reserve your seat now!

To reserve your seat send an email to asweeney@hdlawgroup.com with the subject “SDRA Seminar Reservation” and your contact information.  We will send you information on how to register.

                                                Registration Fee:         $95

For more information, contact:

Alicia Sweeney, Program Coordinator

HeritageDesign™ Law Group LLC
199 Wells Avenue

Suite 302
Newton, MA 02459
617-630-5700
617-630-0003 (Fax)
www.heritagedesignlaw.com

The more I have been involved in guiding investors through the sometimes unforgiving rules of the self-directed IRA, the more I have learned about alternative investments and where my clients can find them.  The following is a list of websites where the owner of a self-directed IRA can locate notes, properties and other non-traditional investments for his or her self-directed IRA.  Note that I am merely providing these links as a service.  I do not recommend any particular sites and I certainly do not receive any sort of compensation from them.  I just want to pass along whatever useful information I can find.

If you know of other sites, provide them as a comment to this post.

Here we go:

Loanmarket.net

Bigbidder.com

Bidday.com

If you are interested in making private mortgage loans and are looking for a loan servicer, consider FCI Lender Services, Inc.

If you are looking for a custodian for your self-directed IRA, I highly recommend PENSCO.

If you want more information about self-directed IRAs, click here or contact me at 401-421-5115 x212 or by e-mail at mmclaughlin@mclaughlinquinn.com.

Conversions to Roth IRAs. For 2009, taxpayers (other than married persons filing separately) with modified adjusted gross income (AGI) of $100,000 or less may convert amounts in a traditional IRA to amounts in a Roth IRA. Amounts from a SEP-IRA or a SIMPLE IRA also may be converted to a Roth IRA, but a conversion from a SIMPLE IRA may be made only after the 2-year period beginning on the date on which the taxpayer first participated in any SIMPLE IRA maintained by the taxpayer’s employer.

For purposes of conversions to Roth IRAs, AGI is defined as it is for traditional IRA purposes except that it does not include income resulting from the conversion from a traditional IRA to a Roth IRA. AGI-for purposes of determining conversion eligibility only-does not include any required minimum distribution from an IRA under Code Sec. 408(a)(6) and Code Sec. 408(b)(3).

A conversion from a regular IRA to a Roth IRA is subject to tax as if it were distributed from the traditional IRA and not recontributed to another IRA, but is not subject to the 10% premature distribution tax.

After December 31, 2007, distributions from a Code Sec. 401(a) qualified plan also may be rolled over to a Roth IRA.

Major change coming next year. For tax years beginning after 2009, the $100,000 modified AGI limit on conversions of traditional IRAs to Roth IRAs is eliminated. Additionally, married taxpayers filing a separate return will be able to convert amounts in a traditional IRA into a Roth IRA (currently they are barred from doing so).

Why make a IRA-to-Roth IRA conversion? Roth IRAs have two major advantages over regular IRAs:

(1) Distributions from regular IRAs are taxed as ordinary income (except to the extent they represent nondeductible contributions). By contrast, Roth IRA distributions are tax-free if they are “qualified distributions,” that is, if they are made (1) after the 5-tax-year period that begins with the first tax year for which the taxpayer made a contribution to a Roth IRA, and (2) when the account owner is 59 1/2 years of age or older, or on account of death, disability, or the purchase of a home by a qualified first-time homebuyer (limited to $10,000).

(2) Regular IRAs are subject to the lifetime required minimum distribution (RMD) rules that generally require minimum annual distributions to be made commencing in the year following the year in which the IRA owner attains age 70 1/2. By contrast, Roth IRAs are not subject to the lifetime RMD rules that apply to regular IRAs (as well as individual account qualified plans).

A similar comparison could be made between distributions from qualified retirement plans and Roth IRAs.

There are other tax advantages: Because distributions from Roth IRAs are tax-free (if they are qualified distributions), they may keep a taxpayer from being taxed in a higher tax bracket that would otherwise apply if he were withdrawing taxable distributions, do not enter into the calculation of tax owed on Social Security payments, and have no effect on AGI-based deductions. What is more, the benefits flow through to beneficiaries of Roth IRA accounts, who also can make tax-free withdrawals from such accounts (they are, however, subject to the same annual post-death minimum distribution rules that apply to beneficiaries of regular IRAs).

Who should make IRA-to-Roth IRA conversions? The consensus view is that the conversion route should be considered by taxpayers who:

• have a number of years to go before retirement (and are therefore able to recoup the dollars that are lost to taxes on account of the conversion);
• anticipate being taxed in a higher bracket in the future than they are now; and
• can pay the tax on the conversion from non-retirement-account assets (otherwise, there will be a smaller buildup of tax-free earnings in the depleted retirement account).

Complicating factor for 2010 conversions. A unique income inclusion rule will apply for IRA-to-Roth-IRA conversions occurring in 2010. Unless a taxpayer elects otherwise, none of the gross income from the conversion is included in income in 2010; half of the income resulting from the conversion will be includible in gross income in 2011 and the other half in 2012.

A major wild card in making this choice is the tax-rate picture after 2010. Absent Congressional action, after 2010 the tax brackets above the 15% bracket will revert to their pre-2001 levels. That means the top four brackets will be 39.6%, 36%, 31%, and 28%, instead of the current top four brackets of 35%, 33%, 28%, and 25%. The Administration has proposed to increase taxes only for those making $250,000, but it is difficult, at this point in time, to predict who will get hit by higher rates. What’s more, there are proposals on the table to help finance health reform with a surtax on higher-income taxpayers.

What do to this year. Taxpayers who intend to take advantage of the new conversion option next year should consider the following strategies:

• Non-high-income taxpayers who are able to make deductible IRA contributions this year should do so. They will reduce their 2009 tax bill and, if they make the conversion to Roth IRA next year, they will not have to pay back the tax savings until 2011 and 2012.
• High income taxpayers should consider making nondeductible IRA contributions this year. They can then roll over the accounts into Roth IRAs next year at no tax cost.
• Some high-income taxpayers plan to make large conversions in 2010 but to opt out of the deferral of tax until 2011 and 2012 because they fear they will be in a higher tax bracket in those years than in 2010. These taxpayers should avoid the standard year-end-planning wisdom of accelerating deductions and deferring income but should, rather, do the reverse in an effort to avoid being pushed into the highest brackets by a large IRA-to-Roth-IRA conversion. These taxpayers should be considering ways to defer deductions to 2010, and accelerate income from next year into 2009.

Effect on Self-Directed IRAs. These same rules apply to taxpayer holding self-directed IRAs, SEPs and 401(k)s.  Due to the possibility that such self-directed retirement accounts may hold illiquid assets, special care should be taken in deciding to convert.

For more information about the rules affecting Roth conversions or self-directed retirement accounts, contact Attorney F. Moore McLaughlin by e-mail at mmclaughlin@mclaughlinquinn.com or by phone at 401-421-5115 x212.

A self-directed IRA is merely an IRA with the ability to invest in any types of qualified investment. Most IRAs have restrictions on the types of investments that are allowed. These restrictions are in place because the custodian of the IRA, for a variety of reasons, does not want to allow these alternative investments, even though the law clearly allows them.

The only restriction on the type of investment found in the law is that an IRA cannot invest in collectibles, life insurance or own stock of an S corporation. Other than that, it is wide open. People are investing in LLCs that buy leveraged real estate, run start-up companies and buy tax lien certificates.

Care must be taken to avoid so-called prohibited transactions and dealings with disqualified persons, but if these can be avoided, investors can realized enormous returns on thier investments, on an after-tax basis.

I will be writing more about self-directed IRAs in the near future in an attempt to spread the word. Like with 1031 exchanges a few years ago, a signficant number of professionals and investors are still not aware of this very powerful tool.