FAQs

Why are there fees associated with my account?

Traditionally, your current investment advisor may or may not charge a fee to handle your IRA account. With most things, there is no such thing as a free lunch, right? Most brokers charge fees on the investments that you choose, which may amount to a percentage of the investment. These fees are often hidden and can add up quickly.

Provident assesses a fee to administrate the account for the account holder. We do not receive a fee on your investment. Administration duties include the accounting for your investment, required IRS and state filings, facilitation of your investment, distributions requests, and compliance.


What is a prohibited transaction?

Per IRS Publication 590 a prohibited transaction is any improper use of your traditional IRA account by you, your beneficiary, or any disqualified person. The following are examples of prohibited transactions:

  • Borrowing money personally from your IRA
  • Selling property you already own to your IRA
  • Using your IRA as security for a loan
  • Buying property for personal use (present or future) with IRA funds


What is a disqualified person?

Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).


What is ERISA?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.


What types of accounts can I self-direct?

Self-direction isn't limited to IRAs. The following accounts can be self-directed:

  • Traditional IRA
  • Roth IRA
  • SEP IRA
  • SIMPLE IRA
  • Rollovers and transfers to a retirement account
  • Individual (k)
  • Coverdell Education Savings Account (ESA)
  • Health Savings Account


Why haven't I heard of this before?

Traditional investment custodians will only allow account holders to hold investments that their firm offers. To date, they have had control of over 97% of the retirement accounts held by the public. They will commonly state that such investments are illegal or too complicated, but it may be in part to the inability of many brokers to provide the self-directed options that you want.


Can I purchase real estate that I or my corporation already owns with my self-directed IRA?

No. This is a prohibited transaction per IRC 4975. You may not purchase a property or an interest in a property that is currently owned by any disqualified person. Per IRS Publication 590: disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).


Can I invest funds in real estate from a self-directed IRA using an LLC?

Yes, you may use a special purpose LLC to purchase and hold title to investment real estate. This involves the forming of an LLC with the self-directed IRA as an owner or member of the LLC. It is important to structure the ownership of your LLC to ensure that your investments do not constitute a prohibited transaction. Always consult a qualified tax attorney or CPA to properly structure your LLC.


Can I obtain a mortgage to invest in a property with a self-directed IRA?

Yes, you may, but only with a non-recourse loan. Typically you must put down 30 percent to 35 percent to obtain the loan.


What is a non-recourse loan?

With a non-recourse loan, the note can only be secured by the property itself. It cannot be personally secured. The lender can only use the property as collateral to secure the note. If your IRA fails to make the loan payments, the only collateral the lending institution can come after is the property itself, and not the IRA. Please consult your tax adviser about any Unrelated Business Taxable Income ("UBTI"), and any taxes that may be due. Non-recourse loans with your self-directed IRA are a great way to help you to be able to diversify. Please contact us for more information about a non-recourse loan.


Can my IRA invest with other partners, including myself?

Yes, your IRA can invest with other partners and yourself individually. However, it is important to consult legal counsel in these situations to observe formalities and rules that may be associated with that investment.


Can I rollover my entire retirement fund and only self-direct a portion of it?

Provident prides itself on providing clients with an entire retirement solution. We do not provide investment advice or products, but we have partnered with licensed advisors to provide you with the traditional investment options that you may want.

It also provides you the opportunity to have full control of your retirement funds, so you may continue to direct your funds without having to rollover your monies multiple times.


Can Provident provide tax or legal advice regarding your investment?

No. If you should need tax or legal advice regarding your investment, you may engage a specialized tax law firm to provide the needed advice. Attorney-client privilege would exist between you and the firm, not Provident.