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SDIRA Concepts

6 Ways to Partner Your Self-Directed IRA

August 8, 2018
You can also partner your IRA with an investor’s funds outside of a retirement account. They can use personal funds to co-invest with your IRA.

2. Your other retirement accounts

Do you have an additional retirement account? If so, you have the option to co-invest that account with your IRA. If you choose to co-invest with a Traditional IRA and a Roth IRA, for example, the profits would be split between the tax-deferred accounts.

If you have a Health Savings Account (HSA) or a different small business account, such as a SEP IRA, SIMPLE IRA or Solo 401(k), you can also co-invest one or more of these accounts with your self-directed IRA to complete the investment transaction.

 

3. Your spouse’s IRA

Although your spouse is considered a disqualified person when it comes to transacting on your IRA assets, it is possible to co-invest with your spouse’s IRA to purchase an investment.

For example, if you’re interested in using your IRA to purchase raw land or a house, but lack the amount necessary to do so, you have the option to partner with your spouse’s IRA to capitalize on that opportunity.

Did you know?

Even if your spouse is not working, they may still be eligible to have an IRA.*

Access complete guide: 10 Ways to Partner Your IRA

4. Other people’s IRAs

Just as you have the ability to partner with a spouse’s IRA, you can partner with other investors’ IRAs. An important aspect of this partnering option to remember is that you must maintain the percentage of ownership for both expenses and profits for all transactions associated with the investment.

For example:
You want to invest in a residential property for $280,000 with your IRA, but your IRA only has $70,000 (25 percent). You could potentially partner your IRA with other interested investors who want to partner their IRAs with yours to purchase the property.

  • Investor A has $112,000 (40 percent) in an IRA
  • Investor B’s IRA has $84,000 (30 percent)
  • Investor C’s IRA has $14,000 (5 percent)

Your IRA will be responsible for 25 percent of the expenses incurred and will profit from 25 percent of the total sale price when the property is sold.

If the property sells for $400,000:

  • Your IRA will receive $100,000
  • Investor A’s IRA will receive $160,000
  • Investor B’s IRA will receive $120,000
  • Investor C’s IRA will receive $20,000

5. Your children or grandchildren’s CESAs

With a Coverdell Education Savings Account (CESA) you can save money for a child or grandchild’s qualified educational expenses. Because the annual contribution limit for a CESA is $2,000, investors who are looking to grow the account often look for co-investing opportunities. Option #5 is to partner your self-directed IRA with a self-directed CESA for your children or grandchildren.

6. Another investor’s non-IRA money

Similar to co-investing with another individual’s IRA, you can also partner your IRA with an investor’s funds outside of a retirement account. They can use personal funds to co-invest with your IRA.

As always, it is recommended that you consult with your tax or financial professional before initiating any IRA investment strategies.

Unlock 4 more ways to partner your IRA

Download the complete guide to co-investing with a self-directed IRA today.

* SPOUSAL IRA – If you are married and have compensation, you may contribute to an IRA established for the benefit of your spouse for any year prior to the year your spouse turns age 701⁄2, regardless of whether your spouse has compensation. You may make these spousal contributions even if you are age 70 1/2 or older. You must file a joint income tax return for the year for which the contribution is made.
SPOUSAL ROTH IRA – If you are married and have compensation, you may contribute to a Roth IRA established for the benefit of your spouse, regardless of whether your spouse has compensation. You must file a joint income tax return for the year for which the contribution is made. Your contribution may be further limited if your MAGI falls within the minimum and maximum thresholds.

Yes, partnering your self-directed IRA or other retirement account with another funding source is possible. You can partner your IRA with your non-IRA money, your other retirement accounts, your spouse’s IRA, other people’s IRAs, another investor’s non-IRA money and your children/grandchildren’s CESAs, to name a few options.

It is possible to transfer funds from an IRA you hold at another custodian or a retirement plan from a prior employer, provided the tax environments are the same. A traditional IRA held by another custodian needs to have its funds transferred to a traditional IRA. A Roth IRA needs to have its funds moved to a Roth IRA. Our retirement account specialists can help you determine what type of account you need to open at Equity Trust to move your funds in an approved manner.


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