Self-Directed Roth IRA's and LLC's

5 Replies

I'd be interested in the answer to this. My original thought would be that a law suit couldn't pierce the IRA and if all of you're planning to put all of your properties in the same LLC it might be overkill on protection as in if they take the LLC's assets there's nothing left to protect inside your IRA. Whereas if you have several properties in the IRA and each are in their own LLC it would be a little expensive and cumbersome to support the paperwork and having a balloon insurance policy (if you can even get one in an IRA) might be a better option.

On other thing I've seen on several sights is how if you have multiple similar LLC's (like 10 LLC's for just 10 houses) the courts could tend to assume they are all 1 LLC type and if the suit proves true negligence a judge could decide against you and possibly pierce the veil.

Again I'd like to see the answer from someone who really knows this area. 

I would say definitely yes unless you are thinking of going the Turn Key route. We do all of ours that way.

What I see as some advantages are that when you go the llc route you can use 'checkbook control', which to me is a must. I dont want be having a Custodian having to cut a check for a $25 screen repair or the $50 monthly water bill. There are so many little expenses that come up that are so easy with the checkbook control model.

The cost are fairly minimal too compared to what many think.

One other thing to think about is what 'other assets' are in your IRA? Meaning is you had rentals worth say 200K, but also had 100K of funds still in stocks those stocks might also be reachable in a lawsuit. If you had the LLC that would be an extra layer of protection for the other IRA assets.

@Daniel Hess

Using an IRA owned LLC is generally a more effective and efficient way to manage an asset such as rental property in an IRA. As Dan Dietz mentions, this structure provides you with "checkbook control" over the funds, and eliminates an array of paperwork, delays, and per-transaction fees that would come with having a IRA custodian directly hold the assets.

If you will have multiple properties within that LLC, it can be effective to create sub-LLC's for individual properties or at least small batches. That creates asset segregation.

@Tom Maricle Courts have actually found that an IRA account owner can be held liable in a property related suit when there IRA is a direct owner of property. Having the IRA be the member of a LLC that owns property does provide an additional layer of protection.

@Daniel Dietz that's what I was wondering, would my entire Roth be at risk even if the rest of it is still in mutual funds. I moved some over to Pensco trust because I plan on buying a turn key. I didn't know I could handle transactions myself if I had it in an LLC. Thanks

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