Whether you’re a seasoned investor or just beginning to explore the world of self-directed IRAs, when it comes to the IRS, everyone is on even ground. The same rules apply to every self-directed account and every investment.

Luckily, the basic IRA rules and regulations are relatively easy to follow.

• No Self-Dealing – The IRS is primarily interested in ensuring that your retirement account is used for exactly that – retirement. Therefore, your IRA cannot be used for any personal benefit, either directly or indirectly. For example, you cannot use your self-directed IRA to purchase a vacation home that you or your family members will personally use.
• Certain Investments Prohibited – There are very few investments that the IRS strictly forbids when it comes to your IRA. And in this way, most investments, as long as they are not on the short list, are allowed within a self-directed IRA. Among the explicitly forbidden investments are collectibles (coins, stamps, art, antiques, etc.), stock in S-Corporations and General Partnerships and life insurance policies.
• Don’t Do Business with Family – Just as there is a short list of investments that are prohibited, there is also a short list of individuals that your IRA cannot do business with. This means you can’t buy or sell an investment from them, nor can they receive any benefit from your IRA investment. The individuals on this list are your spouse, ancestors (parents and grandparents), lineal descendants (children and grandchildren) and any spouse of a lineal descendant.

As a general rule, if you follow these guidelines and the general intent associated with the guidelines, you are probably on pretty safe ground. Seeing as this is your retirement we’re talking about, though, it never hurts to be extra safe.

Equity Trust clients do have access to our highly trained First Class Service to get their questions regarding IRS regulations answered. As a passive custodian, we can’t provide legal or tax advice, so when the questions fall into that arena, we will suggest that you speak with a trusted legal or tax professional.

If you’ve got some ideas that you think might help you take control of your financial future, feel free to call one of our Retirement Plan Specialists at 1-888-382-4727.

Related posts:

1. Back to School with Equity University, Part III: A Crash Course in Self-Directed IRA Investing
2. Do-It-Yourself IRA Investing Could Turn Retirement Savings Positive – Discover More with Free Wealth Checkup
3. Make a Run for the Roses with Your Self Directed IRA…

Filed under: IRA Education, Investing in Real Estate, Investment Opportunities, Managing Your IRA, self directed IRA on January 12th, 2010