My wife and I have 2 properties in Spain through our self-directed IRA's. She's 62 and I'm 67. When can we start using them?
You can never personally use assets held in your retirement plan.
If you wish to use those properties personally, your only option is to distribute the property as an asset in-kind from the retirement plan to yourself. The property will need to be appraised, and that will set the value used for tax purposes on the distribution transaction.
Work with your plan provider and CPA, both of whom should tell you this is a bad idea.
You don't buy shares of Apple or Amazon in your retirement plan because you want to own those shares personally when you retire. Real estate is no different. You invest in any asset to grow the savings value of the plan. Period.
Thanks for your quick and thoughtful reply. Those properties are only part of our retirement investment portfolio. We purchased them with the intent to use them during our retirement. We are both retired now, she is 62 and I'm 67. They are currently managed by a LLC. We'd like to start using them and we're not sure how to start that process. Again, thanks for your advice.
Please see the following additional considerations regarding taking the property as an "in-kind distribution":
1. In-kind transfer means the title is transferred from the IRA (or solo 401k) to you personally.
2. From a tax perspective, this means that you are responsible for paying income tax (not capital gains tax) on the full value in one lump sum. For example, if the property is worth $100,000 it would be as if you took cash in the amount of $100,000 out of your IRA (which would require that you report an additional $100,000 of income and pay the corresponding taxes).
3. While it is theoretically possible to simply withdraw/transfer only a certain percentage ownership of the property (e.g. 20% one year, 20% the next year etc) to spread out the tax burden, this means that you would own the property as a tenancy in common. In that case, the title would need to reflect your personal ownership interest as well as the ownership interest held by your IRA. Moreover, going forward all of the income and expenses must split in accordance with the ownership percentages.
4. Once you own the property 100% in your name, you can use it for personal use, work on the property, etc.
Thanks George for your reply. That's exactly the information we needed. Thanks again for your thoughtful and knowledgeable response. Best wishes, John Murphy