Within many self-directed IRA accounts, the IRA holds real estate directly in the name of the IRA. Advanta then processes the checks in and out of the account relating to that investment. This seminar explores how some individuals have used LLCs and trusts to hold real estate within the IRA. There are many ins and outs when you hold real estate in an LLC or trust, and this seminar goes over all the frequently asked questions on this topic.

1. 1
The Checkbook IRA: How It Works and
What You Need to Know

2. 2
Scott Maurer
Director of Business Development
Advanta IRA
Member of Florida Bar since
May 2005
Worked for Advanta since
February 2006
About the Presenter

3. Advanta IRA, and its employees, do not provide legal, tax, or
investment advice or endorse any products.
Disclaimer
All information and materials are for educational
purposes only. All parties are encouraged to consult with their attorneys,
accountants, and financial advisors before entering into any type of
investment.

4. Key Points to Take Away from the Seminar
3
What accounts can you self-direct (checkbook or not)
IRA Administrator vs. Checkbook IRA
Advantages/Disadvantages of Checkbook Control

5. 5
Most common IRA’s
are administered by
banks and investment
brokers…. Who offer
limited investment
products
…however IRS
regulations allow
a much broader
range of
investments (only
exclusions are life
insurance and
collectibles)
Limited
Investing
The Rules? Self-Direction
Self-Directed
accounts add up
to less than 4% of
IRA investments
Why haven’t I heard of Self-Directed IRAs?

6. 6
• Raw Land
• Commercial
• Rehabs/Flips
Types of Assets: Real Estate (in any form)
•Residential
•Condos
•Duplexes

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Types of Assets: Paper Assets
• Mortgage Loans
• Tax Liens
• Unsecured Notes
• Debenture Notes
• Option Contracts
• Assignments
• Joint Venturing
• Accounts Receivable

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Types of Assets: Other Alternatives
• Checkbook LLCs
• Farm Animals
• LLCs/LLPs
• Movie Projects
• Precious Metals
• Equipment Leasing
• Forex Accounts
• Private Stock
• Commodities
• Oil/Gas

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Types of Self-Directed Accounts
• Traditional/Roth IRAs
• Employer Based IRAs- SEP/SIMPLE IRAs
• Qualified Plan- Individual 401(k) or PSP
• Former Employer Plans (401k, 403b, 457,
TSP, pension)
• Education Savings Accounts
• Health Savings Accounts
Self-
Directed
Account
s

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How do I move money form my current account to a
self-directed account?
10
Transfer: Moving funds directly from one IRA account to another without the
client handling the funds. This is a non-taxable, non-reportable event.
Direct Rollover: Moving funds directly from an employer-sponsored plan
(401k, 403b, 457, TSP, pension, etc.) to an IRA, without the client handling
the funds. This is also non-taxable.
Indirect Rollover: If you personally take possession of the funds from an
IRA or employer plan, you have 60 calendar days to move those funds back
to an IRA to avoid taxes. This can only be done once per 12 months.
Transfers, direct rollovers and earnings with an IRA
are unlimited!!

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What are the Benefits of Self-Direction?
Choosing the investment that you understand
True diversity within your retirement account
Can invest in tangible assets
You choose what type of return is acceptable
Benefits of Self-Direction Include:

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Today’s Agenda and Topics
 Types of Checkbook Control
 Disqualified Persons/Investments
 Things to Avoid with LLCs and
Trusts
 Case Studies: How to buy real estate
with an IRA or using an LLC/trust
 How to get started
1. Wake up
2. Get
dressed
3. Give
seminar

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Types of Checkbook Control: Using an LLC
Terminology of LLC
 Members = Shareholders
o Equity holders
 Manager = Officer/President
o Decision makers
 Operating Agreement: Lists the members
and their ownership percentage
o IRA cannot be Manager or Managing Member
o If IRA owner is a manager, they cannot receive compensation or
co-mingle funds.

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Checkbook-Control LLC
Other Notes:
-Some custodians offer the “one-stop shop” of an IRA, LLC formation,
and a checkbook to get started, but charge several thousand dollars for
this arrangement.
-Advanta does not approve or disapprove of any investment structure but
does permit the checkbook control LLC with disclaimer,
-Advanta can provide attorneys and CPAs who can assist with structure,
set-up and advice.
If you are interested in reading the IRS cases on which the checkbook-
control IRA-LLC is based, they are:
Swanson v. Commissioner 106 TC 76 (1996)
T. L . Ellis, TC Memo. 2013-245

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Types of Checkbook Control: Trusts
Many different types of trusts
- Revocable trusts
- Special Needs trust
- Life insurance trusts
Parties to a Trust
- Grantor :Contributes assets to trust
- Trustee: Manages assets in trust
(fiduciary)
- Beneficiary: Ultimate recipient of assets in
trust
When an IRA invests into a Trust, the IRA is
generally the Grantor and Beneficiary of the Trust,
but the IRA or the IRA owner cannot be the Trustee.

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Two Main Types of Trusts with IRAs
Land Trust (to hold real estate)
- Advanta administers like a real estate asset
(paying bills, receiving income, etc.)
Personal Property Trust (to hold notes,
mortgages, other assets)
- Similar to Checkbook control LLC

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Prohibited Transactions: Investment restrictions
1. Life Insurance
2. Collectibles
a. Antiques
b. Alcohol
c. Artwork
d. Stamps, Coins (Some
coins are allowed)

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Lineal Descendants
of IRA Owner (kids
and grandkids), as
well as spouses of
Lineal Descendants
Lineal Ascendants of
IRA Owner (parents
and grandparents)
IRA Owner and
Spouse
Business or Entity
owned or controlled
by One of the above
Others
Prohibited Transactions: Disqualified Persons

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Some examples of prohibited transactions
between a disqualified person and an IRA are:
• Selling, Exchanging Or Leasing Property
• Lending Money Or Extending Credit
• Furnishing Goods, Services Or Facilities
Two Key Points With IRAs: NO Self Dealing & NO
Personal Use!
Partnering with a DQ person though is possible!
IRS Rules and Regulations:
Prohibited Transactions

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Things to Avoid with LLC or Trust
 Purchasing Prohibited Investments (collectibles/life
insurance) within the entity
 Dealing with Disqualified Persons
 Getting a Current Benefit from assets held within the
entity
 Paying compensation to a disqualified person
(addressed in TC memo in 2013)
 Lending your personal credit to the entity: MUST be
non-recourse financing

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Case Study:
Joe decides to invest in a single family rental properties.
Joe has a Trad IRA ($150,000) and is interested in real estate.
He project the property will net cash flow about $1,000/mth after repairs.
He finds a house that is for sale at $100,000 and needs an additional $20,000
of work to get it ready to rent.
Joe’s real estate deal
So how can Joe buy this property?

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Purchase of Real Estate through IRA Administrator
Steps
Opens and funds an Advanta account
-Completes IRA Application
-Transfer/Rollover of Funds from other custodian
-Acct # issued in less than 24 hours
1
Identifies property for purchase and notifies Advanta
-Contract written in name of IRA
Advanta IRA FBO Joe Smith IRA#8001234
-Approves contract and sends to Advanta for execution
-Escrow deposit issued from IRA
2
Advanta works with title agent/attorney on closing documents
-All documents (deed, HUD, etc. drafted in name of IRA
-Joe will need to read and approve of all closing documents
3

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Purchase of Real Estate through IRA Administrator
Steps, continued
Advanta completes closing
-Representative of Advanta signs after approval from Joe
-Advanta wires funds to closing
4
After closing…..
-Joe secures tenant and directs tenant to send rents to Advanta
-Joe directs that all expenses (taxes, maintenance, insurance, etc.) to be paid by Advanta from cash in IRA
-Joe tracks activity in account online and through email notifications
-Advanta acts as recordkeeper and administrator
5
IRA grows through rents and profits on sale
-Joe can hold property indefinitely and continue to accrue rents to IRA or sell at a profit6

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Purchase of Real Estate Using LLC
Steps
Opens and funds an Advanta account
-Completes IRA Application
-Transfer/Rollover of Funds from other custodian
-Acct # issued in less than 24 hours
1
Forms LLC with division of corporations
-Chooses state to set-up LLC
-Chooses name for LLC
-Uses attorney/CPA/Legal services to file articles
-Articles name Joe (or another individual) as manager
-Articles should not mention IRA
2
LLC Operating Agreement must be drafted
-IRA is listed as 100% owner
-Operating agreement must show IRA as Member
Advanta IRA FBO Joe Smith IRA #800123
3

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Purchase of Real Estate through LLC
Steps, continued
Advanta signs operating agreement
-Representative of Advanta signs operating agreement on behalf of IRA once Joe has approved it
-Advanta issues check from IRA to fund LLC
4
LLC Operations
-Joe opens bank account in name of LLC
-Joe enters into contract to buy real estate in name of LLC
-Joe signs all closing documents on behalf of LLC in his position as manager
5
Going forward…..
-Joe deposits rents from tenant into LLC bank account
-Joe pays that all expenses (taxes, maintenance, insurance, etc.) from cash in LLC bank account
-Joe can use cash in LLC bank account to reinvest in other assets, establish brokerage accounts, CDs, etc.
6

26. 26
Purchase of Assets Using Trust
Steps
Opens and funds an Advanta account
-Completes IRA Application
-Transfer/Rollover of Funds from other custodian
-Acct # issued in less than 24 hours
1
Drafts private trust document
-Within private trust, IRA is listed as grantor and beneficiary of trust
Advanta IRA FBO Joe Smith IRA #8001234
-Joe must name a non-DQ person as trustee
-Trust is not public record
2
Trust document is approved by Joe
-Joe must read and approve trust and sends approved copy to Advanta
-Joe also has trustee sign trust document
-Advanta signs trust agreement on behalf of IRA
3

27. 27
Purchase of Real Estate through Trust
Steps, continued
Funding of Trust
-Joe’s trustee must get tax ID number for trust to open bank account
-Advanta issues check from IRA to fund trust
-Joe’s trustee deposits check to trust bank account
4
Trust Operations
-Joe instructs his trustee to purchase particular assets in name of trust
-Trustee will sign documents, enter into contracts, etc.
-Trustee will then deposit income to trust account and pay any bills out of trust account
5

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Two Main Types of Trusts with IRAs
Land Trust (to hold real estate)
• Advanta will act record-keeper
• Joe must approve all closing documents
• Joe’s trustee signs closing documents
• All rents and expenses flow in and out of IRA
Personal Property Trust (to hold notes,
mortgages, other assets)
• Joe’s trustee opens bank account and purchases assets
• Joe’s trustee must maintain records of income and
expenses

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What about partnering with IRAs using LLCs?
• Multiple parties (including IRAs) can be used to
partner on real estate (and other) investments
• When an IRA partners on an investment with other
parties, the IRA must receive its shares of income and
expenses.
• With multiple parties, an LLC can make it less
cumbersome to manage the investments for multiple
parties.
• The manager of the LLC will hold all investor’s funds
and will make investments on behalf of LLC
• Must be careful when partnering with disqualified
persons
• Must be careful if needing to add additional capital

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Case Study:
Purchase of Real Estate Using an LLC
They decide to form Real Estate Partners, LLC to consolidate their funds.
Sonny has Roth IRA, Michael has Traditional IRA and Fredo has personal savings ($50K each).
IRAs are opened and funds are transferred to those accounts.
They use an attorney to draft an operating agreement, listing each party as a
1/3 owner and selecting Michael to act as Manager.
Sonny, Michael and Fredo’s Purchase

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Case Study:
Purchase of Real Estate using an LLC
 Members in the LLC are the IRAs
• Advanta IRA fbo Sonny Corleone Roth IRA #1234
• Advanta IRA fbo Michael Corleone IRA #5678
• Fredo Corleone, personally
• Operating Agreement is signed by Advanta for the IRAs,
Fredo signs personally and Michael signs as Manager
 Michael opens up checking account for LLC
 Operating Agreement for LLC must state that each is a 1/3
owner in the LLC
 REMINDER: To purchase an interest in an LLC, Advanta will
need to see the LLC operating agreement, NOT the real estate
closing documents.

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Using an LLC to Partner on Real Estate
Things to Remember With Fractionally Owned LLCs
•Since the LLC is fractionally owned, if there is a capital call
for the LLC, the IRAs would all need to put up the same
percentage of the capital call to maintain ratios.
• If an IRA owner puts up the money for the capital call with
personal funds, this would be a prohibited transaction.
• Adding of a new member to the LLC can dilute the
ownership and result in indirect transfer/prohibited
transaction, if new member is disqualified person.

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How to Remove Cash from LLC/Trust
for Distribution
LLC/Trust
IRA at Advanta
Distribution to IRA
Owner
1. The LLC/Trust would send
funds back to the IRA as a
dividend or income.
2. Advanta will deposit the
cash into the IRA.
3. The IRA owner would
send in a distribution form
and Advanta will send the
funds to the IRA owner
and issue a 1099.

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to Using IRA Administrator
PRO: Less likely to engage in prohibited transaction
PRO: Keeping “arms length” from IRA funds
PRO: Clear records of all activity within IRA
CON: Possibly more administrative fees for multiple assets
CON: No ability to write checks for immediate purchases

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to Using Checkbook Control
PRO: Hold more assets in IRA with lower fees
PRO: Quick access to IRA funds for auctions
PRO: Possible asset protection/anonymity
CON: Lack of oversight by IRA administrator
CON: Easier to engage in prohibited transaction
CON: Responsible for keeping accurate records

36. Key Points to Take Away from the Seminar
3
What accounts can you self-direct (checkbook or not)
IRA Administrator vs. Checkbook IRA
Advantages/Disadvantages of Checkbook Control

37. 37
So which option is best for you?
 Consult with attorney, CPA, others to
decide which way is best for you to
hold your assets (Advanta can
provide references if needed).
 Most clients choose to simply have
assets held by Advanta and allow us
to do recordkeeping.
 It is possible to switch between
strategies later (may require deeds,
assignments, etc.)
 Advanta will NOT be able to provide
counsel or advice on which way to
pursue.

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Effective retirement investing is critical
• Our professionals are trained in all areas of self-
directed IRAs, and are ready to assist you.
• Fund your account by making a contribution or by
transferring funds from another IRA or qualified
retirement plan.
• If you are looking for investment ideas, seek
out local investment clubs and organizations..
• Get started today!
Step One:
Open an
Account
Step three:
Choose an
Investment
Step Two:
Fund your
Account
Advanta makes it easy to start

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For More Information, contact:
Advanta IRA
Scott Maurer
smaurer@advantaIRAgroup.com
800-425-0653, ext. 1123
Please also visit our website at www. AdvantaIRA.com for a list of
upcoming events and seminars! At our website you will find a wealth
of information on self-directed IRAs.