If you are paying for this advice your broker, CPA or attorney should not be making this statement.
Your Financial Advisor will naturally show skepticism when they realize that you want to move funds outside of their management. We have heard every excuse in the book from brokers:
If you set this up your IRA will be taxed.
Not true, the funds are transferred from custodian to custodian ensuring that the IRA is still qualified and there are no taxes due on the conversion
This company will run off with your money.
Not true, most companies that structure an IRA LLC wont even have access to your funds and simply charge a fee to facilitate the process.
Once again, the funds are transferred to a Trust Company or Bank, the likelihood that your life savings will be stolen is the likelihood that your local bank will steal it.
Brokers and financial advisors will typically attempt to keep your assets under their management and this becomes more and more obvious the more they talk.
Your CPA is most likely in business to file taxes. Your local attorney doesn’t specialize in IRA LLCs. These professionals usually won’t want to take the time and effort to study the tax code in depth and give you a straightforward answer for free.
To put you off you might be told…
- “That’s illegal”
- “Technically you can but it is frowned upon”
- “This is a loophole and the laws will change”
If you are told this is illegal, simply ask your professional where exactly that is stated in the tax code. They won’t find it. Actually, ask them where it is stated that you can buy a stock – they won’t find that either.
To tell you that this type of structure is frowned upon by the IRS or any other government is completely wrong. Nowhere is it ever indicated that the government doesn’t want you managing your own retirement account. To the contrary, there are many indications that the relevant arms of government are completely aware of this type of strategy and don’t “frown” upon it at all. There are other strategies that are more hidden than the IRA LLC that are being openly scrutinized, if the IRA LLC were in the same category it would be publicly stated.
To say that this is a loophole or grey area in the law is just a clear misunderstanding of the terms loophole or grey area. The definition of loophole is “a means or opportunity of evading a rule, law, etc.” The IRA LLC structure is directly in line with the purpose of an IRA and is in no way a strategy to evade the rules in the tax code. Grey areas are usually grey because the situation has not yet been vetted through the legal system. The IRA LLC structure has clearly been vetted through the courts and relevant authorities and is in no way a grey area. Unless the professionals telling you this are senators or high level officials, they can’t tell you with any certainty how the laws may change. If you believe IRA rules are going to change in the near future then NOW might be a great time to act.
The tax code has always granted these abilities, but most custodians have a vested interest in controlling your money and distributing the profits into their pockets, not yours.