Checkbook SDIRA - Trust vs LLC

5 Replies

Sorry if this has been answered elsewhere - I have a generic SDIRA through New Directions and am looking to switch to a Checkbook Control SDIRA because of fees and some investments I'm interested in exploring.

I have a family trust and have had LLC's in the past. The LLC had some extra work involved vs my simple trust.

My question: for a checkbook control SDIRA what is the reason for using an LLC vs trust? (beyond liability). A trust would be less expensive to set up and maintain and simpler. I see though that most people are using LLC.

@Paul Hom

Good question-Using a trust instead of an LLC is fine. Most people don't understand trusts. The case that allowed checkbook controlled IRAs, Swanson vs IRS, used an LLC. You must include the salient points of the Swanson case and the operating document in your operation of the trust. Prohibited transactions can still occur including involving disqualified persons, signing personally for loans, mixing Ira and personal money, etc so be very careful and understand the subtleties involved. Check all the fees involved and make sure it is a savings. Using The trust is generally less expensive than an LLC for checkbook control.

@Paul Hom The trust is a good checkbook IRA solution for high maintenance LLC states such as California. However, many states require statutory trusts to register in a fashion very similar to trusts, and may or may not charge similar of sometimes higher fees. There is no one "which is best" answer. It is situational depending on the geography where IRA capital will be put to work.

Generally speaking the LLC is slightly simpler when it comes to dealing with counter-parties such as banks, insurance, etc. Our policy for several years has been that unless there is a specific benefit for a trust, we go with the LLC.