Retirement and Asset Protection through Planning. Strategic planning can give you more or less control over the assets you have accumulated for retirement, and provide for the desired levels of protection to compliment your comfort level with respect to risk.
You have worked hard to create that nest egg. Most likely you have put it away in a managed employer sponsored savings plan like a 401(k). Your assets may be held by a custodian such as an IRA custodian. Consider ways that you can liberate those funds into a structure that would allow you great flexibility to direct investment of those funds.
The Checkbook IRA – Individual Retirement Accounts
Consider the possibility for your self-directed IRA to own an LLC that is managed by you. Commonly referred to as a checkbook IRA because you determine how much of your IRA assets are transferred to the LLC checkbook. This provides check writing privileges over your IRA funds held in the LLC, giving you the ability to take advantage of investment opportunities when they come along without the delay of waiting for your custodian to respond to your investment request. You have complete control over all the investment decisions. But, there are rules to follow. See the IRS rules on Prohibited Transactions.
Employer Provided 401(k) and other plans
Plans such as 401(k), 403(b)(7), ESOP or 457 plans in Texas are often beyond the management and control of plan participants. To Cash Out your plan you typically have to pay penalties depending on your age, and taxes depending on where you put the money. In most instances you cannot make any in-service distributions so you have to quit your job to be able to roll over your retirement funds. But some strategies overcome these limitations and provide a means to “cash-out” without penalties and even while maintaining your employment.
Single Member Self-Directed 401(k)
What are the advantages? For a self employed or sole proprietor, if you qualify you can direct the investment of funds similar to the Self Directed IRA LLC. One big advantage is the contribution limits. As much as $62,000.00 in 2019 of tax deductible contributions. Ask your tax accountant. You can also roll-over IRA and employer provided 401(k) funds into your single member self-directed 401(k).
The right structure is essential. Generally speaking, business assets are appropriately held in business entities/structures; while personal assets are appropriately held in Trusts. Both can be used to minimize your risks and protect your assets and your privacy. Common strategies involve the use of the Limited Liability Company to hold rental real estate properties on the business side, and the use of Trusts (revocable and irrevocable) to hold personal assets such as personal real estate holdings (e.g. a second home).
Limiting Risk in Multiple Rental Real Estate Holdings through use of the Limited Liability Company or “LLC”
Generally speaking, business assets are appropiately held in business entities Under Texas law you have the ability to limit risk and liability through the creation of multiple subsidiary LLCs (“series”) under the registration of a master LLC. Each series holds one rental property, affording separate liability protection for each of the properties held within the respective series.
- Protection from personal liability;
- a single certificate of formation for the Master LLC with the Secretary of State, which results in savings each instance when an additional Series LLC is created;
- one master LLC/Unlimited Series LLC;
- separate liability protection for every Series LLC;
- reduced administrative expenses;
- less complex than corporation/subsidiary structure.
Use of Trusts can Limit Risk and Preserve Privacy
The family or “Land” trust can be use to hold provide asset protection by discouraging litigation and privacy by holding property in the name of the trust instead of trust beneficiaries.