Self Directed IRAs

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To buy Secondary Market Annuities with qualified funds, a self-directed IRA is required. We have worked with many SDIRA custodians, however we only recommend GoldStar Trust. They offer the best service, the lowest price, and the fastest execution, and thus there is no reason to look elsewhere.

THERE ARE FOUR STEPS IN AN SMA/IRA TRANSACTION:

  • Open the Gold Star IRA Account– Complete and sign the application and pay account opening fee
    • Account establishment fee of $65 annual/$25 opening can be paid by credit card.
    • Input your Advisor Name on Page 8, the wholesale rep form.  This authorizes the advisor to communicate with, but not direct, Gold Star regarding the SMA purchase.
  • Fund the Gold Star IRA- page 5 , IRA Transfer, or page 6, Rollover Certification
    • Depending on the current custodian and the investments held, transfer may take 2 days or 4 weeks.
    • Typically, we wait until the SMA is court approved, then initiate transfer of funds to Gold Star.
  • Buy the SMA- Direction of Investment form, page 7
    • The best practice is to send in a signed DOI form when opening the account, but leave the investment amount blank until the closing book is priced and prepared.  GoldStar will input the final investment price when the close book is ready
  • Approve Closing Book
    • Review the closing book prior to funding
    • Once reviewed and approved by client, Gold Star signs the Absolute Assignment and the Servicing Agreement as custodian, and funds the purchase of the SMA
    • Closed/Funded/Complete

Self Directed IRA Custodians

There are many self directed IRA custodians, but only a few are familiar with the secondary market annuity.

We prefer Gold Star Trust Company above all others.  Gold Star is the trust-only branch of a  mid-sized Texas based bank and has a specialized niche in the Secondary Market Annuity business.  Gold Star offers fantastic customer service and the lowest prices of any self directed IRA custodian, and is our preferred SDIRA partner.

To be fair, there are two other custodians we can work with for customers who already have accounts, namely IRAServices and Provident Trust Group.  Both understand Secondary Market Annuities and are easy to work with, but Gold Star is a superior value and quality of service.

If you plan to use an IRA, you’ll need to open the account first.  You do NOT need to fund your IRA to open the account, but as it sometimes takes time to open, and then again takes time to transfer money, we prefer to have IRA buyers open their accounts prior to reserving deals to prevent delays.

What Are The IRA Fees For Multiple SMA’s?

Depending on the custodian, there may be fees for adding multiple SMA’s to you IRA, but there are generally no fees for receiving funds from the insurance company into your IRA.

Now, depending on what you direct your custodian to do with your IRA funds in terms of distributions, you may incur fees, as outlined in their fee schedule.  That’s not something we control and is at your discretion.

Our preferred custodian, Gold Star, charges no additional fees to add multiple SMA and their distribution costs are minimal.

Are Taxes Withheld?

None of the money coming in to the IRA from an SMA will be subject to withholding or taxation.  Money you direct to come out of your IRA for distribution to you however would be taxable.  Those withdrawals are all up to you and your accountant.

That said, lottery SMA’s ARE subject to withholding by the state lottery commission.  Typical lottery winners have a $0 cost basis in their prize so all the income is taxable and taxes are withheld by the lottery commission in  the state of issue for both state and federal.  But as you bought the lottery payment, you DO have a cost basis.

In this case, Lottery payments purchased in your IRA will require your IRA to file for a refund in the State that issues the lottery.

Are There Carrier Fees?

While there are no fees to insurance companies, there may be minimal costs for payment servicing. Otherwise, SMA’s are What You See Is What You Get.

IRA custodians have fees, as laid out in their fee schedules.  How you choose determines the fees.

What about Custodian Fees?

There are generally no costs associated with receiving a check into your IRA from an SMA.  There may be some minimal costs for adding multiple IRA’s, depending on your custodian. All custodians, however, have some costs for disbursements, and depending on your case and intentions, we can help determine which is best for you.

Now, depending on what you direct your custodian to do with your IRA funds in terms of distributions, you may incur fees, as outlined in their fee schedule.  That’s not something we control and is at your discretion.

About Self Directed IRA’s

Self directed IRA’s are simply IRA’s held by a custodian that permits you to direct your own investments- you can chose to buy SMA’s, real estate, or any other sort of investment.  A self directed IRA custodian will not offer you investment advice- they just ensure the account is in compliance with the IRS.

By contrast, many IRA’s held by brokerages like Schwab or Fidelity let you pick from only a few Fidelity or Schwab mutual funds- they are restricted and captive, and may  offer traditional stock picking advice.  Read about self directed IRA’s here.

Best Cases For Qualified Funds

IRA’s are designed to offer tax deferral for investors saving for retirement…. and they are designed to be SPENT in retirement as well.  Most investors can’t touch the money in their IRA’s for a long time, and too often, people shoot for income contracts in an IRA and produce income (and return of principal) that they can’t take out.  Instead, take advantage of these deferred interest rates and consider deferred lump sum cases.

RMD Details

Holding SMA’s in a qualified vehicle requires the custodian to calculate the Required Minimum Distribution (RMD) each year.  Be aware that long term deferred SMA contracts in qualified vehicles for investors over 70.5 years of age may be subject to RMD’s yet not produce cash flow.  Advisors should be sure there is sufficient money for RMD’s when using deferred contracts in IRA’s