Entrust Freedom

Real Estate IRA Investing by Dan Fisher of Entrust Freedom, LLC

2010-02-22T07:57:00.000-08:00

At Entrust Freedom one of our most popular investment choices is Real Estate, and why shouldn’t it be? Real estate prices have dropped by more than 50% in some parts of the country. We are seeing more and more clients take full advantage of this great opportunity to purchase properties and land that they would not have been able to afford otherwise. With the credit markets being as tight as they are, using a Real Estate IRA to purchase land and property is an excellent alternative way to fund their investment.
In the last several months I have seen several clients open new IRA accounts to specifically purchase a piece of real estate. The clients have had some light work done on the properties financed through their IRA, turn around and sell the property for a profit. I have truly been astounded by some of the profit margins our clients are receiving from their real estate investments. All profits are returned to the IRA tax free!
I have also seen many clients purchase pieces of land or property with the intentions of holding the asset as a long term investment. Whether it be for the purposes of holding vacant land or holding rental property all gains or income received are tax free. With rental property, all checks are deposited back into the IRA. When the property is sold, all proceeds go back into the IRA tax free.
This is in no way a recommendation or a sales pitch. All of our clients are required to do their own research and follow all IRS guidelines. Not all investments are going to work out like the ones previously mentioned. That is why it is crucial to do your homework and make sure that this type of investment is for you. In doing your research you may discover that a Real Estate IRA is not the best decision for you, but fear not, with the hundreds of different types of investment options that you can take advantage, you’re sure to find the right investment for you. In many cases our clients are following one of the golden rules of investing, “invest in what you know.” The clients I am speaking of knew real estate very well and were able to capitalize on their investment decisions. Don’t miss out on any opportunities to make money with tax free gains, call Entrust today!

Secured Promissory Notes

2010-02-05T12:53:00.000-08:00

At Entrust Freedom LLC, our clients have the freedom to choose their own investments. Many investors are catching on to the idea of being able to invest their money in assets they actually understand. If you are a Real Estate professional, would you rather invest your retirement strictly in products that your broker tells you to invest in or would you prefer to invest in an asset you are familiar with such as Real Estate?

As the Transaction Specialist at Entrust Freedom, I have the opportunity to see how each one of our clients is investing their retirement funds. As I look back over client’s recent transactions, one investment I processed for a client stands out. This client chose to invest in a secured promissory note. In other words, this client loaned money through his IRA to an individual and this loan was secured by a parcel of Real Estate. Through his own research, the client determined the parcel of Real Estate was undervalued and decided to extend a loan to the borrower whose intention was to flip the property.

In order to remain in compliance, Promissory Notes are not allowed to violate state usury laws (i.e. loan sharking). The client structured the Secured Promissory Note as repayment of principal plus 50% of the profit from the sale of the Real Estate. Within a few months, the property was sold and a handsome gain was realized in the IRA. As I look at this transaction in further detail, I realized the client had truly done his homework. Clearly he believed that there is plenty of arbitrage opportunity in the Real Estate market. Secondly, he was knowledgeable about the loan to value (LTV) ratio on the property. Finally, he truly maximized the concept of holding period return.

There's Gold in those Hills!

2010-01-25T13:56:00.000-08:00

In the current turbulent economic climate we find ourselves in, it can be hard to find any investments for your IRA that have been consistently stable. The stock market has dropped over 40% since 2008. It regained some of those losses over the last two months only to see them all but erased in the last week. The housing market has been devastated and is not projected to recover for years. The one investment that has not only held its value but seen significant growth is Gold. During the peak of the economic boom in 2007 gold was priced between $600-$700. Today, in the midst of the worst economic crisis in 50 years gold is trading over $1,000. Gold gained over 30% and the stock market dropped almost 40% in the same time period.
IRA’s are meant to protect your money and keep it safe for retirement years. Gold equals wealth in every country, isn’t tied to any currency, is considered to protect against inflation and deflationary pressures, and therefore could preserve your wealth for years to come. Gold is up over 30% percent over the pat 3 years. Over the past 5 years gold is up almost 60%, in the last 40 years gold has seen an increase of over $1,000/ounce. Gold offers safety, growth, and retained earning power. Gold has proven to be a safe haven for investors during these challenging economic times.
Brokers and investors alike have often criticized investing in gold within an IRA because it is not an income producing asset. What they fail to realize is that over time gold has shown tremendous growth, and in the end you want your IRA money to be there when you retire, not before. Preserve and grow your retirement funds during this down economy, don’t’ lose it. Contact Entrust today and learn how fast and easy it is to purchase gold within your IRA.
While there are some strong upsides to gold, it is important to realize that gold IRA investments are not for everyone. The value of gold can increase or decrease just like a stock or bond, so make sure to contact your financial advisor or CPA to make sure this is the right investment for you and your IRA.
Entrust Freedom, LLC does not promote, endorse or offer any investments. Entrust Southwest Florida does not offer investment, tax, financial or legal advice to clients. Individuals who believe they need advice should consult with the appropriate professional(s) licensed in that area. This website is devoted to providing clients and potential clients with educational information regarding self-directed accounts and possible investment scenarios. It is in no way intended as investment advice.

The Real Value of your Money

2009-12-30T13:25:00.000-08:00

I came across an interesting article today titled: “Why does money have value”? Many may take the question for granted, but it is a completely valid inquiry. What makes this piece of paper that we hold so valuable (or perhaps not so valuable in recent times)? The answer is: money does not, itself actually have any value. What makes paper money so coveted is that it can be exchanged for physical properties that do have real value. For example, money can be exchanged for a house to give you shelter, or even food to keep you alive. So, what would happen if we could no longer exchange our currency for anything?
Americans all across the country would certainly be devastated. While I am not at all implying that I have the foresight to predict such an occurrence, and I am certainly not a pessimist, I have noticed how serious investors are taking this dilemma. Our clients, in particular are buying gold at unprecedented rates. Not even the soaring of gold prices in the past couple months have had a negative effect on the rate at which clients are buying.
The goal of adding physical goal into one’s portfolio is clearly to hedge against potential inflation. Americans wouldn’t know anything about inflation though. I mean, gas prices have only risen by 77% over the past six years. Meanwhile, a specific amount of gold can still buy about as much as it could six years ago. I am not an investment advisor, and do not have a recommendation on whether or not to buy gold, but I can say that I understand the methodology of investors that are buying gold. Furthermore, I definitely see why investors are using their IRA’s as a means to purchase gold. Remember, all earnings within an IRA grow tax free. The client only pays taxes when they make contributions to their IRA or when they take cash or physical assets out of the account. This article is for discussion and educational purposes only, and in no way is intended as advice. Always be sure to contact the appropriate professionals if you need investment, tax, or legal advice. If you need more information on precious metals IRA’s, feel free to contact me at 866-839-0429 or austin@entrustfreedom.com.

Gold Reaches an All-Time High and IRA Investors are Responding

2009-11-12T13:11:00.000-08:00

On consecutive days this week, the price of gold has climbed to record levels. On Wednesday, November 11th, the price per ounce had risen to $1117.05. This may have been what many of our clients were expecting when they opened up precious metals IRA accounts with our office over the past several months. With the dollar in such a decline, many investors have been on the lookout for physical assets like gold to rise substantially. While many of our clients have cited the purchase of precious metals in their IRA as a hedge, I am not hearing any complaints about the gains.
With more and more people becoming educated about the IRS allowing gold in an IRA, we are really seeing quite a spike in the number of new precious metals IRA accounts. I can’t help but be a little surprised that it has taken until recently for this type of IRA to really take off. The fact is, individuals have been allowed to invest their IRA’s into precious metals beginning in 1986. The problem is that many investors are led to believe that this is not a possibility, or is simply not a good route to take; usually this is by their stock broker or financial representative. This can typically be attributed to those professionals having a conflict of interest with their clients sending their funds to an investment they do not sell.
Our clients are more of the mind that they can make the best decisions for their own accounts, and to that respect, there are plenty that are buying gold and other precious metals. We do not have any conflict of interest here at Entrust, as we neither sell any endorsements, nor do we endorse any specific investment type. We do, however, offer plenty of education on allowable IRA investments, as well as how the process works. Those looking into precious metals IRA’s or other self-directed investments are welcome to join us for one of our free webinars by going to www.entrustfreedom.com. You may also call us to speak to one of our qualified representatives at 239-333-1031.

Socially Responsible Investing

2009-11-09T06:36:00.001-08:00

Did you ever think it was possible to make money while helping to preserve the environment? Socially responsible investing describes an investment strategy that seeks to maximize both financial return and social good. Preservation of our natural resources is an important agenda for many investors who remain conscious of their environment. So how can you be a socially responsible investor?

Investing in timberland allows for maximization of both financial return and social good. Many people view harvesting timber as detrimental to the environment. However, investments in timberland strive for preservation of the land to keep the renewable resource abundant. In fact, annual timber harvest plans are derived from existing forest resource management plans, which are based on long-term forest management goals.

A timberland investor has various options when considering the purchase of a tract of timberland. What type of timber, what age to harvest, and what age of timber at purchase are several options an investor needs to review. A consulting forester or knowledgeable Realtor can advise investors when making these critical decisions.

Purchasing timberland with IRA funds can provide investors with tax-free earnings when the timber is harvested. Additionally, investors can avoid capital gains taxes when they sell the tract of timberland at a later date. Unfortunately, many IRA custodians limit your investments to products their firm sells. However, a self-directed IRA allows for investments in non-traditional assets such as timberland.

With a self direct IRA from Entrust Freedom, you'll get true freedom and control of your retirement account. A self-directed individual retirement account allows you to invest your IRA in real estate, notes, limited partnerships, private placements and more. You control the future of your retirement funds and we do the paperwork!

Find out about the amazing tax advantages of a self-directed IRA! Entrust’s website offers information on self-directed IRAs, real estate IRAs, traditional individual retirement accounts, Roth IRAs , 401Ks, SEP IRAs, IRA rollovers, and more.

Please visit www.EntrustFreedom.com for more information.

2009-11-06T09:22:00.000-08:00

Theresa Knower of Entrust Freedom, with offices in Fort Myers and Gainesville Florida, has recently obtained the prestigious CES Designation. CES stands for "Certified Exchange Specialist", and refers to the specific IRS tax code that allows individuals to avoid paying capital gains taxes when selling real estate and trading into a property of greater value. It is worth noting that this accomplishment makes Theresa one of only two professionals in the SWFL with a CES Designation. The other individual is our managing member, Dave Owens. Even with larger growth in the third quarter of 2009 than any other period since the 2005 real estate boom, Entrust Freedom continues to stay on the cutting edge of the industry, allowing clients to keep up to date on the most recent trends in tax strategies and retirement investing.

Tips For Those Struggling in Economic Downturn

2009-10-17T07:42:00.000-07:00

You don’t have to look far these days to find someone who is struggling to make ends-meat. If you aren’t one of the unlucky ones yourself, everyone knows a friend or family member that has lost a job recently. This article is designed to offer potential suggestions, related to retirement funds, to help those in need.
Did you know there are several ways you can pull money from your IRA without having to pay the 10% IRS penalty for being under 59.5 years old? Unless it is a ROTH IRA, you still have to pay ordinary income taxes on the distribution, but can forgo any penalties. We will look at each of these options.
Most people do not realize that they can pull funds from an IRA (without penalty) to pay medical insurance for themselves, their spouse, or their children. To qualify, all of the following conditions must apply.
-They lost their job
-They received unemployment compensation paid under any federal or state law for 12 consecutive weeks because they lost their job
-The distributions must be made during either the year the unemployment compensation was made or the following year.
-The distributions are received no later than 60 days after they are reemployed.
The above example was for people who need to pay for medical insurance. However, other distributions (without penalty) can be made if you…
-are disabled
-are a first time home buyer (maximum limit of $10,000)
-are using the distribution to pay for higher education expenses for yourself or family
-are a qualified reservist (had military active duty after 9-11-01 for more than 179 days)
- have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income

Real Estate & IRAs Go Hand in Hand

2009-10-08T05:55:00.000-07:00

I have seen an influx in the number of clients who are using their IRAs to purchase real estate. Many of them are purchasing multiple properties. While I certainly wish that our economic condition was in a better state, I have to say that I am glad to see that people are able to purchase properties at affordable prices. I had a client purchase waterfront property for $40,000.00. Another client purchased a house for $20,000.00. People who once thought that they could never own a piece of paradise (yes, most people would say that SWFL is a paradise) are now able to do so. I literally get several Buy Directions every day, all of which are real estate purchases with a Self-Directed IRA. The popular opinion of our clients is that they can’t believe what a great deal they got, and that they were able to use their IRA to purchase it. They, like so many other investors, have grown somewhat disheartened with the stock market. Our clients were ready for a change, and they were ready to invest in what they knew best. Any income that is generated from the property goes right into the IRA. Any expenses come directly out of the IRA. Not to mention, they love the amount of control that they have with how and where the funds are invested. It is that simple. Building wealth for retirement has never been so easy! If you would like to know more about how you can use your IRA to purchase real estate, give us a call at (239)333-1031. We would be more than happy to answer any questions that you might have. For more information on our services, visit us at www.entrustfreedom.com.

Written by Theresa Knower, Theresa is the Real Estate Transaction Manager at Entrust Freedom with over 10 years experience. Theresa is an expert at 1031 Exchanges, please feel free to contact her at theresa@entrustfreedom.com or 239-333-1031 x207.

Real Estate IRA's: Two Unique Ways to Benefit

2009-09-24T06:09:00.000-07:00

There is a growing trend in the real estate business, and it is one that can not only be beneficial to the real estate investor, but also to those working in the profession. This trend is using a self-directed IRA to fund real estate purchases. Now, why haven’t many people heard of this? The reason is that there are only a few custodians in the nation that will administer a real estate transaction involving IRA funds. Entrust is one of these few custodians, and the only one with local offices nationwide.
The main benefit of using IRA funds to purchase real estate from an investor’s perspective is tax savings. All earning from the transaction grow in the retirement account tax free. Also, individuals can receive tax deductions for contributions made to an IRA. The exception to being able to deduct one’s IRA contributions would come via the Roth IRA; however, the Roth has its own tax advantages. Specifically, all contributions made to a Roth IRA are taxed up front, thus never being taxed again, and therefore able to grow tax-free forever. Also, since the Roth has already been taxed when the contribution is made, there is no minimum required age to take distributions, thus allowing the compounding effects to take place for a longer period of time. If you study compounding, you will know that this is especially important when the account reaches higher balances.
In addition, it is notable to know that the investor can use many types of IRAs to invest in real estate. These include a Simple, SEP, Traditional, Roth, and Individual 401(k). There is also a variety of real estate investments that can be purchased with an IRA. This umbrella consists of single family and multi-unit homes, apartments, condominiums, improved or unimproved land, mortgages, foreign property investment, and trust deeds.
The second group of individuals that can benefit from real estate IRAs is real estate professionals. The primary gain for real estate professionals is that IRAs can open up a new source of funds for their clients to invest with. Among the best ways for real estate professionals to market to their clients is through publications, newsletters, and even blogs (Entrust can write an article catered to your specific business). An even more effective way is to have a representative from Entrust speak at a private seminar for your staff and clients.
Why may self-direction be right for you personally? You may want to invest in what you know best. Some people are tired of relying on such a volatile stock market for their only means of retirement investing. By investing in real estate, you can truly diversify your own retirement account.
With Entrust as the administrator of real estate IRA’s, it is easy and tax free! We have local offices all over the United States and would be glad to assist you or your clients with your own unique situations. Please feel free to contact us for more information on taking the next steps. Contact Entrust at 352-378-7833 (Gainesville) or 866-839-0429 toll free with any questions!

Gold Purchases in IRAs are Popping

2009-09-10T05:59:00.000-07:00

This week gold prices closed above $1,000 per ounce for the first time in seven months. Commodities traders are screaming the market is overvalued and investors are weary of governments spending that will cause inflation to rise. The weak US Dollar is scaring many investors to look for alternatives. Prudent investors are looking for a stable investment to park their money. Gold and other precious metals appear to be one solution.

Entrust, the Nation’s largest we have seen a Self-directed IRA administrator has seen a surge in the number of IRA accounts investing in gold bars. Brandon Hall, Director of Operations at Entrust Freedom in Florida states, in the last 9 month we have seen a 300% increase in the number of IRA accounts opened to hold gold. Gold IRAs are seen as a great way to diversify your portfolio.

Why hold physical gold in your IRA? Holding gold has become easy and with regional and nation depositories available your gold is both secure and segregated. Holding physical gold can be substantially cheaper than holding gold certificates. With a Self-Directed IRA the investor controls the costs. When you hold physical gold in an IRA typically the two main costs are the small annual administration of the account and the depository fee (based on the value of the gold). When you purchase gold shares you will be paying additional fees that include trading fees, manager fees and other company expenses. This is why Entrust is so attractive because the client controls the cost. Also with a Self-Directed IRA, the client will negotiate the purchase price with gold dealer based on true market costs.

As with any investment there are risks, please be sure to consult your investment advisor for more information. If you are interested in Gold IRAs, Brandon Hall can be reached at Brandon@entrustfreedom.com.

Single-Member LLC's in an IRA. Should I, or shouldn't I?

2009-08-28T13:08:00.000-07:00

One of the more popular questions that I receive when potential clients call in for information is: Do I need to set up an LLC to invest with a Self-Directed IRA? Depending on where you get your information (and who is in line to benefit from you forming an LLC), you may be led to believe so. The fact is, though, that all of our clients self-direct their accounts, and only a small fraction (about 15%) actually set up LLC’s. Truth be told, there is not much reason to justify the additional expense of forming an LLC in most cases. Some self-directed IRA custodians seem to heavily promote the single-member LLC option, and at a hefty fee. Before shelling out the money to do so, please be sure to take the time to do your research as to whether or not this option is best for you. Also, be aware that those clients of ours that do form an LLC within their IRA typically do so by working with their trusted Attorney and paying a fair fee, as opposed to paying the inflated price that certain IRA administrators may charge.
The reason that one may want to look into forming a single-member LLC is if they feel that they will be frequently buying and selling assets within their IRA. This does not accurately describe the bulk of self-directed IRA investors. The idea is to minimize transaction costs that are associated with using your IRA to invest. Those that may fit the bill would be clients who plan on frequently purchasing and selling assets such as tax deeds and liens or foreclosure properties. If this describes your potential situation, I would strongly recommend contacting our office or your own accountant to discuss, as there are very good reasons to want to stay within IRS guidelines. While we are not able to give legal or tax advice, our managing member Dave Owens is a great resource for those looking for information on this topic and many others. Dave has an extensive background as a CPA, as well as a personal self-directed investor.
At Entrust Freedom, we can promise you that we will make all of the pertinent information available to our clients and prospective clients. In addition, we will help you to make your own decision as to how to best minimize your fees. I don’t know of any other self-directed IRA company that will make those promises. Again, I encourage you to do your own research as to whether or not a single-member LLC is right for you, and don’t hesitate to call our office with further questions. We can be reached toll free at (866) 839-0429.

Reinvest Tax Free With a 1031 Exchange

2009-08-18T06:37:00.000-07:00

In the ever-changing real estate market, it is important to stay on top of what options are available to you when it comes to real estate investing. There are tax strategies that are geared specifically for the savvy real estate investor. These strategies allow you to diversify your portfolio while deferring capital gains taxes.

One such strategy is the 1031 Exchange. A 1031 exchange allows you to sell a piece of investment real estate and defer the capital gains taxes by purchasing another piece of investment real estate of equal or greater value. As you already know, long-term capital gains are 15% for properties held for more than 1 year. (This rate could potentially increase in the coming months) However, the majority of investors do not take into consideration that some states may have a state income tax ranging from 4% to 7%, and that there is also a recapture tax of 25% for any depreciation taken on the investment property. A 1031 exchange allows you to avoid all of these taxes. It gives you more leverage when you are ready to purchase your next property because 100% of the proceeds are rolled over rather than what is left after taxes.

The possibilities are virtually endless. Let’s say you have an office building that just isn’t serving your needs. You want to expand to a larger income-producing property. By doing a 1031 exchange, you can sell your current building, and roll those proceeds over into a larger commercial building that will produce more income. Another option would be to sell your current unit, and purchase several units, thus allowing you to expand your practice into more locations. Today’s market is flooded with opportunities for you to purchase buildings that were once thought to be out of your range.

With the current market, another option that has grown in popularity is the Reverse 1031 Exchange. This strategy allows you to purchase your replacement property prior to selling the property that you currently own.

This may sound like a complicated endeavor, but in actuality, it is pretty simple. There are some basic rules that you should be aware of when doing an exchange. First and foremost, it is always recommended that you consult your tax advisor before making any decisions. Once you have determined that a 1031 exchange is the best option for you, it is important to keep in mind the following rules:
All properties involved in the exchange must be investment property. They cannot be your primary home or second home.
The net sales price of your relinquished property is the amount that must be invested in the new property in order to defer all capital gains. (Contract Sale Price – Realtor Fees/Closing Costs = Net Sales Price)
You must use a Qualified Intermediary to facilitate the exchange. It must be an independent third party, which means that it cannot be your accountant, attorney or realtor).
You have 45 days from closing on your sale to identify up to 3 possible replacement properties.
You have 180 days from closing on your sale to complete your exchange.

As you can see, these rules are simple and straightforward. The IRS is very strict on these rules. There are no exceptions.

No one knows what the future holds. Now is the time to take your financial future into your own hands.

Real Estate is Booming in Self Directed IRAs

2009-07-23T05:58:00.001-07:00

How to introduce Self-Direction to your clients

2009-07-22T11:12:00.000-07:00

There are numerous industries that would clearly benefit if only their clients knew about a Self-Directed IRA. What Real Estate agent couldn’t use an addition commission check from an IRA purchasing investment property? How about that futures or forex broker looking for additional clients and funds to trade? A self-directed IRA would be a tremendous resource for this type of broker. Precious metals brokers, private placement/venture capital managers, private equity and fund managers are all examples of industries that could reap the benefits of Self-Directed IRA’s.

The biggest problem is knowledge. The majority of American’s have NO idea their IRA can invest in anything other than stocks/mutual funds. Less than 2% of retirement funds are in non-traditional investments. The main reason? 99% of the IRA custodians sell a product. They let you choose to invest in what you want, as long as it is one of their products. They do not promote the fact that your IRA can invest in assets that they don’t earn commissions on.

The best way for these industries to benefit from self-direction is to inform their clients that self-directed IRA’s exist. Many of their clients are frustrated with the roller coaster Wall Street ride and would rather invest in alternatives. They just don’t realize they can. Our Entrust webinars are a great way to introduce your clients to self-direction. We have many vendors that mail or email their clients information on self-direction along with a webinar schedule. We are more than happy to provide literature on topics pertaining to your industry. Just give us a call at 239-333-1031.

Golden IRA

2009-07-14T11:34:00.001-07:00

This spring it might have been an investment fad, now it is serious investments strategy, buying gold in your IRA. This can be a well positioned move for many retirement accounts that are looking for security and stability in the coming years. As we hear the term "Second Stimulus" being loosely floated to the public, fears of inflation grasp every economist. In this scenario the economics lesson is simple, if you print too much money, it becomes devalued and tangible assets, like real estate and gold, will go up in value.
Gold can be held in IRAs and most retirement accounts in many different ways. Some of the most common ways to hold Gold include:
•1. Gold Bar or Bullion
•2. Gold Certificates
•3. Gold Money
•4. Gold Mutual Funds
Owning gold bars is easy accomplished through a Self-Directed IRA. The IRA owner is in complete control of their investments. Typically the IRA owner directs their administrator to purchase the Gold through a prearrange purchase with the dealer that the client chooses. The gold is usually held at a large company called a depository. The depository will guarantee security of the gold. There are several large depositories throughout the United States. The depositories will charge a fee to store the gold and the nice part is that most depositories will not commingle your gold. When you would like to sell your gold the depository will sell the gold and transfer the currency back to your IRA, it is a very smooth transaction. Entrust is one the leading administrators of Gold IRAs in the country.
The argument is commonly made that holding gold in a mutual funds is the best way. While it can be easy to purchase gold and silver this way, it is not the cheapest. When you buy in a fund, the investor is at the mercy of the fund manager and has no control over their fees or expenses inside the fund. The goal is preservation of principle and keeping costs down, this is not the case with a gold mutual fund.
While the Gold is used throughout this article, any precious metal can be held in an IRA, the most common include, silver, platinum and palladium. All have they own risk and specific guidelines and constraints. While holding actual gold is common and easy, Silver is not typically held outright because of the weight and inconvenience. The author can vouch for this last statement.
If you would like more information on purchasing Gold in your IRA, please feel free to contact Entrust Freedom at www.entrustgoldira.com or calling 239-839-1031 x212. Entrust will be happy to send you a complete packet that outlines all the steps in purchasing the gold and other alternative assets including real estate.
Dave Owens, CPA is the Managing Member of Entrust Freedom, LLC. Entrust is the largest IRA Administrator in the United States. Please feel free to contact Dave with questions at 239-333-1031 or owens@entrustfreedom.com

Tenants-in-Common versus The Formation of an LLC

2009-07-14T11:32:00.000-07:00

It is a very common occurance at Entrust where clients need to pool funds together for a particular investment. We receive many questions in regards to whether or not they should form a LLC or not. While I am not an attorney and do not know the legal justifications for creating an LLC, I can tell you what we see most often. In most cases the LLC is not needed and Entrust can handle the transaction while saving you the money.

Lets look at several examples of some individuals who want to "pool" funds together to purchase real estate.

1) John Smith wants to buy a condo with 70% from his IRA and 30% personal cash.
-Typically, clients like John would just purchase the property as tenants-in-common. The deed would reflect two owners, John and John's IRA. The deed would read as follows "Entrust Freedom, LLC FBO John Smith, IRA #12345 as an undivided 70% interest and John Smith as an undivided 30% interest". There are two legal owners to the property (the IRS recognizes the IRA as its own entity). John has a tenant pay rent. The tenant writes one check to John each month for 30% (subject to taxes) and one check to the IRA for 70% (tax-deferred). Similarly, expenses are paid on a 70/30 split with Entrust (or an unrelated property manager) cutting checks for the IRA ownership.

2) Betty Jones wants to buy a small strip mall with 4 other investors. Betty and one other investor want to use IRA funds while the other three plan on using personal funds. In this case, it would be ridiculous to purchase as tenants-in-common because each tenant would have to write five checks to five different owners. In this case, the group would form an LLC. The operating agreement would account for ownership percentages of the members (adding to 100%). The managing members responsibility is to distribute earnings to each of the members, two of which are IRA's with Entrust. The managing member does NOT have to be one of the invested members, although it can be (as long as the managing member isn't someone using their IRA). The managing member would also pay any expenses the LLC has out of the pooled funds. The key to this transaction is to make sure the operating agreement shows the IRA interest. Rather than Betty Jones being a member, it is "Entrust Freedom, LLC FBO Betty Jones, IRA #12345". Entrust will need a copy of this operating agreement.

Feel free to contact us to discuss your scenario's in regards to pooling funds together for investment purposes. We would be glad to share ideas with you so that you are well informed.

Finding Stability in a Time of Volatility

2009-06-25T12:41:00.000-07:00

Finding Stability in a Time of Volatility

Recent economic volatility has caused investors to flee the markets in order minimize their losses. Everyday we hear weak reports of economic data that continue to erode consumer confidence. Many Americans facing retirement are now questioning how they should invest their money with the lingering memories of the substantial losses sustained in their portfolios. Ultimately, we would all like to take minimal risk and enjoy maximum return. So, how do we achieve this goal?

Self-directed IRA’s allow the investor to invest in what they know best. Additionally, self-directed IRA’s provide for efficient diversification. Efficient diversification is obtained in self-directed IRA’s through the wide range of investable assets that you cannot hold in a typical brokered account. Correlation is a single number that describes the degree of relationship between two variables such as different assets held in a portfolio. How do gold and real estate correlate to traditional securities? How do private stocks correlate to publicly traded stocks?

At the end of the day, we would all like to sleep well without the constant worries of losses in our portfolios. Opening a self-directed IRA will help to provide for efficient diversification through these non-traditional assets available for you to invest in. These assets include but are not limited to: real estate, mortgage notes, private stocks, LLC’s, gold, tax certificates, futures accounts, and many more. Self-directed IRA’s are the first thing that should come to mind when thinking about diversification and minimizing risk.

Self Directed IRAs are ‘Reagan-esque’

2009-06-17T10:16:00.000-07:00

Concentrated power has always been the enemy of liberty. – President Ronald Reagan

I don’t want to be political, but I can feel a change in our Nation and it struck me how it applies to what I do for a living. I have discovered Politics will never make you friends or clients - I will keep the political commentary brief. Whether we like it or not, the society we live in is changing dramatically or at least our view of society is. On the front page of USA Today, June 17th, they noted a story about an agency that is being created by the current Administration from the Office of Consumer Finance. The article stresses how consumers need financial protection; Big Business has made some major mistakes that have cost us all financially.

For example, giving a credit card to every college student (90% of whom don’t have jobs) was probably not Citibank’s best move. Every time I go to a Florida Gator football game and I see the credit card companies giving out a free Gator T-Shirt if you sign up for a card, I am amazed by the number of students and non-students lined up to get a free T-shirt. Either they have no clothes or they are really hurting with the economy the way it is; that same shirt is $7 at the corner vendor.

By creating this new department, what we are doing is saying that consumers don’t need to think or take responsibility for their financial actions. Uncle Sam will save them and the new department will only cost 100 Billion Dollars per year to run. It would probably be cheaper to send the money to everyone that does not want to take responsibility for their financial actions. As a society, we have decided that consumers don’t want to read the fine print, so the Government will do it for them. I am sure Former President Reagan turned over in his grave at thought of this new agency. God rest his soul.

Government does not solve problems; it subsidizes them. – President Ronald Reagan

One of the things our government has done right is to allow for Self-Directed Retirement Accounts. The spirit of Former President Reagan lives in Self-Direction. Self-Direction is independence, free thinking, control and most of all risk-taking. This is your retirement and it is your responsibility.
Self-Direction allows investors to buy alternative assets like real estate, private notes and mortgages, private LLCs, hedge funds, small community bank stock and gold. What is more American than an investment in gold? You can also buy more traditional assets like stocks and bonds with a Self-Directed IRA. With Self-Direction you must do the research, read the fine print and decide what is best for you.

I think the government does not realize that most of us want to take risks; it is in our nature, we are Americans. If some individuals don’t want to read the fine print on their mutual fund statement and find out they are getting charged an 8% load fee a year, they need the suffer the consequences. They do have options with Self-Direction.

Thank you President Reagan for your inspiration and the opportunity you gave us to think for ourselves and control our own lives.

Government's first duty is to protect the people, not run their lives. - President Ronald Reagan

Dave Owens, CPA, CES is the managing member of Entrust Freedom. Please feel free to contact him at 239-333-1031 or owens@entrustfreedom.com.

Self-Directed IRA's - The Very Basics

2009-06-16T06:21:00.000-07:00

Many people hear the term “Self-Directed” IRA and think that it is a special type of IRA. However, in reality, the IRS does not recognize a Self-Directed IRA as a type of IRA. Any IRA, whether it be a Traditional, Roth, SEP, or a SIMPLE IRA can be Self-Directed. Even qualified employer plans, such as a 401(k) or pension plan can be Self-Directed if set up properly. The term Self-Directed is used because the beneficiary of the account is making 100% of the investment decisions. The account holder directs the Self-Directed IRA custodian to make legal investments on behalf of their IRA.

Typical IRA custodians only allow for investments in what they sell (i.e. stocks/mutual funds). You can self-direct your investments as long as you choose something that they sell. A truly self-directed plan does not put these limitations on the account holder. They can choose from a multitude of investments. Real Estate, Promissory or Mortgage Notes, Private Placements, LLC’s, LP’s, Private Stock, and Gold are just a few of the examples of investments that are allowed in a retirement plan.

There are a few limitations that the IRS puts on IRA investments. An IRA cannot invest in life insurance or collectibles (i.e. art, gems, antiques, etc). The IRA cannot purchase or sell assets from the IRA beneficiary, spouse, or lineal descendants (disqualified parties). Finally, the IRA cannot benefit a disqualified party. In other words, if your IRA owns real estate, a disqualified party cannot live, vacation, or rent the property from your IRA. Similarly, if income (i.e. rent) is generated from the asset, that rent must be paid to the IRA (the rightful owner).

-Brandon Hall is the Director of IRA Operations at Entrust Freedom. With offices in Fort Myers and Naples, Entrust Freedom is the only truly self-directed IRA administrator in Southwest Florida. Entrust Freedom, LLC does not promote, endorse or offer any investments. Entrust Southwest Florida does not offer investment, tax, financial or legal advice to clients. Individuals who believe they need advice should consult with the appropriate professional(s) licensed in that area. This article is devoted to providing clients and potential clients with educational information regarding self-directed accounts and possible investment scenarios. It is in no way intended as investment advice.

Power of Self Direction

2009-06-09T05:59:00.000-07:00

Video Blog By Dave Owens

Lending Money with your IRA

2009-06-03T13:57:00.000-07:00

More often than not, the first stop for an individual or business that wants to borrow money is a bank or other lending institution. But, what about those individuals who for one reason or another, cannot borrow from one of these institutions? Some might say that these individuals pose too high of a risk for lending to. I’ll leave that up to you, the investor, but I will however; present you with the other end of the spectrum.
There are actually a couple of reasons that you may want to consider lending money with your IRA. First off, the terms can be whatever you and the borrower agree on. That being said, since the borrowers often times cannot receive adequate financing elsewhere, the interest rates tend to be much higher than those offered by other institutions. Being in the IRA business, I can say that double digit interest rates are not uncommon. This can be a win-win situation for the lender and borrower. The borrower gets the loan that they could not have otherwise, and the lender gets to sit back and accept the far above average returns that they negotiated.
Next, (and this is probably the answer to the question that is in your head) there are ways to significantly reduce the risk involved. One common way to reduce risk involved in lending money with your IRA is to secure the loan with physical property such as real estate or other property. Once secured, the best case scenario for the lender can actually come to place when the borrower defaults and the lender has to foreclose on the property! Now, instead of receiving the anticipated interest payments, the lender’s IRA takes ownership of a property that is typically much more valuable than the expected return. It should go without saying that if you are considering loaning money to an individual, and the loan is to be secured, you had better be comfortable foreclosing on that individual’s property if necessary. Of course, you can loan money without securing the loan, but you do this at your own risk!
Now that we have briefly discussed the basics, I will mention that there are still rules that apply to this type of investment (just like any other investment). First, an IRA cannot lend money to any “disqualified person”. The term disqualified in an IRA is used to refer to the IRA holder’s immediate family (with the exception of siblings) and certain professional associates such as fiduciaries and employers. If you are wondering whether or not a certain person is a “disqualified person”, feel free to contact our office to discuss. Another thing that you will want to check on when ensuring that you comply with the rules, is your state’s rules on how high of an interest rate you are allowed to negotiate. Your best resource for this question would be a competent attorney.
With this, and any type of investment, it is completely necessary to do your own homework and consult the appropriate professionals when need be. Also, note that this article is meant solely to be a starting point, and if interested in loaning money with your IRA, you have more research to do. If you have any IRA specific questions, we would be more than happy to help. I can be reached personally at 239-333-1031 Ext 212.

Self Directed IRA Clients – Processing Deposits and Payments

2009-05-27T09:33:00.000-07:00

As the custodian of your IRA account, we receive a lot of payment requests and checks to deposit for clients every day. We receive a lot of these requests without the information needed to process the requests quickly. Sometimes this could be a rent check from a tenant but no Self Directed Client info. This causes us to spend a lot of time researching the tenant name, rent deposits in the amount of the check we received, the address of the tenant on the check, etc. If you have a tenant or anyone who sends payments that are to be deposited into your Self Directed IRA account, please double check and make sure that this person has all of the correct information. This includes submitting a deposit coupon, having our correct mailing address and referencing your name/account. This is very helpful and appreciated very much!

This is the same for all payment requests. We have a lot of homeowner associations that send mail to Entrust but it does not reference the homeowner name or address. This is especially difficult to research because sometimes we have multiple clients who own property in the same areas. We try to have the Home Owner Association send all of the mail directly to the homeowner so that you receive all of the HOA Budgets, Meeting Notices, and any other personal notifications. The only paperwork that needs to be sent to Entrust would be the invoices for dues or special assessments along with a payment authorization from the client. You can find Payment Authorization form on our website.

Any of your payments requests can be faxed to (239) 466-5496 or emailed to Tricia at Tricia@EntrustFreedom.com or Doug@EntrustFreedom.com.

We usually try to process deposits to the accounts on Mondays and Wednesdays. Payments are usually processed on Tuesdays and Thursdays. Just a little extra information saves us a lot of time, helps us to process your paperwork faster, and makes everything more efficient.

1031 Exchanges are Making a Comeback

2009-05-20T06:28:00.000-07:00

It’s no secret that 1031 exchanges have seemed to be dwindling into obscurity over the last year or so. I am very excited to say that there has been a significant increase in the number of calls I have been getting regarding 1031 exchanges, as well as the number of people who are actually setting up exchanges. While it may seem to have come out of nowhere, this has definitely been a long time coming. Personally, I love working with 1031 exchanges because the rules are pretty cut and dry. There are no gray areas, and that suits my personality type to a T! For those of you who are not familiar with exchanges, or possibly need a brush up, here are the highlights. First and foremost, the property you are selling and subsequently purchasing must be investment or business-use property. That means no primary or second homes. Second, in order to defer ALL of the capital gain (as well as any applicable state taxes and depreciation recapture taxes), you will need to purchase a property(s) of equal or greater value to that of the property you are selling. Nothing lasts forever, so there is a time constraint involved should you decide to do an exchange. You have a total of 180 days from closing on your sale to close on all intended purchases. Within the first 45 days, you need to identify up to 3 possible replacement properties. Only the properties identified will qualify for the exchange. Finally, the IRS requires that you use a Qualified Intermediary (QI) to facilitate the exchange. What is a QI? Well, it just so happens that this is something that we do! Our role is to make sure that the rules and regulations of the IRS are followed from start to finish with regards to the documents, closing instructions, etc. More importantly, since you are not allowed to have access to the funds from the sale, we hold those funds in an escrow account under your name until you are ready to close on your purchases. We are also here to answer your questions, and guide you along the way.
Here is an example of a recent exchange. A client sold some farm land in Ohio for approximately $250,000.00 in exchange for a piece of Florida sunshine. Actually, he purchased 3 pieces of Florida sunshine! He bought three foreclosure properties that he renovated, and now has tenants living in each unit. Not only was he able to defer all of the capital gains taxes, but he now has three income-producing properties that are providing him with an additional source of monthly income. He couldn’t be happier!
There are various scenarios and types of exchanges that are sure to suit your needs. Want more information? Call me, and we can discuss options that are available to you or your clients. (239)333-1031x207.

Purchasing a foreclosure property with your IRA

2009-05-12T11:17:00.000-07:00

Most people probably don’t realize that their IRA can purchase foreclosure property. The truth is, it can be done, and we’ve been seeing a lot more of it recently with our clients. I don’t know the first thing about buying foreclosures, but I do know that if you’re going to do it on your own, you’d better know what you’re doing. If you don’t, you might end up with a bad investment. This is probably why our clients choose to get help from a company that specializes in purchasing foreclosures. They pretty much do all the dirty work for the client, and once the property has been purchased, they’ll even help find a buyer. Obviously, the company gets a cut in return, but from what I’ve seen, I’d say that it’s well worth it.

For us, this type of transaction is treated differently due to the fact that it is so time sensitive. Once the client has been advised that they have won the property, Entrust must provide a cashier’s check for the balance of the purchase by the end of the day. The client must deliver the check to the court house by 4:00 pm, otherwise, they lose their deposit. It may be worth noting that this has never happened to one of our clients.

Here is a rundown of a recent transaction. Please note that this transaction occurred with the help of a company that specializes in purchasing foreclosures.

Scenario:

Matt Crawford requests a cashier’s check from his IRA account with Entrust for $5,000; he goes to the court house on March 30th and makes a $5,000 bid on a property. By noon, he was advised that he had won the property. Entrust provided Matt with another cashier’s check for the balance $56,009.00. The entire purchase of the property came up to $61,009.00. No rehab was done to the property. On April 16th, the property was sold, and the total amount that went back into Matt’s IRA tax free was $67,679.11. That’s a profit of $6,670.11 in less than a month.

This is just another example of how you can think outside the box when it comes to building wealth for retirement. If you are willing to do the work and the necessary research on an investment, there is a world of opportunity in front of you, and a self-directed IRA can assist you in the process.

Lucia Dunn is the senior IRA consultant at Entrust Freedom

Cracking Your Nest Egg?

2009-04-29T07:07:00.000-07:00

Cracking your nest egg?

In these tough economic times, some people are being forced to make a tough decision. Should I borrow funds from my 401(k)? After all, it is quick and easy. You don’t have to go through a credit check to qualify. The interest rate is attractive and why wouldn’t you rather pay your retirement account the interest? Well before you crack that nest egg, there are some other factors you should consider.

Compounding factor
The money you pull from your 401(k) plan will miss the opportunity to be invested and compounded, which could significantly reduce overall savings for retirement.

Interest payments are not tax deductible
If you are able to borrow from a home equity loan, at least you get to deduct the interest from your income. Interest payments to qualified retirement plans are non-deductible.

Your payments will be taxed twice
Your original contributions to your retirement account were probably never taxed. However, your loan payments will be made from taxed earnings. In other words, if you borrow $10,000 from your plan, you will need to repay roughly $14,000 to repay the loan’s principal. (This is assuming 28% tax bracket, 7.65% Social Security/Medicare, 5% state tax). Finally, these loan payments that were made with already taxed funds will be taxed again when you eventually take a distribution in retirement.

Penalties, Penalties, Penalties
There are severe penalties if the loan is not paid back over the 5 years or if payments are missed. The outstanding balance is treated as a withdrawal from the account causing a taxable situation. Not only that, if you are under 59 ½ years old, there is an additional 10% penalty. Typically, qualified plan loans are required to be paid back within 30-90 days upon termination of employment. Therefore, if the tough economic times cause a loss of your job, these penalties might be tough to avoid.

As you can see, there are many factors to consider before cracking your nest egg. Borrowing from a home equity or educational loan might be a better choice in some cases. Talk with your financial planner before making any decisions.

Brandon Hall, MBA, CISP is a certified IRA service professional and partner of Entrust IRA SW Florida. He may be reached by email at BrandonH@TheEntrustGroup.com
Nothing in this article is intended as tax, legal, or investment advice.

Investing in Gold...proper hedge or speculative bet? By Josh Radeker

2009-04-27T10:49:00.000-07:00

It is an understatement to say that gold is seen as a balancing commodity in the global economy. Many investors, national entities and corporations have flocked to gold positions in times of uncertainty or as a hedge against currency fluctuation. And to say that times such as these fit the mold is a continuation of said understatement.
Lets take a look at this history of gold values. A review of historical gold highs from 1800 - 2008 display a recorded value of $19.39 an ounce in 1800 to a record nominal high of $1,032.70 in 2008. The disparity between these figures is of no importance; the consideration of inflation and many other economic factors renders the over $1,000 difference in value useless. A look into the rise in value from the late 1960’s to present day tells the true story of gold. From a modest increase in ounce values from 1800 - 1967 of less than $20 from the 1800 value, gold took leaps and bounds forward as nations abandoned the gold standard for the backing of their currency. A fiat money system was put into place not only in the United States, but in countries abroad. In the time frame from 1971 to the end of 2008, gold values have risen an amazing 2400%.
With the history of gold values established, lets view the propriety of holding gold in our current environment as an investment. Investors and traders have long used gold as a hedge against currency weakness. A quite understandable approach, as countries have economic, political and social movements which can strengthen or diminish the power of its currency. This is even more of an issue today and going forward than ever before, as a world without economic/trade borders creates an active market of analysis and scrutiny over the power of currency between nations. With gold holding a valuable position in the eyes of the globe, the possession of this precious metal can become a powerful tool to the holder, even when domestic values in currency and currency denominated securities are in flux.
To speak to the other side of the argument, many financial professionals consider gold investments to be speculative in nature, as gold values can fluctuate dramatically as economic, political and social forces change. While the day to day flucuations of gold can be volatile, the historical track record is tough to debunk. Day trading in gold may leave the novice to average investor high and dry, however a diversified position in such precious metals is a mainstay in sophisticated long term portfolios.
In summation, gold as an investment in personal portfolios or retirement portfolios is an excellent diversification tool. In my business, we’ve seen an immense surge of interest and positions taken in gold. The main sentiment from our clients stems from a concern that our national currency and value may fall with a growing stream of liquidity being injected by the Federal government. If this is a concern regarding your retirement account, Entrust Freedom wants to help you access the precious metals market. Our office is available Monday - Friday, 9am-5pm @ 239-333-1031.
Josh Radeker is the Northern Territory Regional Manager of Entrust Freedom, LLC, a company specializing in Self-Directed IRA’s and 1031 Exchanges. Josh can be reached at 239-333-1031 ext 222 and josh@entrustfreedom.com.

Using IRA Record Keepers: Service, Safety, and Sanity

2009-04-11T07:30:00.000-07:00

March 11th, 2009, by Hugh Bromma, CEO of the Entrust Group, www.theentrustgroup.com

I recently read Tom English’s attempt at demystifying the roles involved with self-directed retirement funds, titled “Custodians, Administrators and Facilitators Demystified.”

Rather than demystify, he ended up obscuring the truth. It’s always great when people try to help others understand complicated rules of the financial world, but let’s get the facts straight.

I wish that English had taken the time to speak with someone who is familiar with how custodians and record keepers work together rather than those who view them as competition or may simply be lack the knowledgeable. His sources are Tom Anderson, president and CEO of PENSCO Trust Company, which offers self-directed services like The Entrust Group but uses a different model, and Jeff Nabers, the founder of IRA Association. Spreading these types of untruths are of the ilk that lead people to hide money under the mattress because you can’t trust the banks.

As part of the banking industry for over 40 years, including being a bank auditor and owning several bank-related organizations, I know these concepts can be confusing to investors. Whenever it comes to money and our hard-earned dollars, we want to know that our nest egg is safe. I understand the concern—I feel the same way about my funds. So let’s not spread unnecessary fear about an industry that is tightly regulated. In response, I would like to address some of the confusion and misrepresentation regarding administrators and record keepers.

Tom English brings up two key issues in his article: whether administrative services are necessary and whether they are safe.

To address the first concern about necessity, we can ask ourselves if any service that we pay for is necessary—from house-cleaning to getting your car repaired to preparing our taxes. Any of these you could do yourself if you have the time, skill, or interest. There are books you can read, courses you can take to master any service.

The Entrust Group has over 50,000 customers who have used our record-keeping services for decades, because they simply do not want to do their own record keeping, like the way we do things, appreciate that we maintain local offices for personal service, and know that they can trust us to do the job correctly. We have investors who range from highly experienced to those who would prefer to do something else on the weekend. They know that we are knowledgeable about IRS rules and regulations and monitor accounts for potential prohibited transactions. Our customers also appreciate the educational offerings that we make available. So like any service, the decision is yours.

But with any service, you want to know if the provider is doing things correctly. The self-directed industry is a highly regulated business that must comply to specific rules and requirements. So let’s start by looking at banks and the custodial services that they offer.

Banks are established by national or state charters that they must adhere to. The Internal Revenue Code specifically permits banks and trust companies to act as trustees or custodians of Individual Retirement Arrangements (IRAs). The code also allows for non-bank trustees. The IRS requires that banks, trust companies, and non-bank trustees be audited regularly for regulatory compliance. The IRS does not perform the actual examination of companies; it’s usually a state agency. I was such an auditor and examiner as well as a general auditor for a multi-bank holding company for some years.

Both PENSCO Trust Company and ours, International Bank and Trust (IB&T), are chartered as non-depository trust companies by the State of New Hampshire. We operate under the same state laws and regulatory oversight. By law, all of our clients’ funds are not deposited in our own trust companies, but in third-party banks until the client directs the purchase of a specific asset.

You know your money has a degree of security in a bank because it must comply with regulations and is subject to regular audits from state or federal agencies. For example, if you deposit money into your checking account at your bank’s branch office, the bank adds it to the pool of funds acquired from all of its customers at other branches. If you withdraw funds, the bank takes it from the pool. Pooling funds is how the banking and financial industry works.

So why is English concerned about administrators pooling funds at custodial banks? Pooling is two of his three reasons to not have administrators process your IRA transactions. It baffles me, because it’s no different from the rest of the industry. At IB&T, all client deposits are handled like every non-depository trust company and bank must, including PENSCO. All uninvested funds are directly deposited into a pooled trust account at an FDIC-insured depository bank.

The Entrust Group uses a model similar to national banks. We have local offices that maintain clients in their region. Customers use the local services and can deposit their funds locally. Each branch office must, by law, comply with all rules and regulations that apply to The Entrust Group as a whole. The custodian or the custodian’s record keeper and administrator keep individual records for each IRA or qualified plan participant. There is no added liability, and no reason that it should take any longer than it takes to withdraw funds from a regular savings account.

But it is English’s third point, that administrators are not subject to regulatory demands, that is the most distressing.

For over 50 years, federal law has allowed banks and trust companies to hire third parties to perform services. Without this ability, the current check processing and debit and credit card system would not exist in its present form. Most of the first self-directed IRAs that were introduced in 1975 were record kept and administered by third-party record keepers and administrators. Banks and trust companies are required to ensure that all such third parties meet or exceed the same regulations under which the bank or trust company is regulated. In fact, regulators reserve the right to directly examine IRAs that are record kept and administered by third parties, such as The Entrust Group.

No regulator would allow any record keeper or custodian to continue to operate in an unsafe or unsound manner. In fact, FINRA, New Hampshire Banking department, FTC, SEC, and many other regulatory agencies have a duty to close any unsound institution that have the kinds of issues that are pointed out in English’s article.

And regulation and audits are crucial. The risk of an employee embezzling or diverting client funds from a bank or its holding company is no different for a service provider. Unfortunately, this is a part of any financial service or other business. In the financial services industry, the question is not “Does the risk exist?” but more aptly “How is the risk mitigated.”

The Entrust Group and IB&T maintain comprehensive policies and procedures governing business operating practices to mitigate these risks. The procedures are further strengthened and verified through a robust, independent internal audit program, employee background checks, bonding, and insurance. The Entrust Group and its custodians provide safety unparalleled in the industry, which is why we continue to maintain a strong and growing customer base for nearly 30 years.

Banks that act as custodians hire administrators such as The Entrust Group to provide extensive valuable services to their self-directed IRA clients because it’s less expensive. Using companies who specialize in these services is more efficient and usually offers better personalized service and a more knowledgeable staff. Again, the banking institution and any services that they use are regulated and audited.

As a final note, I was curious how English glossed over the concern of the SEC and FDIC regarding LLCs and the use of checkbook control for IRAs. Now here is an area that is fraught with abuse. The watchfulness stems from the fact that these LLCs have been used to launder money, hide funds offshore, and engage in prohibited transactions, either intentionally or accidentally.

In these economic times especially, no one wants to hear that their funds aren’t safe. So I’m concerned when English tries to fuel panic over an industry that is tightly regulated. Clearly, as the nation’s largest network of third-party record keepers, with 50,000 customers and growing, we offer services that meet our clients’ needs while protecting their assets. PENSCO and a few other custodians and record keepers/administrators offer a similar service using a different a model. One type of model might work better for you, but one is not less legal than the other. Do shop and compare, do seek to understand the differences, and don’t allow others to use fear tactics to scare you into information that is not correct.

If I have not answered your questions or concerns, feel free to email me personally for more information at info@TheEntrustGroup.com.

Stimulation - More Economic Caffeine?

2009-04-11T07:27:00.000-07:00

$700B in Stimulus in 2008, an additional $750B in 2009 and still no end to declining stock markets, real estate, and escalating unemployment.

By: Glen Mather

The brightest minds in the business are hard at work and money doesn’t seem to be an object, yet still no surge of economic uptick has been felt.

Not surprisingly, we are a nation of short attention spans, threadbare patience and fickle-mindedness. We want, indeed demand, that our leaders not waste another moment in addressing the economic problems in a way that will mitigate the pain many are feeling. Yet, there are a few positive changes in behavior that will serve us well as we await the momentum shift that history forecasts will happen.

Savings: A nation of non-savers has come to the realization savings accounts may not be the anathema of the educated and informed. Rather, having a few dollars salted away for unanticipated expenses or gaps in employment may actually signal prudence. According to the Wall Street Journal, household debt decreased for the first time since 1952! This in turn resulted in a rise in the savings rate. In the past few years the savings rate has actually been below zero at times.

Spending: The first cousin to savings, spending has been severely impacted as it is anytime consumer confidence is on the wane. The real question is that once this recession has moved on, will consumers realize that driving a “non-new” car or living without “blue-ray” technology isn’t really that big a sacrifice? Our grandparents and great-grandparents were never able to quite shake the sense that needless or superfluous spending would somehow lead to ruin, despite that 1929 was quite a few years ago. Perhaps we, too, are starting to get the message.

Greed: Very difficult to define, yet one that has become the rallying cry of those demanding change. Toxic assets held in banks and creatively packaged and resold to an unsuspecting and unobservant marketplace are now seeing the light of day. Financial Services firms are now under the microscope; with compensation packages no longer afforded the private sector equivalency of salutary neglect from their board of directors. Finally, stockholders are voting, not just with their proxies, but also with their sell orders when they see management that is unresponsive to current economic realities.

Taking Control: In times of uncertainty, the investor seeks certainty and always pays a premium for sanctuary. Thus, billions have left the equities market to hide in low-yield treasuries and money market funds. Why? Lack of confidence in the markets, the market funds, and those advisors whose rallying cry has been, “Hold on, hold on, and buy now, when the market is on sale.”

Well, there are a few contrarians, but where they thrive is not always in the public markets. Many have sought out self-directed IRAs as a way to seize control from those advocating listed stocks, bonds and mutual funds, and instead, make their own investment decisions. Unlike the stock market, where stocks always trade at “market price,” real estate, notes, mortgages, tax liens, etc… can always be found at a discount. It is up to the investor to Unlock their IRA© and start looking at their retirement opportunities in a whole new light.

So, as more caffeine is poured into the economic system, it’s yet to be determined when the patient will stir. But awaken it will, and as we turn our attention to the issue of higher taxes, increased regulation and the specter of inflation, let us not forget the lessons that our older and much wiser relatives learned before us. Don’t spend money you cannot afford, save enough to provide security, temper aggressive investment goals (don’t be greedy), and take control of your investments. No one cares as much about your economic future and retirement as much as you.

Glen Mather is President of Entrust Administration Services, Inc., a member of The Entrust Group, the nation’s largest network of self-directed IRA administrators and record keepers. He can be reached at (407) 367-3472 or gmather@entrustfl.com.

Deducting Tax Losses from "Ponzi" Schemes

2009-04-11T06:46:00.001-07:00

By: Dave Owens

Now that Bernie is in the poky and we all feel a lot safer, how do investors treat their losses for tax purposes? The IRS has recently released two Revenue Rulings to help. This ruling applies to all “ponzi” losses, not just Bernie’s mess.

The IRS released Rev. Rul. 2009-9 addressing the tax treatment of "Ponzi" scheme losses, and Rev. Proc. 2009-20 which provides safe harbor options for deducting these losses. This is a safe harbor rule which means it is not law, just guidance. The guidance is welcome relief to the thousands of investors who have lost money in the Bernard Madoff scandal and others who have incurred similar Ponzi scheme losses.

The revenue ruling states that the losses are considered theft losses not subject to casualty loss limitations under §165(h) or the itemized deduction limits under §67 and §68. The rulings will allow the losses against ordinary income and goes so far that it even allows an NOL generated by Ponzi losses to be treated as sole proprietorship losses, potentially eligible to be carried back 3, 4 or 5 years under the business tax breaks enacted by the American Recovery and Reinvestment Act of 2009. This is good news that the losses are not treated as capital losses because they would only be eligible for a maximum deduction of $3,000 a years until the losses are used up.

The safe harbor options under Rev. Proc. 2009-20 allow a 95% deductible loss for investors with no potential third-party recovery or a 75% deductible loss for investors with potential third-party recoveries. The investor may have additional losses of income in later years depending on actual recoveries. The returns in those years would reflect the actual loss and be reported accordingly.

This ruling my also apply to the 1031 exchange industry where several qualified intermediary companies lost client’s proceeds while held in escrow.

Dave Owens, CPA, CES, is the managing member of Entrust Freedom, LLC and can be contacted at owens@entrustfreedom.com or 239-333-1031. The Entrust Group is a national administrator of Self-Directed Retirement Plans.

THE GOLD STANDARD

2009-04-09T07:49:00.000-07:00

THE SAVAGE TRUTH For IRA investors battered by market, bullion bars, coins are solid options

March 30, 2009

TERRY SAVAGE savage@suntimes.com

If you can stop licking your stock market wounds for a minute, it's time to consider your IRA contribution for this year. The April 15 tax deadline is also the last date you can make contributions for 2008. And it would be a good time to consider your 2009 contribution.
In 2008 and 2009, the contribution limits remain the same: $5,000 for both traditional and Roth IRAs for those under age 50. But if you're 50 or older, you can set aside $6,000 for each of these years.
If you qualify with adjusted gross income of less than $101,000 on a single return or $159,000 on a joint return, and you are not covered by a company retirement plan, you can open a tax-deductible traditional IRA. Remember, part of the money you're investing today would have gone to the government in taxes!

The possibility of higher tax rates in the future makes a Roth IRA even more attractive. You don't get an immediate tax deduction. But if the government keeps its promise, the gains will all come out tax-tree to help pay for your retirement.

It takes a strong heart and a good sense of perspective to consider making an IRA contribution now. This year, more people are likely to take a conservative attitude, after watching their IRA accounts melt down with the stock market. That might turn out to be an unfortunate decision: Money in bank CDs can't grow much, while you might be passing up a chance to pick up bargains in the stock market.

IRA alternatives

Perhaps it's time to get even more sophisticated with your IRA, or IRA rollover account. While stocks traditionally have been a good "hedge" against the impact of inflation, you might want to diversify into another direct inflation hedge: gold or silver. Yes, you can buy shares of mining companies, or mutual funds that buy these stocks, or Exchange Traded Funds that buy the metals.

But most people are unaware that you can buy certain gold bullion coins and bars for your IRA -- if they are held in trust by a certified custodian. Those include U.S. coins such as gold and silver Eagles, and gold Buffalo coins, as well as bars and wafers of the precious metals. Some foreign coins, such as Australian Kangaroos and Canadian Maple Leafs, also meet fineness standards to qualify.

You cannot buy collectibles, such as numismatic coins, for your IRA -- even if they are gold. And those "commemorative" gold "coins" don't qualify either. Similarly, you're not allowed to buy artwork, gems, stamps, antiques and other collectibles inside an IRA.

The basic principle of investing in "alternative assets" in your IRA is that there must be an official "custodian" who has control of these assets for your benefit. There are several companies that provide that service. Entrust (www.theentrustgroup .com [or www.entrustIRAadmin.com]) is one of them. The Blanchard Group -- a coin dealer -- has a similar program using its GoldStar Trust (www. blanchard.com). I prefer separating the coin dealer purchase from the IRA custodian, which is how Entrust works.

Bullion coins in trust

If you have an IRA with a "checking" feature at a mutual fund company, you can go to a coin dealer, pay for your coins with a check from your IRA -- and then direct that the coins be sent to Entrust by certified mail for storage. Or you can open a new IRA with Entrust, and they'll handle the purchase for you with your coin dealer.

The coins are then placed in a safe-deposit vault in the bank of your choice. The safe deposit box is opened by the trust company as trustee for your IRA. You can watch the coins being placed in the box -- but you don't get a key to it.

As an alternative, Entrust can act as trustee for coins left in the vaults of a certified dealer. They sign the storage agreement with the coin dealer as your trustee. Either way, the IRA holder gets a daily online statement, as well as a year-end valuation for seniors who must start taking a required minimum distribution.

Entrust CEO Hugh Bromma says there is a growing interest in gold and silver bullion for IRAs, even among those most scared about the future of financial institutions: "We can act as custodian for your gold in any vault, even outside the United States."

We plan our retirement in dollars and we will pay our retirement living expenses in dollars. But how much will those dollars buy in our retirement years? If dollars don't keep their buying power, gold will! And that's The Savage Truth.

Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.

For More information on buying Gold in your IRA - go to http://www.entrustgoldira.com/