A Checkbook IRA, also known as a Self-Directed IRA with Checkbook Control, gives the owner direct control over their retirement funds. It enables the IRA holder to make investments by simply writing a check. This structure gives you the freedom to invest in non-traditional assets like real estate, precious metals, private businesses, and more.
The steps to create a Checkbook IRA are as follows:
1. **Set up a Self-Directed IRA**: This is a type of IRA that is typically offered by specialized firms, known as self-directed IRA custodians. It’s necessary to find a custodian who allows for Checkbook IRAs. Make sure you do your due diligence to find a custodian who understands your needs and is well-rated. Once you’ve selected a custodian, you will need to complete the application process to open your self-directed IRA.
2. **Fund the Self-Directed IRA**: Once your self-directed IRA is set up, you will need to fund it. This can be done through a transfer, a rollover from an existing IRA, or a contribution. Your custodian will guide you through this process. It’s important to understand that there are limits to how much you can contribute to an IRA each year.
3. **Create an LLC (Limited Liability Company)**: The Checkbook IRA structure involves creating an LLC that is owned by the IRA and managed by the IRA holder. You can create the LLC in the state where you reside or in any other state that has favorable laws for your intended investments. You’ll need to obtain an EIN (Employer Identification Number) from the IRS for the LLC.
4. **Open a Checking Account for the LLC**: Once the LLC is set up, you will need to open a business checking account in the name of the LLC. This will be the account you will use to write checks for investments.
5. **Investment Directions to Custodian**: Once the checking account is open, instruct your custodian to invest your IRA funds into the LLC. Essentially, the IRA is buying a membership interest in the LLC. This is often done by writing a letter of direction to the custodian, specifying how much money you want to be invested in the LLC.
6. **Transfer Funds to the LLC Checking Account**: Once your custodian has received the instructions, they will wire your funds from the self-directed IRA to the new LLC checking account. Now your Checkbook IRA is funded and ready to go.
Not an endorsement – but this firm has great information on the setup process – https://www.checkbookira.com/check-book-ira-llc/setup-check-book-ira/