Ep. 151 | Self-Directed IRAs and Hidden Strategies
Download MP3Hey, everybody, and welcome back to the teaching tax flow podcast episode 151 today. We are jumping into those self directed IRAs. We're gonna dive deep into them, explain what they are, maybe what they're not as well with a great guest. But as always, let's take a brief moment and thank our episode sponsor.
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John Tripolsky:Hey, everybody, and welcome back to the teaching tax flow podcast. We know that you know what you're doing here because, obviously, we have the best content out there. Just kidding. There's a lot of great content out there. However, I like to bring a little bit of poor comic relief to this because, obviously, my cohost here, Chris Pacquero brings all the knowledge when it's just me and him, but he does not know everything, which is why we bring on these great guests.
John Tripolsky:So I won't introduce him, but I will introduce Chris Pacquero. Welcome back to your show, sir. We opened the door. We let you in. How's it going?
Chris Picciurro, CPA:It's going great. And you know what? I don't know any everything. That's for sure nobody does. But more importantly than what you know, it's who you know.
Chris Picciurro, CPA:And I'm excited to welcome back Scott Mauer from Advanta IRA. You guys are in for a treat today. Scott's the VP of sales and manages an amazing team because there's a lot of questions in the teaching tax tool community and in our private CPA practice about self directed IRAs. You know, we're from and self directed retirement accounts. So we're gonna break down those rules.
Chris Picciurro, CPA:We found out to I don't know how I didn't know this before because we've been working with Scott for a while that he is a Florida Gator two time alum. So chomp chomp to all the Gator fans out there. And, you know, they, John, I I know you probably don't know this, but they had kind of a decent basketball year. Just decent this year.
John Tripolsky:Yeah. Yeah. I wouldn't I wouldn't know that unless they unless they are really good at hockey all of a sudden. You know? I'm kind of in the I'm kind of in the dark with that.
John Tripolsky:So, you know, it's it
Chris Picciurro, CPA:is I haven't I haven't seen their I've had the privilege of visiting their campus probably about eight times, and I've yet to see the hockey arena.
John Tripolsky:But But and and honestly, Chris, before we get into it and and really, give the mic over to Scott here too. So we're dating back a little bit here. So Scott has been on here with us, but we're going, like, all the way back. Like, he's kind of an an an OG as we used to say. Right?
John Tripolsky:So episode 22 is what we had him on. So to give you a a kind of a a context around that. Right? So if if anybody hasn't been listening that long for shame on you, you've have not been
Chris Picciurro, CPA:around long listening to
John Tripolsky:every episode. But that is literally in March 2023. So things have probably changed a little bit. You know, Scott and Chris, you guys are probably getting wiser with time. Right?
John Tripolsky:I can't say Chris is old because I always do that, but, you know, it's all good. It's all good. So well welcome back, man. We're happy to have you.
Scott Maurer:Oh, great. Hey. Great to be out with you guys. Appreciate the, the invite coming and share some knowledge with the people. And, yeah, the the hockey arena is hard to find at University of Florida.
Scott Maurer:It's double it doubles as a pool behind one of the dorms, and when it when it freezes over, they play hockey on it.
John Tripolsky:Hey. At least you didn't say it doubles as storage for, you know, the landscapers or something. So it's all good. It works.
Chris Picciurro, CPA:I bet, you know, I bet the more roller hockey than ice hockey has been played on that. So, well, Scott, tell us about a little bit about yourself. How did you get into, the space that you're in with with self directed retirement accounts and where you, I mean, you're in a amazing part of the country. You stayed in Florida. And, yeah, tell us a little bit about yourself and what led you to where you're at right now professionally and personally, and then we'll jump in.
Chris Picciurro, CPA:Sure. Yeah. I was, like, I
Scott Maurer:was born and raised here in Tampa, Florida, which is is odd odd, but it's it's a little rare than other places. A lot of transplants here in the in the area. In fact, both my parents were transplants to the Tampa Bay area, but my sister and I were born here. Born and raised here, lives here pretty much all my life. As you mentioned, went to school, the University of Florida in Gainesville.
Scott Maurer:You know, went got my went for a while, went back, got my law degree. And coming out of law school, you know, looking to, enter the enter the a different type of workforce I've been in before and and met our owner, Jack Callahan, who was also an attorney and had this this company where we help people who have, you know, retirement accounts, people who are looking to do something outside of the norm with their retirement accounts, take advantages of different opportunities. He was looking to grow at that time. You know, the the company was, I think, just about two or three years old. I was employee number four or five, and we're now Wow.
Scott Maurer:We're, yeah, we're now well over well into the fifties, and just we actually just moved into a new building last year at this time and as or almost outgrowing that building. So it's good thing that we brought brought more space next door as well. So we're gonna continue to expand, but that's kinda how I got into the business. It was, just meeting Jack, and really learning. You know, I didn't know much about retirement plans and much less investing in real estate and things of that nature and have learned a lot of it just on the job.
Scott Maurer:And learning the learning continues today. We always see something unique, something different with people, looking to do with their their IRAs, their Roth IRAs, etcetera.
Chris Picciurro, CPA:No. That's I mean, that's a great point because a lot of times people feel like their choices are very limited or more traditional when in when working with their I with their retirement assets. And and what I see on the tax side is a lot of times someone might want to invest in something like real estate or something that's not traditional, we'll say, and they end up taking a distribution from their retirement account getting paying a tax on it, maybe even a 10% penalty only to invest in something that if they knew, they could have just done within their IRA. Are you seeing that have you seen that over the years as well?
Scott Maurer:Absolutely. Yeah. It's it's something that most people don't know about, I think, primarily because their IRAs, maybe their old four zero one k account is with a a firm. Like, you're not gonna not bad mouthing Fidelity, Schwab, and those companies of the world, but they they stick to what they know best, which is publicly traded securities, stocks and mutual funds. And so they're not gonna tell their clients that you can invest in rental properties or you can invest in multifamily real estate.
Scott Maurer:You can buy physical gold and silver. You can invest in startup companies. All the different things you can do within an IRA because they're not willing to hold it. So that's, you know, the equivalent of, you know, McDonald's telling everyone, you know, that, you know, they you should go have pizza for for lunch. You know, we don't have pizza here, but you should go somewhere else.
Scott Maurer:So, that's that's the equivalent, I think, in the the the analogy in the industry. So it's you know, most people just don't know it's possible. So either they're lucky enough to find someone like us or yourself who can let them know of that option. But, unfortunately, sometimes people don't know. They talk to their adviser who says, well, you're just gonna have to take the money out of the account to make that investment, and they they pay taxes.
Scott Maurer:They might pay penalties on it. But the self directed IRA, as you said, allows you to avoid that and simply make the investment inside of the account. Instead of investing in a mutual fund, you invest in in this alternative asset, and the gains from that investment now are what is growing your retirement accounts. So it really allows you that that true diversity, not amongst, you know, different types of funds, but actually among different asset classes altogether.
John Tripolsky:And, Scott, I think this plays hand in hand too with what me and Chris are always talking about. I mean, Chris, literally, the time about controlling your tax bill. Right? Like, controlling the relationship with the IRS. So why why I say that's really related to, right, is through what you're talking about here specifically, it's really giving somebody as much control as they want to to invest and really be there be the manager of it instead of you know, I think conditionally, a lot of people that started off in the workforce.
John Tripolsky:Right? W two, one job, going through it, pumping money into into retirement. It's kind of conditioned maybe into us. Right? Like, you just put it there, somebody else does it, and then you collect when it's time where literally what you're saying is that there's a lot of freedom in it, and it's as much as you want to be.
John Tripolsky:Right?
Scott Maurer:And I and I think that's what's so attractive to a lot of people is, you know, you have, you know, different events happen, you know, in in our world every decade. You got COVID. You have, you know, wars, depressions, recessions, things like that where, you know, that impact someone's retirement account. You know, they talk about, you know, back in COVID or or actually, it was '20 02/2008, April is becoming 02/2001 k's. You know?
Scott Maurer:Funny unless that's your account, and you're just seeing the the dip in the value with and the reality is what happens is people feel powerless. Right? They my money's in the market. The market's going down. My alternative is to take it out and stick it in a CD at, you know, 2% or 3%.
Scott Maurer:And I know in doing that, that's not a good long term strategy, but what else could I do? So the self directed IRA allows them that they see other opportunities where they can drive higher returns. They can I can go invest with my friend instead because I I you know, I've known him for years? I see what he does, and he's successful at what he does. So if I can, you know, work with him, I can have my retirement account going through that vehicle, whether it's, again, whether it's rental property, whether it's startup companies.
Scott Maurer:You know, you can lend money from your IRA. There's so many different things you can do, and that's what the self directed IRA gives you, John. I think that was a great point is control. And it's not and I wanna point out too. This is not an all or nothing strategy.
Scott Maurer:That's very important thing. I think people think, well, if I'm gonna self direct, I could use some of my money to invest, but I don't wanna put all my there. Well, that's great. The IRS allows you to have multiple accounts, move money between different accounts, and invest in different places. So a lot of our clients hold an alternative asset on our platform, but they maintain their Schwab or Fidelity account for more conventional assets, and they transfer money between accounts.
Scott Maurer:And when you transfer money from one IRA to the other, zero tax consequence. Zero reporting done. It's you can do it anytime and it often as often as you would like. That's the important. You're only taxed the money when you pull it out into your own pocket, and that's the danger of people who don't know about self directed IRAs.
Scott Maurer:They pull the money out. They pay taxes, and they move forward, and and they're taxed again on that income rather than simply putting it inside the IRA. Absolute so when we're talking no. That's a great point,
Chris Picciurro, CPA:and I was gonna mention that all or nothing. And, Dirk, I ask you about that because that's that's something to consider where I mean, I've seen a lot of situations where someone has a significant amount of cash in their retirement account, then I'm gonna ask them about something else about self directed type account types, and maybe they're getting charged to AUM, a wrap fee based on the assets in there, and they've got a bunch of cash that's doing nothing. And they they have a situation where they have opportunities to invest in things that pique their interest outside of what I would call your traditional or publicly traded assets, especially as we see well, I'm gonna put a pin on that because we're gonna talk about what you can actually invest in within a self directed account. You mentioned self directed IRA. Are there other type of a other types of retirement accounts that can be self directed?
Chris Picciurro, CPA:And and if you had to describe, like, self what self directed is, does that mean someone has to do like, go to the bank and do everything? Or or what is what is the VANA IRA how do they partner with people to help administer that that account to keep it in con compliance is what I'm saying.
Scott Maurer:Yeah. So the the key thing to note is the word self directed is referring to what you can invest in or how you can control your account. At their core, a self directed account is still, from a tax perspective, a traditional IRA or a Roth IRA or a SEP IRA if you're self employed. It could be a solo four zero one k plan if you're self employed and wanna start your own your own four zero one k and and make larger contributions. So self directed just just saying, you can invest in the things that you know that you can control, that that you understand.
Scott Maurer:But, again, tax wise at their core, it's traditional IRAs. It's Roth accounts, SEPs, solo four zero one k's, any former employer's plan. So if you have an old four zero one k, an old four zero three b plan, through a prior employer, those monies can be rolled over, into an an IRA account as well with zero tax consequence and then invested. So I think that's that's a very important thing I think where people miss is they think self directed, that's a certain type of IRA, and it's not. It's I mean, our our paperwork, when you sign up an account, you check a box for traditionally.
Scott Maurer:You check a box for Roth. It's just gonna be what those investment options are.
Chris Picciurro, CPA:So you've got SEP, Solo, Roth, traditional, and I believe simple, we can't do self directed at this point. Is that No. You you can self
Scott Maurer:I I forgot. You can self direct to simple.
Chris Picciurro, CPA:Just no. Okay. Cool. Yeah. Mhmm.
Chris Picciurro, CPA:I learned something. Alright. I learned a lot. I I've always learned stuff. That's cool.
Chris Picciurro, CPA:Okay. So you could and so, also, you know, I know you can roll money over from another retirement account, which is typically the way that they get funded. Can can taxpayers contribute to these accounts like normal IRAs?
Scott Maurer:Yeah. They again, the the IRAs that we hold operate the exact same as any other IRA. So the contribution limits, the distribution rules, everything is the exact same. The only difference is the type of investments that you're placing inside the IRA account. That's, again, what you mentioned.
Scott Maurer:That's what we do at Advance IRA when you wanna invest in a piece of real estate or you wanna invest into a private debt fund or something like that. Our job is to make sure that the paperwork all gets prepared properly in the name of your IRA. Make sure you review and approve it for us as well so that, you know, this demonstrates very clearly to the IRS that this asset, is inside of your IRA and therefore not taxable to you, to make the investment and then not taxable on the returns that are coming back into the IRA account. So
Chris Picciurro, CPA:what are some of the common, investments that are made in a self directed retirement account? I mean, obviously well, I'm gonna shut up and listen to because you're seeing it on you and your team are seeing it on a daily basis.
Scott Maurer:Yeah. I mean, it's it's I mentioned I keep mentioning real estate because we it is real estate heavy. Probably a good 60 to 70% of the assets we hold are real estate in nature, but that term means so much to so many different people. It's it's rental properties. It's rehabs.
Scott Maurer:It's tax liens and tax deeds. It's lending money from your IRA to somebody else who's buying real estate, and you're IRA acting as a bank. We've seen an increase over the years in people investing in, you know, multifamily and commercial property where Mhmm. I don't have enough on my IRA to buy, and maybe I don't want to use all my IRA funds to buy a rental, you know, three two rental property, but I'm happy to put 50 or 100 k into somebody else's, you know, commercial ass commercial asset Right. And then just share in the profit.
Scott Maurer:So a lot
John Tripolsky:of real
Scott Maurer:estate. Outside of real estate, we've seen, you know, the the private LLCs, startup companies, your debt fundings, startups, precious metals, people wanting to buy physical gold and silver. We've had a large of our clients invest in rights, oil and gas bonds, things like that as well. Again Right. It's rather than the and the other thing I think is important for people to understand, rather than trying to see where do I get that list of all the possible investments, the IRS list simply says you cannot invest in life insurance, and you cannot invest in things that are deemed to be a collectible, like artwork and antiques.
Scott Maurer:So that's the IRS list. It's not all the things you can do. It's simply you can't buy life insurance, and you can't buy collectibles. Gotcha.
John Tripolsky:Which is a lot more clear when they do it that way.
Scott Maurer:Yes. Yeah. Exactly. Exactly.
Chris Picciurro, CPA:That so you could and so I've are you seeing more people invest in digital assets, cryptocurrencies? And and if they are, they are you what's that mix between Roth and and pretax accounts?
Scott Maurer:Yeah. I mean, we certainly have it. I was gonna mention as you're talking I talked the rule these rules were written back in the mid seventies, right, as far as what you can and can't invest in. So I don't know. I mean, maybe someone back in the seventies said, hey.
Scott Maurer:One day there's gonna be an ass something you can pay for that you don't even have to see your touch. But, yeah, we have we certainly have clients who invest some in crypto. As far as the the, I guess, breakout between Roth and tradition, I don't have those numbers, but, I mean, in general, our assets and I think this is kind of a good thing for people to understand. It's it's predominantly traditional because that's where more people have some of their money, but there's a fair number of of Roth. But for people deciding when they wanna make an investment, it's it's more so I see an investment opportunity, and I wanna make this.
Scott Maurer:I wanna take advantage of it, and this is where my retirement funds are. They're in a traditional IRA or they're in a Roth IRA, and I wanna I don't wanna miss out on this investment. So it's but, yeah, there's certainly circumstances when, you know, people who are predicting a large return. Years ago, we had a insurance companies a startup insurance company. People wanted to invest their Roth IRA into that startup company because they knew when it went public, they were gonna double or triple their money.
Scott Maurer:That was all gonna be tax free inside the Roth. So some people invested their traditional fund in it, but, yeah, that was a strategy. But, certainly, digital assets is something we've definitely seen arise in the last few years.
Chris Picciurro, CPA:Absolutely. And I'm you know, the cool thing with this is if you've got you know, obviously, do your due diligence, but you this this self directed account can invest in LLC. So let's say, John, you wanna start a car wash, and you Hey. Lisa's not a
John Tripolsky:you know, I don't wanna invest in another Afghan business.
Chris Picciurro, CPA:No. I'm gonna make it more money.
John Tripolsky:Hey. Let's say we own that one. Remember from, like, 10 podcasts. Be like, I don't wanna invest in another one. I want a 100% market share.
John Tripolsky:Is is that's that's the whole deal behind it, is I don't want any comp competition. So let's hear about your car wash.
Chris Picciurro, CPA:But let's say you wanted you wanted your car wash and I wanted a I wanna invest a $100,000. I could use my I could roll that money from my, you know, simple IRA into a self directed IRA, and then my IRA own the LLC interest. And that could you know, if I that that could be that that could be beneficial for all of us. I mean, because if I took it out of that IRA, like I said, I would IRA, I'd be paying a significant tax on it. That being said, Scott, there are some rules with with disqualified persons.
Chris Picciurro, CPA:John and I are not related. Thank goodness. Our family gatherings would be really a mess.
Scott Maurer:What are some of the rules get
John Tripolsky:kicked out of the of Thanksgiving.
Chris Picciurro, CPA:Yeah. Self dealings and and, you know, who you can be partnering up with and investing with? Because a lot of investments occur between families and spouses and all this other stuff.
Scott Maurer:Yeah. So it's the rules are no collectibles and no life insurance. Then the other arena is your IRA cannot transact with or benefit a disqualified person. And very simply, the the disqualified persons for your IRA, if it's your IRA account, you and your spouse, your parents and grandparents, your kids and grandkids, and any business or entity owned by one of parties. So in in layman's terms, my IRA can't lend me money.
Scott Maurer:My IRA cannot lend my son money. My IRA cannot buy a house and lease it to one of those individuals. My IRA cannot buy a piece of real estate that one of those individuals wants to live in or get any use out of. So those rules definitely pop up. If it was a a business, you know, startup, your IRA can't invest in your son's business.
Scott Maurer:So there's definitely some rules, but that's it. It's really up and down your lineal tree. Brothers and sisters, your IRA can can invest with on a as long as you're doing on an arm's length basis.
Chris Picciurro, CPA:Mhmm.
Scott Maurer:But that that's a key thing to keep in mind when you're when you start talking about family and retirement accounts, things can get a little tricky and sticky and and maybe not possible. That's that's what we're here for, obviously. When you have those questions, call us. Let's walk through the scenario, and kinda I can let you know my thoughts on it and whether or not you need to seek other advice.
John Tripolsky:And, Scott, a question for you too. So this is I mean, obviously, we're talking about, you know, some of the, rules and regs from this being written in the seventies. Right? So so think about that, you know, for somebody younger. Right?
John Tripolsky:Like, that basically predates bottled water. Right? Like, before there was bottle being sold to you or water being sold to you in a bottle, some of this was written. But the reason why I say that, right, is do have you seen a lot of changes just with the, really just the Internet being available to people, apps, like, as a whole. Right?
John Tripolsky:Like, you talk about, you know, going back in time. Right? Somebody might have been sitting there waiting to open the mail that usually shows up at their door the fifth or sixth of the month that has their statement in it, where I couldn't tell you the last time I actually got a physical statement that I opened and looked at for one on anything, if I even get one. So, really, the, the availability of technology. Again, do you find people are much more inclined to want to even if they don't, you know, go into self directed you know, the self directed route?
John Tripolsky:Do you think that they're, obviously, the ability to do it is different? But, like, how do you think technology and tech as a whole has really impacted that? Yeah. I mean, I I think Changed it.
Scott Maurer:Of on a micro level, we've had clients who've invested in tech technology firms or apps even. Like, there have been there's one client of ours. I know this his strategy is he invested in, like, six or seven different little tiny startups, which some of which were just, like, new apps for parents to use for their kids and things like that. And, he knows that some of them aren't gonna work out, but he know he's hoping that a couple of them are gonna hit home runs, and there's there's his gain. And I think on a bigger on a different scale is, I think, as younger generations are looking to come into this know, come into industries and and raise capital, they're not always looking for the traditional funding mechanisms that, you know, the us or our parents are probably looking at.
Scott Maurer:So I think that's where self directed IRAs can be enticing them. It's something new. It's something different, and they're they're kinda teaching the old dog new tricks when they're talking to their investors of of here's how you can utilize some of that capital, and realizing they're real they're, you know, the they're smart enough to know, like, hey. This is a you know, trillions and trillions of dollars in retirement accounts they might have access to if they can show people how to use it. So from that standpoint, I think the the technology and that kind of revolution has certainly helped our industry because people are it just is is opening people's eyes.
Scott Maurer:Hey. Things are different. Things are new, across all all spectrums.
John Tripolsky:And even just learning of new opportunities. Right?
Chris Picciurro, CPA:Like, back
John Tripolsky:in the day, you might you might only hear of companies starting within a a 100 mile radius. Now it's you know, it depends on where you consume your news at. It's you could find anything and everything that, you know, what went public two minutes ago. Or nope. This one's not.
John Tripolsky:This one just started. Somebody just started this and kind of your, your overall reach is now unlimited Oh, yeah. Globally.
Scott Maurer:In that realm, I mean, you know, the the reels that are out there, the little videos you get before you click on YouTube and things like that, they're I've definitely seen a lot of, people that use our services and and companies that refer people to us and other similar industries using that as added advertising. And a lot sometimes they'll even say, hey. This isn't, you know, perfect for a self directed IRA or is IRA eligible investments, things like that. So, yep, definitely utilizing that. Like you said, getting that out.
Scott Maurer:Yeah. How would you have found out about a multifamily partnership investment, you know, twenty years Might have had to know somebody or go to the steak dinner, right, at the at the at the hotel or whatnot to be invited. Now it's like, oh, you just you look on social media, and there's a little ad talking about it. You know? And you probably have to do your research on what an accredited investor is and how do I get into it and do my due diligence on the investment, but it's opening people's ideas for for a lot more out there.
Chris Picciurro, CPA:Well, I wanna touch wrap up by touching on a couple not as fun points, but some compliance driven points when it comes to self directed IRAs. And one of the reasons you do wanna work with a company like Advanta, you know, transparently, we've got I mean, I have a real estate kinda syndication I put together ten years ago, and I've got a few people that did invest within a self directed IRA, and it's That being said, sometimes taxpayers like to take things into their own hands. And I can't tell you how many times I've heard now, not our clients, thankfully, people would say, oh, I'm gonna run a $10.31 exchange. Really? Great.
Chris Picciurro, CPA:Yeah. I sold my property. I just put the money in my bank account, but I'm gonna get a qualified intermediary when I'm ready. It doesn't work that way. Right?
Chris Picciurro, CPA:So in as far as self directed IRAs, can you talk a little bit, about what the custodian requirement is, and it which is really there to protect someone from themselves? And then finally, this really isn't a question, but I I think it is important to to note that I like using the self directed IRA with more more a more traditional IRA, for lack of a better term, because sometimes you you don't want all of your assets in, in something that might not be as liquid as you'd like. Right? Because those required minimum distribution rules apply. So having maybe an IRA account that's more liquid to kinda take those RMDs because you don't wanna have to sell your property in your in your self directed IRA in a distressed situation because you need need the money.
Chris Picciurro, CPA:But Sure. But, yeah, I I mean, the you know, so maybe practical tips for people, juggling RMDs and then the custodial, requirement.
Scott Maurer:Yeah. So the the custodial requirement for for any retirement account, any qualified account, you have to have a qualified custodian or or trustee. So you can't simply go to a bank account and tell them to when they say, hey. What's this new account open as? They just say it's My IRA.
Scott Maurer:Like, it it you have to have an account through a bank, a trust company, brokerage firms, etcetera, that are going to do the IRS reporting that are actually qualified and able to report to the IRS, your contributions, your distributions, your annual valuation. So you do have to have a custodian, someone like Adana, someone like Charles Schwab, who's going to do that reporting and and catalog and report the the those ask those those items back to the IRS on an annual basis. So you can't just simply have you you can't just say, I I created my own IRA. This is the account I'm using for it. So there there are ways that we that's definitely something to call me about.
Scott Maurer:There's ways you can get more control over your funds by utilizing LLCs and trusts. You still have to have a custodian that who's gonna do the reporting on it. So that's just an important note. Like I said, that's people shouldn't be doing that themselves. They have to use a a a qualified custodian to do it.
Scott Maurer:That's that's the role we serve. The RMD issue is definitely a good one to consider. I think that's know, when you invest in things that are self directed, it's, you know, pieces of real estate, private partnerships. They are not liquid. You can't just sell them like you can a stock or mutual fund.
Scott Maurer:So if you're getting to the age of 73, we're getting close and you're like, hey. I'm I'm gonna have to start taking required distribution for my regular IRA account, per IRS rules, you wanna make sure you have the ability to draw that RMD out from some source. Now if your self directed asset is producing enough cash every year that you can meet the RMD from there, great. If not, you're gonna wanna be said like, Chris, have another IRA where you can satisfy that RMD from and not have to mess with that illiquid asset inside the the self directed account.
Chris Picciurro, CPA:Right.
Scott Maurer:That's just proper planning. That's something that people would go to you for and say, let's make sure we do this right too. Really? Yes.
Chris Picciurro, CPA:Well, no. I appreciate it. Go ahead, John.
Scott Maurer:I'm sorry.
John Tripolsky:No. No. Was gonna say this is great having you back, man, and we'll we'll have to make a better habit about this and not wait two years
Chris Picciurro, CPA:to get back in the shower.
Scott Maurer:Yeah. Anytime. If you have, you wanna yeah. Have me on talk about the the checkbook route or just other areas. There there are definite little intricacies and things that people that come up that people need to know about and and and whatnot outside just a general overview.
Scott Maurer:So, yeah, happy to come back anytime.
Chris Picciurro, CPA:I'm gonna get greedy for a second. I'm sorry. I know we're we're supposed to let Scott go, but can you just touch on the you know, within a self directed retirement account, there are a couple options as far as, you know, this could be a whole another piece of content, but, the checkbook versus non verse noncheckbook and and and which one is better? Because I I could tell you that I've seen a big spike in private lending through the self directed retirement accounts. Yeah.
Chris Picciurro, CPA:Can you kinda give us an because some people do hear they might say, I've got a checkbook IRA. Well, they don't realize that's a type of self directed IRA.
John Tripolsky:Correct.
Scott Maurer:Right. Yep. So the the checkbook structured did we first talk about what I would call the custodial IRA, which is someone sets up an account with us and they wanna do private lending through their IRA? They contact us. They tell us who their borrower is.
Scott Maurer:They tell us how much it is they wanna lend, and our job is to make sure that the loan documents are properly prepared, make sure the clients approved it, of the investment before we send cash out of the IRA to the closing agent to close that private loan, and then the borrower's payments all come back to Advanta for deposits to the client's accounts. That's really you know, we're handling the money in and out of the account. You're still directing the activity, but we have control, I guess, over the cash or the checkbook. So now checkbook IRA, now maybe we need to change this term, talk about technology, how many people are using checkbooks anymore, but that's the terminology that's used, where you can set up an LLC or a private trust where the owner of that LLC is your IRA account, and you can direct Advanta to fund a bank account in the name of that LLC. And if you're the manager of that LLC, you can now make all of your private loan investments in and out of that LLC bank account.
Scott Maurer:So you have much more control over the cash, making the investments. You're now responsible for the recordkeeping. Advanta is still there as a custodian, but your IRA instead of hand holding a litany of private loans, we are holding the membership in the LLC. So we're still reporting to the IRS on that, but you have much more control as manager of the LLC. Enough control to do what you wanna do, enough control to hang yourself if you're not careful.
Scott Maurer:So that's something you wanna make sure you're you're well aware of when you're doing, but that's just a different strategy that people use to to take that level of control to the next level.
John Tripolsky:I I got my trusty old pen out. Here I am learning things today, like back in school. So I'm glad you reined into that. Mean, they're, discuss that. That's actually a good one that I bet a lot of people don't know about.
John Tripolsky:I think that's something too. So and it's probably probably a decent place to to end it up. We don't wanna give away all the secrets in one discussion. But, yes, Scott, we'll we'll have you back there. We'll, you know, either do a a take this one step further either on a podcast or even if we do some little breakout sessions, I think we'll be able to to get some good stuff out with people, and I look forward to that.
Scott Maurer:Great. Yeah. Looking forward to it, guys. Let me know when.
John Tripolsky:Absolutely. Absolutely. Well, we'll let you off the hook this time. But, again, we'll have you back on so you can't can't get away that easy again. But and and honestly, anybody that's listening or watching this, obviously, on YouTube, if you're listening, you're missing out on something great.
John Tripolsky:You can stare at Chris the entire time. Right? So hop on YouTube. Subscribe to that. Again, if you have any questions, we'll drop some resources here in the show notes for you.
John Tripolsky:If you're on YouTube, it's right there. If you're somewhere else, it's probably on that side over there. But check it out. Don't be lazy. Click on those resources.
John Tripolsky:Do not forget to subscribe to this channel specifically. We have amazing, amazing content out here. I think we just passed over, about 500 videos, pieces of content that we've put on YouTube specifically. So do the math. That's a lot of stuff.
John Tripolsky:A lot of stuff you can search through as well as we're working on a couple, we can call them little top secret projects. But before we even say anything about them, we'll let you go too. Thank you again everybody for joining us here on the teaching tax flow podcast. We'll see you again next week. Different date, same day of the week, completely different topic.
John Tripolsky:Have a good week, everybody.
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