Industry experts coined the term “Checkbook IRA” to describe a type of Self-Directed Individual Retirement Arrangement (IRA) which allows retirement account holders to make investments on behalf of the retirement plan simply by writing a check.
The emphasis on “checkbook control” is intended to differentiate a “Self-directed IRA” that is controlled by a Custodian (acting on behalf of the account holder) and a Self-directed IRA that gives the account holder the power to execute an investment transaction through check signing authority.
The Limited Liability Company (LLC)
Check writing ability is a result of setting up a special purpose LLC designed to hold the IRA funds in a local bank account controlled by the Manager of the LLC. Typically, this Manager is also the account holder, but not always. It simply depends on the desire of the account holder as he has authority to appoint anyone to be the Manager.
In addition to instant access to funds, the LLC also offers liability protection to the assets held within this structure.
What is the Role of the Custodian With a ‘Checkbook’ IRA Plan?
While the Checkbook IRA structure offers superior functionality for a retirement investor, it still must maintain a registered Custodian. But, with this type of plan, the only asset being held at the custodial level is the investment into the special purpose LLC. Therefore, custodial participation and fees are held to a bare minimum.
Very few investors know about the Checkbook IRA, since larger brokerage companies on Wall Street and other Custodians and Trustees, would rather manage the retirement accounts and earn large fees and commissions.
Investment Assets That Can Be Held in a Checkbook IRA
- Residential and commercial properties
- Raw Land
- FOREX Trading Accounts
- Private Company Stock
- Tax Liens and Notes
- Commodities
- Equipment leasing
- and much more.
