Benefits of Owning Multiple IRAs or HSAs

Multiple IRAs or HSAs: What are the Benefits?

Patricia McCrystal

September 18, 2015

Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs) are powerful tools investors can use to save and invest for retirement or qualified medical expenses, all on a tax-deferred basis. Many investors only open one IRA or one HSA account, not realizing they can open as many HSA and IRA accounts as they desire – and the potential benefits of doing so are nothing to overlook.

You can further the autonomy of your retirement account by opening a self-directed IRA or HSA. Self-directed accounts allow you to invest in nearly any asset you desire (with the exception of life insurance and collectibles). Self-directed IRAs or HSAs expand your investment horizons outside of the stock market and into any asset market in which you may already have knowledge and experience.

All HSAs and IRA account types have a yearly contribution limit that encompasses every IRA or HSA account you own; meaning your contribution limit remains the same regardless of how many accounts you open. However, there are strategic benefits to opening multiple retirement and HSA accounts. Multiple accounts allow you to maximize investment opportunities and diversify your retirement portfolio. Investing in more than one asset class provides autonomy from the potential volatility of any single asset market.

If it helps you to calculate potential returns for each asset, you may want to keep your assets in separate IRA accounts. Some investors prefer to open an IRA or HSA for every asset market in which they want to invest. Multiple IRA accounts can help you keep your assets organized in a way that makes sense to you. Additionally, if one or more of your IRA assets has more liability risk associated with it, your attorney may advise you to keep that asset in a separate IRA.

It’s logical to assume that multiple accounts would mean paying more in fees.  However, the reality is that each new account with New Direction only means a $50, one time fee to set up the new IRA.  In almost every case, the total fees thereafter are the same, whether you have one account or ten.

For instance, if you have an old 401(k) invested in publicly traded securities, you can keep some of the 401(k)  funds with its current provider, and open a self-directed IRA with New Direction to diversify and invest in alternative assets like real estate, private equity, or both – the combinations are limitless.

For HSAs, a tactic some investors may prefer is owning a “liquid” HSA with the amount of money he or she feels comfortable with, in the event of a medical emergency. With the money over and above the “liquid” contingency, investors can open one or more self-directed HSA accounts to invest in specific asset markets for long-term returns on a tax-deferred basis; thereby creating money for a lifetime’s medical expenses. Investors may have an HSA invested in stocks and bonds, and other accounts invested in precious metals or private lending; among many other asset options.

To learn more about opening self-directed IRA and HSA accounts, feel free to call New Direction or visit us online at www.ndira.com. 

New 5498 Reporting: What does it mean for my IRA’s private loans?

Patricia McCrystal

August 25 2015

IRA holders are facing a new change in asset reporting for the 2015 tax year. IRS form 5498, which IRA providers use to report the value of your account, includes new Boxes 15a and 15b, which require IRA administrators to categorize the values of the assets within their clients’ IRA accounts. This includes a category that delineates the value of private loans extended with IRA account funds (15b).

Prior to the 2014 tax year, Box 15 didn’t exist, and IRA account holders only had to report the overall value of their IRA or qualified retirement plan. Box 15 appeared on IRS form 5498 in 2014, but reporting within the box was optional. For the 2015 tax year, the IRS is actively taking steps to enforce requirements for hard-to-value IRA assets. This means the IRS will have a more differentiated system for identifying which IRA accounts possess hard-to-value assets; not to mention a heightened ability to target certain investment structures in which prohibited transactions can often occur, such as Checkbook Control IRAs/ Individual LLCs.

Code B of Box 15b. requires the reporting of “Short or long-term debt obligation that is not traded on an established securities market”. This is essentially asking for a valuation of all notes and private loans within your IRA. Every asset in your IRA has a generally accepted process for valuation; original, purchased, and secondary market notes included.. The value of a private loan is determined by more than just the amount of money lent – there are three factors which contribute to the valuing a private loan in an IRA: 1. Original loan amount, 2. Interest rate, and 3. Length of term.

Theoretically, the value of a note fluctuates everyday due to inflation and the risk associated with the loan’s repayment. A private loan’s value is also dependent on the lender’s risk tolerance, as defined within the loan’s agreed-upon interest rate and maturity date.

The creation of Box 15 may mean the chances of your IRA getting audited by the IRS could increase. IRA account holders will have to be more meticulous than ever in their IRA transaction proceedings. So what can you do to make sure you and your IRA account are ready for IRS scrutiny should they choose to audit your account?

It requires a joint effort between the IRA account holder and the IRA administrator to keep account proceedings within the bounds of IRS rules and regulations. IRA administrators that provide educational services to their clients make it easier for account holders to exercise due diligence when making investment decisions. Choose a credible IRA administrator with a reliable track record and an educational business model to confidently make knowledgeable decisions about your IRA account proceedings. To learn more about self-directed IRAs, feel free to visit New Direction IRA’s website at www.ndira.com for educational videos, webinars, and more.

Gold and Silver with an IRA Custodian vs. IRA LLC Home Storage

What’s the Real Difference?

Patricia McCrystal
Louisville, CO, August 10th 2015 – Here at New Direction IRA, we make it a priority to empower our clients with unbiased information about their investment choices so they can make knowledgeable investment decisions. If you have a self-directed IRA account with New Direction IRA, you’re more than likely already aware of your ability to invest in gold, silver, and other precious metals with your IRA funds. However, as more companies promote the idea of storing gold and silver at home with an IRA LLC (or in a local safe deposit box), we’d like to highlight the differences between storing precious metals at a depository via an IRA provider, and storing precious metals at home with an IRA LLC. 

Companies that endorse the idea of home storage don’t always paint the whole picture regarding benefits, risks, and rules of at-home storage vs. utilizing a depository that specializes in precious metals storage through the IRA administrator. These companies usually refer you to your own legal counsel for advice on the process.

You can rely on New Direction to communicate the relatively unknown details about at-home metals storage that you need to make a fully informed decision about your precious metals IRA.

IRA/LLC program:
•  The IRS is notified annually that your IRA owns the LLC.
•  Metals investment choices are severely limited.  No metals other than US minted Eagles
•  The IRA owner must supply the IRA provider with third party confirmation of the value of the LLC including any metals and any cash it owns.
•  Insurance for home stored metals is unattainable at any reasonable price.
•  Safe Deposit box storage is not insured by the bank and although insurance is available from select vendors, it is expensive. (ex: $100K  = $200/yr  $50K = $110, $20K = $75)
•  The metals still belong to the IRA, not to you, so you must avoid any prohibited transactions with them otherwise your IRA is at risk. An example of this would be pledging the metals for a personal loan or taking personal ownership of the metals directly.
•  Distributions of metals or other assets owned by the LLC must go first to the IRA provider to be reported to the IRS.
•  Providing storage space for the LLC assets at your personal residence, in your personal safe, in your personal back yard, may be a prohibited transaction.
•  The LLC must have a business bank account which may have monthly fees.
•  Bank safe deposit boxes cost between $15 to $65 per year or more.  Keep in mind that silver eagles take much more space per $.
•  IRA provider annual fees for LLCs are often higher than for direct metals ownership.
•  Bookkeeping for the LLC must be maintained by the IRA owner.
•  Annual reporting and state filing fees may be required for the LLC.
•  LLC set up and legal fees are required.
•  If the IRS asserts that a prohibited transaction occurred, the burden of proof is on the taxpayer to ensure that the IRA holder did not receive a personal benefit.  In tax court you are presumed guilty until you prove otherwise.
•  Personally-held metals are likely subject to a higher level of due diligence from buyers as there is no documentation of “chain of possession” ensuring that the metals have not been tampered with and may reduce the resale value of some metals.

IRA Direct Ownership:
•  The IRA provider does not alert the IRS that your IRA owns metals.
•  You may invest in any allowed metals.
•  You pick from a selection of depository companies specializing in holding metals.
•  You may take distribution of or sell the metals at any time.
•  You do not need to supply the IRA provider annual confirmation of the value as this is done automatically by the IRA provider.
•  Insurance is included in the depository fee for any metals stored.
•  There is practically no possibility of you having a prohibited transaction. 
•  Banking accounts and bookkeeping is included in IRA provider fees.
•  IRA providers often have lower annual IRA fees for metals than any other asset.
•  Depositories offer either specific item storage or commingled storage at your option.
•  There is no state reporting required by you.
•  No LLC creation fees or legal fee is needed.
•  IRA can be established and ready to make a purchase significantly faster.

Although the idea of having your IRA’s precious metal sitting on your kitchen table may sound appealing, most of our clients realize that holding their IRA’s metals with a professional administrator is the option with lower stress, lower hassle, and lower risks.
For many investment strategies, there are multiple factors in play when making the best choice. Education about IRS rules and regulations is critical to making knowledgeable IRA investment decisions.

For New Direction account holders, our numerous educational programs and materials provide the best information in the industry. Use this chart as a quick reference guide to compare the risks, costs, and responsibilities of direct IRA ownership verses IRA LLC home storage of your precious metals assets. For more information on New Direction's Precious Metals IRA and IRA/LLC options, please visit our gold IRA website, and as always, happy investing!

New Direction CEO Makes Waves with Lawline.com IRA Courses

Patricia McCrystal

July 10th, 2015

Bill Humphrey

If you are looking for continuing education courses that provide a clear and direct run down of investment options within a self-directed IRA, make it a priority to view Bill Humphrey and Bradley Burnett’s IRA related courses on Lawline.com. These courses run the gamut for IRA related information – from insider knowledge about current IRA investing trends, to the ins-and-outs of Unrelated Business Income Tax – Humphrey and Burnett make IRA education smooth and simple, without skimping out on any important details.

Bill Humphrey is an experienced Certified Public Accountant who has specialized in tax-related property issues and forensic accounting over the past 20 years. He is the Co-founder and CEO of New Direction IRA, leading provider of investor education and administrative services for retirement accounts and HSAs for over 13 years.

Bradley Burnett, J.D., LL.M., is a practicing tax attorney in Denver, Colorado, with 32 years of tax practice experience. His practice emphasis is on tax planning and tax controversy resolution. Bradly has been the top rated and most requested instructor for the Kansas Society of CPAs annual tax conference.

Regarding how accessible and engaging these courses are for the average viewer, the proof is in the pudding: according to Lawline.com, each course was rated above the 90th percentile by reviewers. These ratings come as little surprise, considering New Direction IRA boasts an education-based business model that empowers clients to make knowledgeable decisions about their self-directed IRA investments. What’s more is Burnett and Humphrey can customize courses for any reader’s office, in addition to offering CPA and RE professional courses. You can find the CPA courses at AMICPE.com.

The ratings for the courses in terms of viewers who said they would recommend the course to others breaks down as follows: 269 out of 286 viewers recommend "Self-Directed IRAs: The Fastest Growing Segment of Retirement Investing", 117 out of 123 viewers recommend "Case Studies: What Self-Directed IRAs are Doing Now", 173 out of 178 viewers recommend "Unrelated Business Income Tax", and 116 out of 120 viewers recommend "Checkbook Control IRA: Handle with Care".

In order to view these courses, all interested persons will need a Lawline.com subscription, or need to pay per course through Lawline.com. To take advantage of free educational resources, you and your clients can visit New Direction.com today to access specialized material and informational videos about every type of IRA and IRA investment available through your self-directed IRA.

Secured or Unsecured Promissory Notes and Private Lending

Secured or Unsecured Promissory Notes: Due Diligence and Private Investing

If you’re looking to use your self-directed IRA to invest in a private lending opportunity, it’s important to understand the difference between a secured and an unsecured promissory note before sealing the deal.

Patricia McCrystal

July 10th, 2015

Your best friend from college, a stay at home dad, has decided to pick up a new hobby that will help him generate additional income for his growing family. After he and his wife remodeled and sold their first home for a sizable profit, your friend has decided to try his hand as a novice real estate fix-and-flipper. You've talked to your friend in the past about wanting to invest your self-directed IRA account into an alternative asset - something more concrete than just stocks and bonds. Now he’s approached you to ask if you’d be willing to invest in his next real estate fix-and-flip project. He already owns the house, but he’s asking you to finance the remodeling of the property.

Before you agree to use your self-directed IRA account to loan him the money, you have to decide whether to request a secured or unsecured promissory note from your friend. A promissory note is a written, signed, and dated contract that establishes the rights and duties of the parties involved in the loan agreement. The loan recipient agrees to pay a certain amount of money either on demand, at a specified time, or in installments to the lender. The amount due may include interest on the note’s unpaid principal amount.

A secured note is any debt secured by real property. This could include a first deed of trust, a vehicle title, or a certificate of deposit. An unsecured note is any note that is uncollateralized. You trust your friend will repay the loan; you’ve known him a long time and don’t think he would take advantage of your generosity. You don’t want to undermine your relationship by requesting a secured note.

However, your friend does have some outstanding student loans from college that he still hasn’t paid off; not to mention his wife is expecting another baby before the end of the year. You’re afraid that without some form of collateral, he may run into financial trouble, and you’ll have to accept a loss on the loan.

When considering a private lending opportunity with self-directed IRA account, every investor should exercise two types of due diligence. First, is the investment viable? Meaning, what will be the estimated rate of return, and does the investment make financial sense? Will this investment produce a significant cash flow for your IRA account? Secondly, is this investment a scam? Is it being proposed by a reputable and non-fraudulent source? Although you want to expand your IRA’s investment opportunities and you want to help your friend with his fix-and-flip project, it’s important to acknowledge possible drawbacks and faulty dealings with every investment opportunity.

Before extending a private loan, every investor should “do the numbers” for the deal. Understand how to determine whether you are about to engage in a good or bad investment. How does the estimated cash flow of this investment compare with other opportunities? What is your personal risk tolerance?

With real estate, factors to evaluate may include physical inspections of the property, title company and insurance (make sure the person selling the property is the full legal owner), quality of neighbors, cost of utilities, HOA fees, property insurance, rental history & market rents (including surrounding properties), generating your own expenses (time and energy spent doing research on the property), among many other factors.

Due diligence is not a perfect formula. You may exercise extreme vigilance before evaluating an investment opportunity and still get taken advantage of – by a scam artist, or a well-meaning friend. Determining whether you want a secured or unsecured note from your loan recipient is completely up to you. However, a secured promissory note guarantees you won’t be left completely empty handed if your loan recipient gets himself into financial trouble – or if his wife has twins!

Expenses to Pay? Make Sure it Stays in Your IRA

Patricia McCrystal
June 25th 2015

If you're the type of active investor who prefers to stay engaged with the oversight of your investments, you are likely already well-versed in the wide array of investment opportunities available through a self-directed Individual Retirement Arrangement. Contrary to common belief, your IRA account has almost limitless investing potential - providing the asset and your management methodology align with IRS guidelines.

Despite your investment savvy, when it comes time to pay the piper for your IRA expenses, including custodial services for those assets, you may have a few questions about what the process looks like. Can you as the IRA account holder finance the expenses of your retirement plan with your own personal funds? What about collecting income – do you as the IRA owner get to handle any of your hard-earned capital gain?

The fact of the matter is, your IRA is a completely separate legal entity from you, the IRA account owner. Consequently, financing the expenses of your IRA account and collecting income from your IRA’s investments must all be done through your IRA, not through the account of any disqualified persons – yourself included.

Nick Snapp, Client Representative at New Direction IRA, explains that the details of this process are fairly intuitive, as long as you understand the basic tenants of an IRA, “Although an IRA may be owned by a client, it’s helpful to look at it as a sovereign entity. The reason IRA administrators like New Direction exist is because the IRS wants to keep IRA owners at an arm’s length from their IRA investments.”

“Because an IRA is its own legal entity, any money that is earned through its investments or owed for its expenses must flow through IRA funds themselves. As far as making this process as painless as possible, New Direction has a leg up on its competitors because of our Online Bill Pay.”

New Direction IRA is paving the way in technologically advanced payment processes for self-directed IRA administrators. NDIRA has created an online bill payment environment that saves clients time and money. This unique feature allows clients to submit expense payments through myDirection.com, and reduce processing time down to only one business day. There are also no additional check fees to this process.

“Another benefit of the Online Bill Pay feature is clients’ ability to view their payment throughout the entire process. The feature works kind of like a bank account. Clients also have direct access to their funds. They can request a check for emergencies and receive it between 1 and 3 business days.”

To learn more about New Direction’s quick and efficient Online Bill Pay feature, click here. 

Remember, you and your IRA account are friends, not carbon copies. Your IRA’s profits and expenses must be managed through your IRA alone – a provision that allows you to bask in the tax benefits that IRA accounts have to offer!