My husband has always been very secretive about the two items above, but I believe he has a self directed IRA and most of his retirement is in stocks. He use to talk about changing his stocks to cash when he had an inkling of a downturn. It worked quite well for him, especially in 2008! I'm expecting to receive a pretty good sized lump sum along with a nice alimony check every month. Should I transfer the lump sum to a not yet created LLC, so I can begin investing in RE and not have to pay large penalties and tax bills? Or is there another strategy? Any help would be appreciated. I hope to speak to an accountant, but not sure how to find an investor friendly one.
Transfering the money into an LLC will have no effect on taxes you owe at all. I'm not an attorney or accountant, but I don't see where you would be taxed on you part of the divorce settlement. Its existing assets that are being divided between you two. The alimony payments are taxable income for you and are a deduction for your ex.
Now, if there are investments in stocks and those get sold and result in realized gains, those gains may be subject to capital gains taxes. And if you take money out his IRA then that will be subject to taxes and possibly penalties. Nothing you can do to avoid these.
Jon Holdman, Flying Phoenix LLC
@Maggie H. Sorry to hear of your current circumstances. It's not likely that your husband is in a self directed IRA in the sense of the investments you may have read about here on BP if he is in conventional investments like stocks. I can't advise you on your personal situation because I would need a lot of information that shouldn't be shared on the Internet with someone you don't really know.
Here's what I would tell my sister, if she were in a similar circumstance. We live in a community property state (that matters). Vickie, (that's my sister's name) you should have the funds transferred to a Vanguard Money Market Mutual fund when/if your husband transfers the funds to you as required by the divorce decree. If the funds are Roth, you should transfer them to a Roth account with the same investment selection I already mentioned. If the funds are in a traditional IRA or 401k, you should transfer them to a traditional IRA account with the same investment selection I mentioned.
Leave the funds in the appropriate account at Vanguard until you are ready to transfer the funds to a self directed IRA that will be of a matching tax status (Roth or traditional). If you don't know the difference in those, that's why I gave you a way to park the funds until you learn what the difference is. You also need to take some time to learn how an SD IRA works - there is really a lot to know and you need to know how it all works before you try to use it.
That, Vickie, is all I can say until you take the time to learn how all of this works and are in a position to make informed decisions for yourself. If the funds are important to you, you will take the time to learn this stuff. Otherwise, you are at the mercy of whoever you trust to make the decisions for you.
First and foremost, I would suggest speaking with a tax attorney and a good advisor. Your foundation will be the most important part of your investments going forward. Best of luck.
Thank you all for your input. It looks like I need a serious education on this one. It seems rather daunting to me at this time in my life, but I know it needs to be done, before too long. I'm not particularly savvy when it comes to understanding this aspect of investing. I wonder if there are any tax attorneys here who could advise me a bit, as at this time I am broke!
BTW Make sure you vet the people who are contacting you via PM very carefully before investing with them!
@Cal C. Gotcha! I'm hoping to have a team in place and a few local REI club meetings behind me before I take the leap. I have all kinds of time right now, but the lump sum will only be there once, so intend on being very careful. Thanks for your advice!
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