Contractor · Temecula, CA · Member since 2015 · 190 posts · 36 votes
Hey investors, does anyone know how to take money from a self directed IRA to fund a deal for a relative without getting penalized. Like maybe creating a LLC investment fund with a company name? Thank you, Nick
If they are a disqualified party, there just is no way to lend. Any direct or indirect transaction between the plan and a disqualified party is considered a prohibited self-dealing transaction and is catastrophic to your IRA and your pocket book.
Disqualified parties include:
The IRA account holder
Their spouse
Lineal antecedents - parents, grandparents, etc
Lineal descendants - children, grandchildren, etc
The spouse of a descendant
An entity like a business or trust where one or more of the above have controlling interest through equity or decision making power.
Family members not on the above list are not disqualified. That does not mean, however, that you could do something like lend to your sister (OK) and then have her lend to your son (disqualified).
Thank you for your response Brian, so if my brother wants to lend me money from his self directed ira to fund my REI deal, that would be OK? Thanks again, Nick
While transactions between siblings are not directly prohibited, you should always ensure that it is a market rate transaction and there are no preferred terms. That would be prohibited.