Self Directed IRA (SDIRA) - Legal?

Question

We're trying to invest into a tort litigation fund. The entry amount is more than I have in my self-directed IRA account. In order to get into this asset class, my brother and I plan to combine our self-directed IRAs.

Here's the idea.

My brother & I create an LLC with the members being our IRAs.

Our SDIRA custodian will deploy the funds into the LLC, then we deploy the funds into the tort litigation fund.

All insight is appreciated.

Thank you,

Mat Sorensen · Answer

Luke,

As long as you are not an owner or would benefit outside of the IRA from investing in the fund I do not see any reason why you could not.

Taylor L. · Answer

According to this FAQ post from Camaplan...

"Any ascendant or descendent of you and your spouse are considered disqualified. Children and their spouses, grandchildren and their spouses, parents and grandparents are prohibited. Family members such as siblings, nieces/nephews, aunts/uncles and cousins are allowed."

I can't weigh in on that at all, just share information I found from a company that operates in this space.

@Carl Fischer is a partner in Camaplan and an active member on BP, perhaps he'll weigh in.

You could also ask if the sponsor will accept a lower investment amount. The worst they can say is "No." We do get that question all the time when raising capital.

Cal Dunagan · Answer

@Luke Hadden

This is definitely a legal question, so consider reaching out to a good real estate attorney. Before you do, make sure you do your due diligence and ask the right questions in the vetting process. This article covers some good questions to ask a potential lawyer. I also found a great article regarding SD IRAs that might point you in the right direction.

Best of luck!

Self Directed IRA (SDIRA) - Legal?

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