Self-Directed IRA Custodians for Investment Crowdfunding

 CrowdFundBeat Guest Editor,

Founder & Chief Executive Officer, American Homeowner Preservation LLC

Self-directed Individual Retirement Account custodians and investment crowdfunding platforms are both proliferating rapidly. There is good reason: these custodians and platforms empower investors with direct control over where their money is invested. Instead of investing IRA funds only in stocks, bonds and mutual funds, investors can now select alternative assets such as startups, peer-to-peer loans, real estate, mortgage notes, and numerous other opportunities.

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Although most people keep their IRAs with big brokerages, many of the largest investment brokerages do not permit investing in alternative investments such as those offered on crowdfunding sites. Thus, some investors have had to move their accounts to a self-directed IRA custodian in order to participate in investment crowdfunding. There is even a custodian with crowdfunding in their name: Crowdfunding IRA.

Using a self-directed IRA is not for the investor who wants to deposit money one day and then pick it up years later in its larger form. It’s for the active, diligent investor who will be able to attend to the requirements of the investment. They include having a qualified third-party custodian to hold the assets, and ensuring that there is no self-dealing, such as investing the IRA funds in entities owned by the IRA’s beneficiary or relatives. Tax implications and other realities of investing also need to be watched and handled properly by investors who direct their own IRA funds.

Nevertheless, for an attentive investor, the benefits of directing one’s own IRA funds outweigh the downside, the housekeeping details. As more custodians automate functions and enable investors to transact online, investing IRA funds has become quicker and more convenient. Whether an investor wants to fund a start-up on Circle Up, a peer-to-peer loan on Prosper, a discounted subprime mortgage on American Homeowner Preservation, or independent film production at Indie Crowd Fund. In fact, with modest investment minimums of $25 to $10,000, you might be able to invest in all of these and several other alternative opportunities offered through the investment crowdfunding platforms.

For skeptics who think the self-directed IRA is a new twist: it’s not. Self-direction has been available since the origin of IRAs via the Employee Retirement Income Security Act of 1974. But, because the legislation required that IRA-holders’ funds be held by a custodial institution, such as a bank or brokerage house, the range of investments eventually became limited to types that those institutions customarily worked with.
Real estate, coins and other types of investments beyond stocks, bonds and mutual funds got habitually overlooked.

Since 2001, the Internal Revenue Service has explicitly permitted self-directed IRAs as a type of account that may put funds in so-called alternative investment categories. Some categories are disallowed; they include artwork, rugs, antiques, and alcoholic beverages. However, there does not appear to be a prohibition against investing your IRA monies in marijuana businesses, such as those offered on CannFundr.

To explore the transition to a self-directed IRA, investors can begin by consulting custodians of these types of funds. Here is a list of 52 (it was 50 when I started writing this) self-directed IRA custodians who are open to alternative investments:

  • Accuplan
  • Advanta IRA
  • American Estate & Trust
  • American IRA
  • Asset Exchange Strategies
  • Broad Financial
  • CamaPlan
  • Central Bank
  • Checkbook IRA
  • Crowdfund IRA
  • Equity Trust Company
  • First Trust Company of Onaga
  • GoldStar Trust Company
  • Guidant Financial
  • Horizon Trust Company
  • iPlanGroup
  • IRA Advantage
  • IRA Express, Inc.
  • IRA Innovations
  • IRA Resources
  • IRA Services Trust Company
  • IRAvest
  • Kingdom Trust Company
  • Madison Trust Company
  • MidAtlantic IRA
  • Midland IRA
  • Millennium Trust Company
  • Mountain West IRA
  • Nevada Trust Company
  • New Direction IRA
  • New Standard IRA
  • Next Generation Trust Services
  • NuView IRA
  • Pensco Trust Company
  • PGI Agency
  • Polycomp Trust Company
  • Preferred Trust Company
  • Premier Trust
  • PrimeFund
  • Provident Trust Group
  • Quest IRA
  • Real Trust IRA Alternatives
  • Safeguard Financial
  • Self Directed IRA Services, Inc.
  • Sovereign International Pension Services
  • Summit Trust Company
  • SunWest Trust Company
  • The Entrust Group
  • The IRA Club
  • UBM Banks
  • uDirect IRA
  • Vantage IRA

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