FAQs

• What investments can I make through my self-directed IRA/401k?

• Isn’t buying and selling real estate within an IRA illegal?

• How do I use my current 401(k) plan to invest in real estate?

• How do I use funds in an old 401(k) plan to invest on a tax deferred basis?

• Can I invest in property that either I or my company already owns or has a substantial ownership interest?

• Will I be affected by Unrelated Business Income Tax (UBIT)?

• How do I get started?

• Is there a minimum amount to open an account?

• I currently have an IRA at a bank/brokerage firm. Do I have to transfer all of the funds into my new self-directed IRA?

• How do I rollover or transfer funds into a self-directed IRA?

• How long does it take to set up a self-directed IRA?

• If I open a self-directed IRA, administered by Chicago Trust Administration Services, LLC., what are the roles of Chicago Trust Administration Services and the custodian bank, UNATCO/First Midwest Bank?

• Who takes receipt of my assets, i.e., executed note, recorded trust deed, etc.?

• What happens to my uninvested funds?

What investments can I make through my self-directed IRA/401k?

There are currently thirty-eight (38) IRS approved asset classes. Nearly all types of investments are open for consideration with the exception of life insurance and collectibles. Investing with your tax deferred (or tax free with Roth IRA’s) self-directed retirement plan is considered advantageous by many clients. Please consult with your tax, investment and legal advisors when making these decisions.

Isn’t buying and selling real estate within an IRA illegal?

No. The IRA and Department of Labor does not publish a list of legal investments. Instead they provide non-permitted or prohibited transactions and disqualified persons. For example, collectibles are not permitted, while real estate investments are permitted (provided rules and guidelines are followed). Section 4975 of the Internal Revenue Code provides additional information on prohibited transactions.

How do I use my current 401(k) plan to invest in real estate?

Although many 401(k) plans have historically not allowed for self-direction, that trend is changing. Check with your plan administrator or benefits department to determine options available for self-direction.

How do I use funds in an old 401(k) plan to invest on a tax deferred basis?

Funds from an old 401(k) or qualified plan may be “rolled over” into a Traditional Self-Directed IRA. Start by contacting your old employers’ Plan Administrator or benefits department to determine which specific forms and procedures are required. It is important, for taxation purposes, that the funds be “rolled over” and not taken as a “distribution”. Some plans require that old 401(k) assets, such as stocks, be transferred “in kind”. Please contact us for specific forms, procedures and requirements for “in kind” transfers.

Can I invest in property that either I or my company already owns or has a substantial ownership interest?

No. This is a prohibited transaction under the IRS Code. You are receiving, either directly or indirectly, a personal benefit from an investment made with your IRA/401(k) (or other self-directed retirement plan). A prohibited transaction incurs a 100% tax, as well as a 15% tax penalty on the amount of the transaction (if not corrected within the taxable period).

Will I be affected by Unrelated Business Income Tax (UBIT)?

Properties owned by an IRA that have been debt financed may be subject to UBIT, provided there is a net gain of $1000 in a year. UBIT also comes into play when an IRA owned property that has existing debt financing is sold. IRS Form 990-T needs to be prepared. Please consult your accountant, attorney or tax specialist regarding your specific situation.

How do I get started?

Once your self-directed IRA or other qualified retirement plan is established, you are ready to transfer/roll over funds/assets or make contributions. Funds are available for immediate use once the assets are in your self-directed account.

Is there a minimum amount to open an account?

We require a minimum of $2500.00 to open and maintain your account. Amounts above this figure should be sufficient to cover the costs of your self-directed investment along with any additional administrative fees.

I currently have an IRA at a bank/brokerage firm. Do I have to transfer all of the funds into my new self-directed IRA?

No you do not. You may transfer only those funds needed for the investment into your new self-directed IRA. The IRS permits you to have multiple IRA’s with more than one custodian.

How do I rollover or transfer funds into a self-directed IRA?

Please send a completed “CTAS Account Transfer Request” form along with a copy of your Drivers License. Please include a copy of the last statement of the account from where your funds are being transferred or rolled over. Your account may be opened by fax or email, however the original, signed “Account Transfer Request” is required before the previous custodian will release funds for your new self-directed account.

How long does it take to set up a self-directed IRA?

Upon receipt of your completed application your account will be set up in one to two business days. Typically, assets from the old account are received within 2 weeks. This time may vary depending upon the type of asset being transferred. For instance, transfer of non-cash assets may take longer than two weeks.

If I open a self-directed IRA, administered by Chicago Trust Administration Services, LLC., what are the roles of Chicago Trust Administration Services and the custodian bank, UNATCO/First Midwest Bank?

Chicago Trust Administration Services. (CTAS) is a third party administrator. CTAS does not sell investment products or give investment advice. CTAS has an agreement with the custodial bank for their services. CTAS contracts with you, the IRA holder, for our services. These agreements define the responsibilities of the custodial bank, CTAS, and the IRA holder. CTAS processes the paperwork for each transaction. It is our responsibility, as the administrator to operate within current IRS regulations affecting IRA’s. The custodial bank, as the legal owner, holds the assets for the benefit of the IRA holder.  The custodial bank produces quarterly statements and prepares annual IRS reports. The custodial bank requires authorization from a CTAS representative and you, the IRA holder, to process transactions.

Who takes receipt of my assets, i.e., executed note, recorded trust deed, etc.?

Our custodial bank, UNATCO/First Midwest Bank, holds all original documents in their safekeeping at the bank.

What happens to my uninvested funds?

Uninvested funds that remain in your self-directed IRA/401(k) account will be held in an FDIC insured account with First Midwest Bank.