STC Offers On-line Access to Financial Statements Thereby putting the “Self” in Self-Directed IRA
STC of Hagerstown, Maryland, has announced the availability of on-line access for its clients to their IRA’s financial information.
STC is the leading provider of administration services to owners of self-directed IRA accounts. As such, STC creates a limited liability company (LLC) structure for self-directed IRA investing, confers with its clients regarding investment strategies, reviews all client transactions to ensure their compliance with IRS and ERISA regulations, and manages all custodial and reporting functions.
With all self-directed assets titled in the name of the client’s LLC, STC manages these assets and their associated transactions like those an operating business and produces quarterly financial statements for each client, including a Statement of Profit & Loss and a Balance Sheet. With STC’s new on-line client information systems, the Company’s clients can now view all of their financial information on line.
Unlike other companies in the field which are either asset custodians or “checkbook IRA” set-up companies, STC plays an active role with the IRA’s assets, managing all of the back-office functions associated with non-traditional asset investing; including such examples as tax liens and real estate IRA investing. The Company’s unique approach to IRA financial administration alleviates the account holder from concerns regarding their entering into prohibited transactions, purchasing prohibited assets, dealing with prohibited parties, complying with annual reporting requirements, and a dealing with a host of other complex issues associated with self-directed IRA accounts.
As explained on STC’s new web site, the Company’s focus is on the individual investor, and the site is filled with personal reflections from STC’s clients on their self-directed IRA investing experiences. The site also includes a variety of tools to help investors navigate through the often complex world of self-directed retirement investment options. These tools include access to the Company’s periodic Industry Insight email alerts, frequent self-directed IRA educational webinars from industry experts and podcasts that are designed to guide individual investors.
2010: The Year of the Roth Conversion?
Rich Arzaga of Journal of Accountancy explains how previously ineligible high income taxpayers will now be eligible to convert their traditional IRAs to Roth IRAs.
Read the article here.
Demystifying Unrelated Business Income Tax: What You Need to Know
In the world of self-directed IRA’s we are constantly dealing with areas of gray, none more so than Unrelated Business Income Tax (UBIT). As soon as you have a good handle of the types of transactions that you can do, you have to figure out if the income that those investments generate is taxable.
UBIT was designed by the IRS so that charitable organizations wouldn’t have a benefit over for profit organizations if they had an income producing part of the business that wasn’t tied to their exempt status. The IRS has now ruled that it may also apply to certain types of income that is generated within your IRA.
In most cases, the net income that your IRA generates would be exempt from UBIT. Typically, IRA investments generate “passive” income, for example interest income, rental income, and dividends or distributions. The sale of Real Estate would also be considered “passive” as long as the intention of the purchase was for appreciation or long-term gain. Rare exceptions exist where the IRS would consider an investor an active participant and the income would be taxable.
Unrelated Debt Financed Income (UDFI) is a subset of UBIT and applies to any income that is generated from an asset that is purchased using financing. UDFI is based on the Net Income of the property, not the revenue that is generated, and the first $1,000 is exempt from taxation. In addition, the percentage of taxable income is based on the ratio of debt on the property, so as the debt of the property decreases so does the tax. For example if you purchase a property for $200,000 with $100,000 down and finance the remaining $100,000, 50% of the net income would be taxed. After a few years if you reduce the debt to $80,000, only 40% of the net income would be taxed.
When the time comes to sell an asset, if there were any debt in the previous twelve months, the gain would also be subject to UDFI. At this time the calculation changes and the percentage is based on the debt in relation to the sale price. Based on our previous example, if you sell the property for $400,000 with an $80,000 debt, 20% of the gain would be taxed.
Both UBIT and UDFI tax are reported on IRS form 990-T and should be prepared by your accountant.
Self-directed IRA Administrator Helps Financial Professionals Increase Client Base
From realtors, real estate brokers & commercial land developers to business brokers, mortgage brokers & financial planners, everyone is feeling the effects of today’s turbulent economy. Industries that were flourishing just a few years ago have now been affected by tight lending restrictions, lack of funding and a general sense of fear stemming from stock market woes and vanishing retirement plans. Financial professionals are now left with the task of becoming much more creative about how to close deals and retain & increase their client bases.
STC, a leading self-directed retirement plan administrator, seems to have found a creative solution for just that. By launching a cooperative business development program for financial professionals early this month, STC is showing how new opportunities, in the world of self-directed investing, can grow their businesses.
While self-directing your retirement plan — such as an IRA, SEP, Roth or even a 401(k) — as an alternative to the stock market is not headline news, a program which allows the financial community to benefit from, and their clients benefit from, is. And while STC is already helping investors structure potential transactions and comply with the complex reporting requirements associated with self directed IRAs and 401(k) Plans, their unique LLC structure helps to facilitate those transactions that are a natural fit within the real estate and lending industries. “The LLC structure offers maximum flexibility by offering an immediate response to investment opportunities, simplification of asset titling and the ease of pooling funds for investors looking to combine their funds to purchase an investment,” explains Mick Hersh, Chief Operating Officer for STC.
Because STC does not offer or represent any investment opportunities, partnering with those that do completes the circle while giving financial professionals creative investment funding options to present to their clients. It truly ends up being a home run all around when you factor in that the investor not only gets to close their deal, but also take control of their retirement and invest their nest egg in assets outside the stock market. In an economy where 2 out of 3 Americans over the age of 45 now intend to postpone retirement, due to the recently disappearing value in their retirement plans, these investors are going to be thanking their financial professionals for presenting this as an option. And these same investors will say thank you by not only sticking around, but by passing on the good word to their friends & colleagues.
STC’s cooperative business development program offers creative benefits, like co-branded advertising, cooperative website marketing and email marketing customized for each partner.
401(K)s for Solo Businesses
Jane Hodges of The Wall Street Journal discusses the variety of retirement savings options available to sole proprietors.
Read the article here.
Five Things to Consider Before Consolidating Retirement Accounts
Edward Collins, founder and wealth adviser at Artisan Wealth Management in Lebanon, NJ, recommends consolidating retirement assets in a self-directed IRA.
Read the article here.
The New Threat to Your IRA: An IRS Crackdown
The IRS is cracking down on violations of the picky rules around IRAs.
Read the article here.
Beware of Fraudulent Investment Opportunities
Unfortunately, we have recently seen a marked increase in fraudulent investment schemes targeting holders of self-directed retirement accounts. While we are unsure what has driven this increase, it may be related to several macro-economic factors, including the low yields on CDs and other liquid investments, the poor performance of the stock market in 2011, and the need for many retirees to increase the yield on their retirement assets in order to maintain their anticipated lifestyle.
On December, 14, 2011, the Wall Street Journal (on page C1) discussed this growing problem in an article entitled: Boomers Wearing Bull’s-Eyes. In part the article stated:
Exotic unregistered securities such as promissory notes, private placements and investment contracts have emerged as the main vehicles for fraud involving older investors. Of the enforcements in 2010 involving investors age 50 or older, cases involving unregistered securities outnumbered those related to ordinary stocks and bonds by a ratio of five to one, according to the securities administrators’ association. The Securities and Exchange Commission in September warned investors of pervasive fraud in pitches aimed at holders of self-directed IRAs.
Keith Grimes, 56, of Mulberry, FL, was a victim of such fraud. The facts of his case are a chilling reminder that even informed self-directed investors can be taken in by these siren songs:
Keith Grimes, 56, of Mulberry, Fla., sunk $500,000—”every penny that I made,” he says—into an investment fund marketed to older investors that promised returns of 14% to 24%. Billed as having a manager with a successful track record trading stocks and other investments, it turned out to be a Ponzi scheme, in which money from new investors is used to pay returns to other investors. “Sometimes we think, ‘Maybe we were just being too greedy,” says Mr. Grimes. “But you try to get the best return you can when you’ve saved through your career to be able to retire.” After losing almost all of his savings, Mr. Grimes is living in a borrowed mobile home and running an industrial-fiberglass business.
At STC, unlike other self-directed IRA Custodians and Administrators, we review all investment documents from our clients before we disburse their retirement funds. In our review, we look for red flags such as unreasonably high interest rates that may be promised, the security for the investment, the sufficiency of the investment’s documentation, and the professionalism with which the documentation was prepared.
As an STC client, you can rest assured that we will discuss these warning signals with you before you risk your retirement funds and invest. Of course, the final decision to make an investment with a self-directed account is always in the hands of our clients, but STC’s experienced staff will help you understand any proposed investment and respond to any questions you have.
Man’s Mistake Cost His Children $400,000 of an IRA Inheritance
Before Leonard Smith lost his battle with cancer in 2008, he worked with his financial advisors and attorneys to make sure his children received the balance of his retirement funds when he died.
Read the rest of article here.
Latest Webinars
Advanced Insights to Self Directed Retirement Accounts
Need some help understanding the ins-and-outs of self-directing your retirement investments? Then you've come to the right place. In this STC webinar you'll:
- Learn about using leverage in your retirement portfolio through non-recourse loans
- Understand what investments may trigger UBIT or UDFI
- Decide if you should investigate a Roth conversion for your account