how to access ira and othercontent/pd… · individual retirement account overview in 1974 the us...
TRANSCRIPT
By Patrick Dague. © 2018. All rights reserved.
www.InvestorsForMyBusiness.com
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 2
About the Author 3 Introduction 4 What Exactly Is a Self-Directed Retirement Account? 5 Take Action and Help Others – It Works 6 Self-Directed Individual Retirement Account Overview 7 Types of Self-Directed Individual Retirement Accounts 8 Benefits for Your Venture When Using This Option 9 Benefits to Your Investor When Using this Option 11 Services Provided by Self Directed IRA Custodians 14 List of Self Directed Retirement Account Companies 18 Selecting a Self-Directed IRA Custodian 20 Things to Look For When Selecting an Account Custodian 22 How it Works 24 401K Rollovers 27 Getting Your Offering Documents Approved 28 Detailed Overview of the Process 30 IRA Ownership Vesting Examples 31 Where to Find Investors with Retirement Account Assets 33 Case Studies & Real Examples 35 Summary 35
Your Personal Investments and Investment Objectives 36
Form Examples - IRA Trust Services 37
Contents
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 3
About the Author
Mr. Patrick Dague was trained on Wall Street in New York City by a major
national investment brokerage firm. He became a registered investment
advisor, financial planner and stockbroker and helped his firm raise tens of
millions of dollars for various private business and real estate opportunities.
After gaining knowledge and experience
with that firm he joined a smaller
investment securities firm where he
specialized in raising private capital for
various real estate ventures, and for small
and medium-sized companies. Mr. Dague
gained considerably more experience
there then resigned as an investment
broker to focus on his own ventures.
Since resigning as an investment broker over twenty years ago Mr. Dague
has successfully raised millions of dollars in private capital for his own real
estate and business ventures and coached others about the process.
Mr. Dague holds undergraduate degrees in Aviation Science and Business
Management. His graduate work was in International Business. He is
currently active in certain types of charitable work in addition to funding his
own ventures, particularly real estate ventures, when opportunities arise.
DISCLAIMER CONCERNING LEGAL ADVICE: All information here is for educational purposes only. Each and
every business situation is unique and different. For specific legal questions related to your particular venture please
consult a lawyer. Mr. Dague is s not an attorney. He does not give legal advice and nothing herein should be
considered in any way to be legal advice. The information here will likely be of great help when speaking with your
own attorney and others, including potential investors, but it is not a substitution for having good legal counsel.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 4
Introduction
Hey – hope your day is going well. You’re reading this so you likely want to
bring private capital into a business or real estate deal. You may want to:
(a) Fund a start up business such as an internet
marketing venture, manufacturing or services.
(b) Bring more capital into your existing business
(c) Put together a group of investors to buy a strip
mall, an apartment building, rental houses or
another kind of real estate related investment.
You may instead have some other kind of venture
in mind that could use private investor funds.
Whatever your objective, part of being really successful at raising investor
money for a private venture is having the ability to access and use Self-
Directed Retirement Account funds.
It is particularly important for you to know
how to access IRA funds and 401K rollovers.
It really helps to know how to access IRA funds & 401K rollovers
when funding a venture. There are other types of qualified Self-
Directed retirement plans as well. I’ll talk a bit about them too,
because they are also potential sources of funds for you.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 5
So What Exactly Is a Self-Directed Retirement Account? A Self-
Directed retirement account, such as a Self-Directed IRA, acts exactly like
an IRA your bank might set up for you. However there is one key difference
– it allows an investor to hold much a wider range of investments.
A Self-Directed IRA, or any other Self-
Directed personal retirement account (such
as a Self-Directed 401K), gives a person
complete control over their investment
choices. Therefore, unlike far more common
bank, broker & mutual fund IRAs and 401K
accounts, they’re not limited to just CD’s or
the stocks, bonds, or mutual funds sold by the account custodian.
This means people who want to invest in YOUR BUSINESS can place
some portion of their retirement account funds, as an investment, into your
venture. (It also opens up a lot of other alternative assets for investment
such as real estate, limited liability companies, gold and much more.)
Since this is all done within their Self-Directed retirement account there are
no withdrawal taxes or penalties when making the investment. In addition
the tax-deferred growth that is allowed in all IRA, 401K and other types of
personal retirement accounts remains intact.
The result is a true win-win situation at the outset for you and your investor;
of course making their investment profitable over the long run for them is
up to you.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 6
It is both a privilege and a responsibility to be trusted with part or all of
someone’s retirement account assets. Helping your investor get a good
return on the money invested is what it’s all about when you do this. It is
important to bear that in mind.
However, if you have a good idea and an honest heart, then do not let that
responsibility worry you. Just be up front about the potential risks involved
as you move forward. In most cases it will be appropriate to create a
disclosure document, usually referred to as a PPM, to disclose details
about your venture, as well as any possible risk factors that might apply.
You can use a good template, such as the ones I have available at
https://www.investorsformybusiness.com/templates to get that done.
Then move forward and take action! There is something about being kind,
helpful and honest, combined with taking action, that just seems to work.
That has always been true in my experience – and my guess is that the
same is true for you.
One action to take every time you speak
with a potential investor is to ask about their
retirement accounts. Ask them, in particular,
if they have an IRA or a 401K.
If they do, ask them if they might like to get a
better return on those assets.
Ask them about their retirement accounts.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 7
Self-Directed
Individual Retirement Account Overview
In 1974 the US Congress passed the Employee Retirement Income
Security Act (ERISA) which is the law that makes individual IRA, 401(k)
and other types of Self-Directed Individual Retirement Accounts possible.
The controlling law can be found in IRS Code Sec. 401, IRC 408. For more
information on this see: https://ira123.com/learn/irs-rules/ and
https://www.law.cornell.edu/uscode/text/26/408.
Authorized Retirement Account Custodians: A Self-Directed
individual retirement account is created by a written document. The
account trustee or custodian must be:
(a) A bank,
(b) A federally insured credit union
(c) A savings & loan association,
(d) An entity approved by the IRS
to act as trustee or custodian.
///
///
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 8
Types of Self-Directed
Individual Retirement Accounts
Types of Self-Directed Retirement Accounts You Can Access: Always
ask potential investors if they have one of these accounts. In most cases
they can be transferred to a Self-Directed account & used in your venture.
Traditional IRA
Roth IRA
SEP IRA
SIMPLE IRA
Keogh
401(k)
403(b)
Profit Sharing Plan
Qualified Annuity
Coverdale Education Savings
Money Purchase Plan
Defined benefit Plan
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 9
Benefits for Your Venture
When Using This Option
There are many reasons to consider accessing retirement account funds
for your potentially profitable venture, but here are the two primary ones:
(a) It is a fairly easy thing to do
(b) There is a lot of money available in retirement accounts
$5 Trillion: In the United States it is
currently estimated that IRA and other
retirement accounts hold nearly 5 trillion
dollars in total. That figure is according to
the Employee Benefit Research Institute.
You Can Use it Too: Wall Street Brokers
tap into this big pool of funds all the time
but it can easily get overlooked when
people raise private money for their own
ventures. Regardless of what others do, though, when raising investor
capital for your venture it is important to consider this funding source!
Investing IRA $ without Early Withdrawal Penalties: People invest
retirement account funds in private investment offerings all the time
without creating an early withdrawal tax penalty or taxable income.
You can easily set this up for your venture. More follows on this.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 10
Just One Investor Can Make the Difference: Just one IRA or other
type of retirement account investor
may be enough to reach the
minimum funding level you set for
your own business or real estate
venture so you can get it launched.
Done Every Day: Money is invested every day in private investment
offerings (like yours) via Self-Directed Retirement Accounts for
business and real estate ventures.
Keep the Investment Inside a Retirement Account: To use
qualified retirement funds in your venture without creating a tax
liability or an early withdrawal penalty the investment itself remains
inside the retirement account. This is done by transferring the IRA or
other retirement funds to a Self-Directed retirement account.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 11
Using Your Own 401K: Companies such as Guidant Financial
(http://www.guidancefinancial.com/) can also help you invest your own
retirement account funds directly into a venture you want to
fund, typically using your own 401K funds if you have them.
Certain Rules Apply. One rule is that you can’t invest
your own IRA or 401(k) money into a business in which
you a have 50% or greater interest. And you can’t derive
an immediate personal benefit from making an investment
into your own company or any other company.
Get Advice: Speak to your retirement account custodian
before proceeding if you do choose to invest your
retirement funds into your own venture. See
https://www.guidantfinancial.com/financing-solutions/401k-business-financing/
Benefits to Your Investor when
Using a Self-Directed Retirement Account
Diversification: Self-directed retirement account funds can be invested
directly into an extremely wide variety of investments.
Allowed investments include real estate, first and
second trust deeds, small businesses, personal
loans, foreclosures, gold, and many other alternative
types of investments not typically offered by banks or
commission-driven investment brokers.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 12
Better Control: Most retirement account investors are interested in growth.
Quite often the only option they have for that is the stock market, so they
miss a lot of other potential opportunities, such as your venture. A self-
Directed retirement account gives them better control & a lot more options.
Investing with YOU: Once a Self-Directed retirement account is set up it's
easy to use it to buy and hold private investments. A third-party investor
can easily use it to invest with you in the startup business, internet
marketing venture or commercial real estate opportunity you’re offering.
More Benefits: There are several other benefits that accrue to your
investors when they use a Self Directed retirement account.
No Early Withdrawal Penalties:
A Self-Directed retirement
account enables your investor to
invest in your private offering,
and in other investments of all
kinds, without incurring any early
distribution taxes or early
withdrawal penalties.
Tax-Deferred Investment Growth: Profits generated from an
investment made inside a Self-Directed retirement account will flow
back into your investor client’s retirement account and continue to
grow tax-deferred, or tax-free in the case of a Roth IRA, helping them
build a nest egg for the kind of retirement they want.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 13
Transfer and Rollover Options: A Self-Directed
retirement account can be funded by transferring or
“rolling-over” funds from any of your investor client’s
existing retirement accounts or plans, such as an
IRA, 401K, Roth IRA, SEP IRA, Keogh, 403b, etc. Of
course they can also fund it by making an initial
contribution. (See: https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-
retirement-plan-and-ira-distributions)
Advisers Available: Although your investor clients will have complete
control over the investments they select, they do not need to make all
investment decisions alone. Outside fee-based professional advisers (as
opposed to commission driven investment brokers) can assist them with
their investment choices and help answer questions.
Fees & Costs to Switch to a Self-Directed Retirement Account: Fees
vary from one Self-Directed IRA Account Company to the next; however
many of them have low fees which are structured in one of two ways:
(a) Asset-based-holding &transaction fees. IRA Services Trust Co.
(https://www.iraservices.com/) is an example of this type of fee structure.
(b) Fixed fees. A few companies offer a fixed annual fee that remains
the same, regardless of how large your investor client’s account is
or how many transactions they place during a given year. This
may to be more expensive in the early years when investors are
putting money into their retirement accounts.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 14
Guidant Financial (https://www.guidantfinancial.com/) for example has a
fixed fee structure. They do not charge holding or transaction fees
and instead charge a fixed annual fee.
Services Provided by
Self Directed IRA Custodians
Keep Records: Self-Directed
Individual Retirement Account
Trustee / Custodians (Custodians)
must maintain a record of all
transactions that pertain to the assets
in a given retirement account and file
required IRS reports.
Statements and Other Services:
Those custodians are also responsible to issue client statements and
perform various other administrative and accounting duties. They’ll also
help with other services, such as transferring assets & explaining rules.
Deal with Established Companies: It is important to deal with established
IRA Custodian companies with a good reputation. They hold assets,
sometimes for decades, and they are responsible to provide services to
clients for the life of an IRA or other retirement account. In exchange they
earn certain fees which allow them to operate as a profitable business.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 15
In House Investments Offered by Some Custodians: Some Self-
Directed IRA Custodians also offer a selection of standard in-house asset
types that the account owner can choose as an investment. Those assets
may include more customary types of investments typically sold on Wall
Street, such as stocks, bonds, and mutual funds.
Other Investments Permitted: All Self-Directed IRA Trustees and
Custodians must, by definition, permit the account owner to make other
types of investments, including loans, private equity, privately offered
shares in a small company, or participation in a real estate venture.
Your Venture is Allowed: The overall range of permissible
investments in a Self-Directed retirement account is in fact quite
broad, and can certainly include an investment in your venture.
Investment Stays In Tax Protected Account: So to be clear a Self-
Directed Retirement Account allows an investor to hold non-standard
investments within their IRA or other personal retirement account.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 16
Investments: Allowable Investments
include private offerings, secured real
estate promissory notes and many
others; whereas “regular” IRAs are
typically limited to bank CDs and
traditional Wall Street investments
like stocks, bonds, and mutual funds.
Two Kinds of Investments Not Allowed in IRAs: Two types
of investments are not allowed under ERISA and IRS Codes.
Those two specifically excluded investments are:
(a) Life Insurance Contracts
(b) Collectibles like art, jewelry,
coin collections & such.
So congress apparently found it
easier to identify which investments are not permitted!
Can’t be of Immediate Personal Benefit: The investments held must be
real. They can’t be used to drain IRA money for vacations and such.
Everything Else: Everything except the above two specifically excluded
types of assets are allowed as investments in Self-Directed retirement
accounts.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 17
Self Directed
Retirement Account Companies
Third Party Trustee Required: IRS rules
require that either a qualified trustee or a
third party account custodian hold the IRA
assets. Basically, a retirement account
trustee or a third party custodian holds the
retirement assets “for benefit of” the real
owner of those assets.
There are a lot of companies that offer
this service.
Some also offer Third Party Administrator (TPA) services, which may be
helpful for really large retirement account assets or useful if large annual
contributions are made using less common types of retirement plan such
as a Defined Benefit Plan or a Money Purchase Plan.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 18
List of Self-Directed Custodians: Here is a partial list of companies that
offer Self-Directed retirement account services:
Self Directed IRA Custodians with $2 Billion or More in Assets
IRA Services Trust Company ...... (https://www.iraservices.com/)
The Entrust Group ....................... (http://www.theentrustgroup.com/)
Pensco Trust Company .............. (https://www.pensco.com/)
Equity Trust Company ................. (https://www.trustetc.com/)
Millennium Trust Company .......... (http://www.mtrustcompany.com)
Provident Trust Group .................. (https://trustprovident.com/)
Trust Company of America .......... (http://www.trustamerica.com/)
Self Directed IRA Custodians - $500 Million to 2 Billion in Assets
Advanta IRA (TPA) ..................... (http://www.advantaira.com/)
GoldStar Trust Company .............. (http://www.goldstartrust.com/)
Midland IRA (TPA) ....................... (http://www.midlandira.com/)
New Direction IRA (TPA) ….......... (http://newdirectionira.com/)
NuView IRA (TPA) ……………….. (http://www.nuviewira.com/)
Self Directed IRA Services, Inc. ... (http://www.sdiraservices.com/)
SunWest Trust Company ............ (https://www.sunwesttrust.com/)
Vantage IRA (TPA) ..................... (http://www.vantageiras.com/)
Others Custodians (Less than $500 million or not disclosed.)
American IRA (TPA) ................... (http://www.americanira.com/)
Quest IRA (TPA) ......................... (http://www.questira.com/)
Next Generation Trust Services... (http://nextgenerationtrust.com/)
American Estate & Trust .............. (https://www.americanestatetrust.com)
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 19
Companies I’ve Used: IRA Services Trust Company, Entrust and Pensco
Trust Company are among those I’ve used. All three are responsive &
reliable, as were others I used. You of course should make your own
investigation concerning which one best suits you & your investor.
Do NOT Have Investors Directly Withdraw Funds: Best practice is
for your investor clients to not ever take personal control of retirement
account money they plan to invest in your venture. Instead they
should keep their retirement account funds inside the Self-Directed
retirement account they are using and have the plan custodian make
the investment on their behalf. That is because if the funds are
withdrawn that will can create a tax liability for your client. If they are
under age 59 and a half there is a 10% early withdrawal penalty as
well. There are exceptions, though, and more on this follows below.
Inherited IRA Exception: If
your client has inherited an
IRA from a non-spouse, then
even if he or she is under
age 59 1/2 that investor may
not have to pay the penalty
tax on amounts withdrawn.
Deceased Spouse IRA: If your investor inherited an IRA from a
deceased spouse they have other options to access those
funds without withdrawal penalties. See this link:
https://www.thebalance.com/i-inherited-an-ira-from-my-spouse-what-are-my-choices-2388695.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 20
Selecting a
Self-Directed IRA Custodian
CYA – But They Worked Well for Me: Choosing a good Self-Directed IRA
custodian is important and I already mentioned several I’ve used with
excellent results, although of course I can’t and don’t warrant their products
or services. Information here is for educational purposes only.
Must be U.S. Based Firm: IRA
assets are required by law to be
held by a licensed custodial firm
set up in the United States for the
exclusive benefit of the account
holder or their beneficiaries. The
firm you select must meet that
requirement.
Other Requirements: The
complete list of requirements to
become a retirement account
custodian as set forth by the U.S.
Government is available
at:https://www.gpo.gov/fdsys/pkg/CFR-2008-
title26-vol5/xml/CFR-2008-title26-vol5-sec1-408-2.xml.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 21
More Information: As another reference see IRS Publication 590, the IRS
document that lays out rules for IRAs. It’s a bit long at 114 pages but those
interested can see it here: http://www.irs.gov/pub/irs-pdf/p590.pdf.
Avoiding Custodian Fraud: Best practice is to use long-
established, financially strong account custodians. Being
approved by the IRS to act as trustee or custodian does not
carry guarantees of proper handling of investor client funds.
Rare Rotten Rascals: There have unfortunately been some
rare cases of fraud and theft by
IRA custodians. For that reason it
is important to do some checking
on your own, especially as to
licensing, assets held, reputation
and their years in business before
referring your investor client to a
Self-Directed retirement account
custodial firm.
Fraud Example in the News: This really is a vey rare
occurrence; however one possible fraud example that was in
the news just a few years ago concerns fraud and theft charges
leveled against American Pension Services and its founder.
For more information – AND IT IS A SAFE LINK - go to:
https://www.sec.gov/litigation/complaints/2014/comp-pr2014-86.pdf and
http://www.apsreceiver.com/.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 22
Things to Look For
When Selecting an Account Custodian
Some are Better: There are differences between the available account
retirement custodial firms. When deciding which Self-Directed IRA
custodian is going to be the best fit for your venture, and for your investor
clients, you will want answers to some very specific questions which are
suggested just below.
Do Your Homework: Many of these questions can be answered simply by
visiting the Self-Directed retirement account custodian company websites:
(1) Do they accept Private Placement offerings as an approved
investment? If so how what is the process to get your venture
approved so that your investor client
can use those retirement account
funds in your venture?
(2) Is the Self-Directed Retirement
Account trustee or custodian properly
licensed to act as a custodian for
your investor client’s IRA or other
type of approved retirement account?
(3) Will your investor client’s
un-invested cash be FDIC insured?
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 23
(4) Are there any alternative investment types the account custodian
will not allow, and if so where does your venture fall with regard to
that question.
(5) What are their fees?
(6) How long have they been in business?
(7) What is their typical turn around time for investment authorization
requests?
(8) What is their typical turn around time for check requests?
(9) What type of support do they provide for you as the investment
company they are funding with your investor client’s money and
what type of ongoing support do they provide for your investor
clients?
(10) How many clients do they currently have?
(11) As of their last audited financial statement, what was the ‘then-
current’ dollar value of assets under their control.
(12) Do they have online client references and testimonials that
discuss their service?
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 24
Don’t Get Held Up by Slow Processing: You will not want to wait weeks
for an investment check to arrive so be sure when choosing the custodial
firm you intend to use to ask question # 7 shown above!
How it Works
Overview: The process of working with a Self-
Directed IRA custodian to bring capital into your
venture varies a bit, depending on the custodial
firm you and your investor client use. Here is a
general overview.
98% Not Self-Directed: First, keep in mind that while most all
retirement accounts can be easily transferred to a Self-Directed
retirement account custodian, only about two percent (2%) of
retirement account assets held in the United States are actually in a
true Self-Directed retirement account.
Mistaken Claims – Ability to “Direct” Limited to Mutual Funds:
Some mutual fund IRA account custodians, or their representatives,
may say clients can “direct” their investments when in fact their choices
are limited to mutual funds offered by that mutual fund company.
Actual Control: In a true Self-Directed retirement account investors
actually do control their funds and can choose – as already noted -
from a wide range of non-standard investments, including private
equity, private debt, real estate, and of course your venture!
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 25
First Thing - Transfer or Rollover Funds to New Custodian:
Most all of the several trillion dollars held in retirement accounts
(again about 98% of it) are not held in a Self-Directed
retirement account so in most cases the first thing to do is
transfer or rollover your investor client’s IRA, 401K or other
retirement account to the Self-Directed retirement custodian
you have jointly agreed to use. (See below.)
Transfer: If your investor client’s funds are in an IRA then
the process is referred to as a “transfer” of IRA assets to
a custodian such as IRA Services trust Company
(https://www.iraservices.com/).
Rollover: If your investor client’s funds are in a 401K the
process is referred to as a “rollover” of all or part of his
401K assets into a Self-Directed IRA account. His current
401K plan custodian will have to tell him if an IRA
“rollover” is or is not allowed.
Self Directed 401K: An investor can also select a custodian
such as The Entrust Group that offers a Self-Directed 401K
http://www.theentrustgroup.com.
First Convert to Cash: When transferring or rolling over retirement
account assets have your investors sell stocks, mutual funds, bonds
or other assets held in their “normal” IRA. That way the cash (and not
the assets) is what is transferred to the new account custodian.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 26
Cash-Out Phone Call: To convert his retirement account assets to
cash simply have your investor call his current IRA custodian. He
should tell them he wants to sell his assets and hold the money in a
cash account for transfer or a rollover & then follow their instructions.
One an investor’s retirement account assets have been liquidated
they will then be transferring liquid funds for use with your venture!
Use Direct Transfer: Best
practice is for the transfer of
cash or assets to go directly
from one retirement account
custodian to the next without
passing through the hands of
your investor client.
Avoid Using the 60 Day Rule: There is a “60 day rule” that
may allow an investor to briefly take personal control of funds
being transferred to another retirement account custodian.
However, using it incorrectly could result in taxes and penalties.
“Missing the Boat” Risk: If your investor client uses the
60 day rule then “misses the boat” – meaning they fail to
return the funds to a qualified retirement account within 60
days, withdrawal penalties and income taxes will probably
have to be paid. For more information on the 60 day rule go
here: https://www.investopedia.com/articles/retirement/06/rollovermistakes.asp
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 27
401K Rollovers
Simple Procedure: As a general rule 401K assets can be easily “rolled
over” into a Self-Directed IRA if your investor client is no longer working for
the same company that he was employed with when his 401K was funded.
If Still with Same Company: If your
investor client is still working for the
same company that funded his 401K
then it will depend on how the plan
documents are written. In many cases
rollovers are allowed even while the
employee is still with the firm that is
currently funding his 401K. However
some plan documents will prohibit an IRA rollover while the investor
remains employed with the same firm. If that is the case it will probably not
be possible to access those particular funds for your venture.
403(b), Money Purchase and other Retirement Plans: if your investor
has another type of plan, such as a 403(b), a defined benefit purchase plan
or money purchase plan, ask them to check with their plan custodian about
the rules that govern that particular plan.
Less Common Plans Can Be Used: In almost all cases the less
commonly used types of retirement account plan funds, such as a
Money Purchase Plan, can be made available for your venture.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 28
Some Custodian Representatives
Don’t Know the Rules: If your
investor client has a 401K plan with
an investment firm or broker where
commissions are generated, it is
quite possible their representative will
simply say “NO” without even looking
at the plan documents. If that
happens have your investor client
speak directly with the top plan
official. They should ask for the exact
wording that prohibits a 401K
rollover. A prohibition might not exist
and the 401K can be rolled over.
Getting Your Offering Documents Approved
Documents Approval: Self-Directed retirement account custodians must
review and approve your offering documents before they will send you
money from a client’s retirement account custodian. It is just a matter of
emailing them to the account custodian. They will also want to see a blank
copy of the proposed investment contract (subscription agreement) that
you intend to use.
Suggest Use Templates: If you use the templates offered for sale on
my website, and properly complete them, your offering documents
will likely be approved by the Self-Directed IRA account custodian.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 29
Merits of the Deal Not a Factor for Approval: Self-Directed
account custodians will not analyze the relative merits of your
deal. They simply need to confirm that certain requirements
have been met, such as confirming that your offering is for a
properly formed business entity, and that the investment
documents otherwise meet certain normal standards.
If Not Approved: If, for any reason, your offering documents
are not approved the account custodian will let you know what
is needed. Once those concerns are resolved your offering
documents will then most likely be approved.
This breaks down into three main steps:
(1) Have the Self-Directed account custodian
approve your offering documents.
(2) Have the investor sell stocks or other
assets held by the former custodian.
Once sold and cash is sitting in the old
“regular” retirement account tell your
investor to transfer all of it, or at least as much money as
needed for an investment with you, to the new Self-Directed
IRA account custodian they’re now using.
(3) Have your investor client sign and send in the investment
paperwork.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 30
Detailed Overview of Process
(a) Your investor agrees to place retirement
account funds into your venture and you
get your offering documents approved
by the retirement account custodian.
(b) Your investor uses the new account form
supplied by the Self-Directed custodian
to set up his Self-Directed retirement account. He also uses their
’Transfer Form’ to instruct the old retirement account custodian to
send the money to the NEW Self-Directed account custodian..
(c) When your investor buys into your venture using his Self-Directed
retirement account the vesting will read something like this:
ABC IRA Services CFBO ‘John Doe’ IRA.
(“CFBO” means “Custodian For Benefit Of”)
(d) Your investor client fills out and submits an investment authorization
form to the Self-Directed account custodian. The investment
authorization form says exactly what he or she is investing in, where
to send the money and etc. He submits it with his signed investment
contract for placing funds into your venture, which you also signed
showing that you will accept his investment. That document is usually
referred to as a “Subscription Agreement”.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 31
(e) The Self-Directed retirement account custodian then reviews and
authorizes the investment. Once it’s approved the account custodian
then physically signs the investment agreement (the investment is
held inside the retirement account) for benefit of the investor.
(f) The Self-Directed retirement account custodian then sends the
agreed upon amount of money to you for use in your venture, along
with a copy of the signed subscription agreement.
(g) You send the account custodian a Stock Certificate, Membership
Certificate, promissory note or other document that identifies what
type of investment was sold to your investor. You also send copies to
your investor client.
IRA Ownership Vesting Examples
“Custodian for Benefit of”: To expand on a point made earlier, ownership
interest when using a Self-Directed retirement account is typically titled:
Account Custodian Name CFBO: First / Last Name – IRA Account Number.
Example: As an example lets assume you have an investor client
named Robert C. Smith. Lets further assume Mr. Smith used IRA
Services Trust Company as his retirement account custodian when
he made an investment in your venture through his Self-Directed IRA,
IRA account # 123456.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 32
“CFBO Robert C. Smith”: Given the above example, the ownership
interest of Mr. Smith in your venture would be titled as follows:
IRA Services CFBO: Robert C. Smith, IRA Acct # 123456.
Money held in a Self-Directed Retirement Account, as in this
example, is considered by the IRS to be in a tax protected retirement
account and is therefore not subject to withdrawal or tax penalties.
Don’t You Do It, Billy: “Don’t You Do It, Billy” is a quote from a movie
about Billy the Kid. It’s a scene where ‘The Kid’ makes unnecessary
trouble. If Mr. Smith in the above example did withdraw money from his
IRA, put it into his bank account and write you a check, that also could
cause trouble. The reason is that it would be a “Taxable Event”. Moreover,
if Smith were under 59 ½, taking money out of his retirement account would
probably also create a 10% early withdrawal tax penalty for him. That
would be in addition to the “taxable event”, i.e. in addition to a requirement
for him to pay taxes on the withdrawn funds. Ouch!
Notice that in the first example
Mr. Smith did not take money out
of his IRA, put it into his personal
checking account and write you
a check. Instead the money
comes directly to you from his
retirement account custodian. So
there is no taxable event.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 33
Where to Find Investors
with Retirement Account Assets
In each of the following investor list categories you’ll find people with
significant amounts of IRA or other Retirement Account Money. There is a
lot more information about finding & working with investors in my Core
Training videos. See: https://www.investorsformybusiness.com/core-training3/
(1) Friends, Family and Co-workers:
Many people you’re personally acquainted
with have will IRA & retirement account assets.
(2) Angel Investor Groups: Most Angel
Investors have substantial assets in retirement
accounts and it is entirely possible that an “Angel” will make an
investment in your venture using those funds. That may be especially
true if it is viewed as safe and conservative, such as a conservatively
financed real estate deal, or a venture with an already proven market
that is looking for Angel capital to expand. I suggest getting my
training about working with Angel Investors to learn more. See:
https://www.investorsformybusiness.com/angel-investor-secrets/
Make a Good Impression: If you get your private offering
approved by a Self-Directed IRA account custodian before
talking to Angels that is impressive. It demonstrates a level of
sophistication many others talking to them just don’t have.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 34
(3) Local Investment Clubs: Many or most of the people who belong to a
local investment club will also have substantial assets in retirement
accounts. Some of that money can be access for YOUR venture.
(4) Referrals: The same as said above applies to the referrals you’ll get.
(5) Local Businesses: Virtually all successful local business owners that
you know will have retirement account assets
(6) Bringing a Partner into Your Venture: If you bring a partner into your
venture you can usually access their contact list as well yours. And
again, many of those contacts are likely to have IRA or other
retirement account money which they would like to see grow.
(7) Accredited Investor Lists: These lists are available for purchase from
online resources. Moreover the 2013 Jobs Act now allows solicitation
of accredited investors within certain parameters. See
http://www.mondaq.com/unitedstates/x/264860/Securities/SEC+Amends+Rule+506+To+Permit+Ge
neral+Solicitation+In+Securities+Offerings and
http://thecaliforniasecuritiesattorneys.com/2013/07/12/sec-approves-advertised-rule-506-offerings-
bruce-e-methven.
Accredited & Non-accredited Investor Definition: See
respectively: https://www.sec.gov/fast-answers/answers-accredhtm.html
and https://www.investopedia.com/terms/n/nonaccreditedinvestor.asp for
definitions of those terms.
This Works: Entrepreneurs “in the know” do this successfully every day!
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 35
Case Studies &
Real Examples
Case Study in Core Training: In the Core Training offered on my website I
include a case study, as well as a lot more information about finding
investors. There’s a 30 day guarantee and it is definitely worth getting. See:
https://www.investorsformybusiness.com/core-training3/
Summary
Quick Review: Here is a quick summary of the main points:
Not Just for IRAs: IRAs are one of the oldest types of retirement
plans. There are in addition many other kinds of Self-Directed
retirement plans that can be accessed to fund your venture.
Tax Advantaged Investing: Investments made in your venture
through a Self-Directed retirement plan are tax-deferred or grow tax-
free, depending on the type of plan.
Wide Range of Options: With a Self-Directed traditional IRA, as well
as other types of Self-Directed retirement
plans, the investment options can go beyond
common Wall Street offerings, while still
retaining all of the benefits of an IRA or other
qualified plan. That can include the option for
the investor to place funds in your venture.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 36
Huge Pool of Potential Resources: The Employee Benefit
Research Institute estimates that IRA and other types of private
retirement accounts in the USA hold about 5 trillion dollars in total.
You Can Use It Too: Wall Street investment brokers tap into
retirement account assets all the time. With this information you too
can easily access IRA or other kinds of retirement account funds held
by a willing & interested investor to fund YOUR venture.
Your Personal Investments & Investment Objectives
Although this training is all about showing folks how to raise private
capital for their own ventures, you or others may instead be reading
this more as a guide for investing your own money. If so, it might
make sense for us to connect on that level.
*One of the lessons I’ve learned over the years
is the importance of maintaining the safety of
invested capital because lost capital gets harder
to replace as we get older. From time to time I
may have investment opportunities available. If you want to know
more about this please, respond to the brief survey on my website
and I’ll send a short personal note in response. The url for it is
http://www.investorsformybusiness.com/investors-survey/ *This is not in any way whatsoever a solicitation for money nor an offer to sell an investment. Investments, if any
are offered and / or sold, will be offered and sold only to those persons or entities who meet the requirements of that
particular offering in advance, and will be offered and sold ONLY by written prospectus. No offers to invest will be
made or accepted via public or online formats of any kind, but you can learn more about this if interested.
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 37
Self-Directed
Retirement Account Form Examples
Please note: I am not employed by, affiliated with or associated with IRA
Trust Services Company or with any other retirement account custodian.
The attached forms are for example
purposes only. For a complete set of the
forms needed to set up a new Self-
Directed IRA account with IRA Services
Trust Company use these links:
https://www.iraservices.com/.
https://www.iraservices.com/sites/default/files/downloads
/Investor%20Kit.pdf .
There are many other Self-Directed retirement account custodians to
choose from. I recommend looking at several before moving ahead.
- - - - - - - - - - - - - - - - - - - - - - - -
In closing, the information provided here gives you a significant advantage.
Many other people have accessed investor retirement account money to
fund a business or real estate venture, including internet marketing-based
ventures, and as I already said, you can too, if you put your mind to it.
With best wishes to you for joy in life & success in business,
Patrick Dague
PS. Knowledge is power – use it wisely!
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 38
Form Examples - IRA Trust Services
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 39
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 40
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 41
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 42
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 43
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 44
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 45
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 46
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 47
© 2018 By G. Patrick Dague www.InvestorsForMyBusiness.com 48