When investing through your self-directed IRA, it’s always important to research the investment and do your due diligence. If you have questions about a particular investment, it would be wise to speak with a tax attorney or CPA to get their opinion. If a deal sounds too good to be true, it probably is.

The State of New Mexico has come out with a great website to give people information about Ponzi schemes and other fraudulent investments. The goal of the website is to inform the investing public about scams and give them helpful information that will allow them to make better investment decisions. The following is directly off of the website, which can be found at

http://www.redflagsnm.com.

When you consider any investment, watch out for these warning signs:

INSIDE INFORMATION:

The promoter claims to have inside or non-public information that he's willing to let you in on, but you need to keep it confidential. Trading on non-public information about a publicly-traded stock is a violation of federal securities law. Even if the info is legitimate, do you want to be party to a crime?

SECRET METHODS, BREAKTHROUGH TECHNOLOGY: He's trying to get you to act without getting an outside opinion or checking his story with the authorities.

ACT NOW or LOSE OUT: He's trying to get you to make a snap decision without thinking it through and seeing the holes in his story. If it’s a good investment, it will still be there after you've checked the promoter's credentials and done your own research on the offering.

RISK-FREE or GUARANTEED RETURNS: should also ring alarm bells. There is no "risk free" investment. Remember the iron law of investing: risk and return are inseparably linked - the higher the return, the more risk you’re taking. Low risk with high returns does not compute.

DON'T TELL ANY ONE: If the promoter urges you to keep the investment confidential, even from your family, he's afraid of what their questions may uncover.

ABOVE MARKET RETURNS: If you are promised higher profits than comparable investments, there's something you're not being told about the deal.

YOUR PASTOR (or MINISTER, or LOCAL BANKER) HAS ALREADY INVESTED: Con artists may try to convince you to invest because others you know and respect are participating. Remember, in a ponzi scheme earlier investors may appear to make money at first, but it's only cash flowing through the con from newer victims. Ultimately, everybody loses.

LIMITED to a FEW SELECT INVESTORS: The promoter may be attempting to evade securities regulations by limiting the pool of investors so he is not subject to federal or state disclosure requirements. Or he may be trying to stampede you into making an unwise decision.

What risks are involved? Don't be dazzled by the prospect of making big money on your investment. Ask about what can go wrong. What's the risk you'll lose some or all your money?Can I get a detailed explanation of this investment in writing? Don't rely on verbal promises or vague explanations. Get a clear, detailed description of your investment in writing, and make sure you understand the offering before you invest.Are you licensed to sell securities in the state of New Mexico? Individuals who sell securities or provide investment advice are required to earn a license by passing rigorous examinations before they can offer their services to the public. Those who bypass this requirement often are predators offering bogus
investments.Is this investment offering registered with the SEC or the NM Securities Division? The law requires that investments offered to the public in New Mexico must be reviewed by either state or federal regulators.

Buyer

1. You do not have to qualify for a Real Estate Contract like you do with a conventional mortgage.
2. With a Real Estate Contract, you don’t necessarily have to have a large down payment to close on the property. Your seller will likely want some sort of down payment, but it’s completely negotiable with the seller.
3. If you have no credit or bad credit, an REC gives you the chance to show that you can make payments and eventually refinance and get a mortgage.
4. Real Estate Contracts give more room to negotiate on the terms. Usually with a mortgage, the terms are set in stone, but with an REC, as long as both the buyer and seller agree, the terms can be modified however you want.
5. Close contact with your lender. With a mortgage, you are usually paying your payments to a large company, which can make them very inaccessible. By actually knowing your lender by name, you can contact him/her with any problems that you have or make them aware of the situation, if your payment is going to be late for any reason.

Seller

1. Since the buyer does not have to qualify for the loan, the seller has access to a much larger market than someone who is only willing to sell for cash.
2. Interest rates on Real Estate Contracts are often higher than the rates on conventional mortgages.
3. You can use the interest income as an investment. For instance, if you are a retired couple who owns your property free and clear, you can sell the property on a Real Estate Contract. Instead of having a bunch of cash to try to invest or letting it sit in your bank earning you next to nothing, you could sell on an REC and earn 6-7% (or whatever interest rate that you and the buyer agree upon) on your money.
4. Interest paid on the mortgage is a tax deduction. Even though a third party is buying the property from the seller, the mortgage is still under the seller’s name. The seller will get to deduct the interest paid from his/her AGI.
5. No judicial foreclosure on Real Estate Contracts. With a mortgage, the lender has to file for foreclosure, if the buyer is not making payments. With an REC, if payments are not being made, the seller can send a demand letter. If payment is still not made when the cure-default period ends, the seller may terminate the contract.

Today, I decided I would take a few minutes to talk about what is probably our most popular investment, real estate. There are lots of reasons why real estate is the most popular thing to invest in through your self-directed IRA. First, most of our clients either own their home or are in the process of purchasing or renting a home, so they’ve already got a good grasp of what is involved with a real estate transaction. Also, with real estate pricing being very low for much of the country, now might be the chance of a lifetime to cash in on some amazing deals.

Purchasing property in your IRA is not much different from purchasing property as an individual. The first step is to set up your self-directed IRA. Once your self-directed IRA is set up and funded, the next step is to identify the property that you wish to purchase and negotiate a purchase price. Once you and the seller have agreed on the terms, make sure to have the title company (or whoever is preparing your documents) title all of the closing documents to “Sunwest Trust Custodian FBO your name IRA”. Technically, the purchaser of the property is your IRA Custodian who purchases it on behalf of your IRA.

We recommend that you have a CPA or Attorney review the documents with you to make sure that all the terms of the contract are what you intended them to be when you negotiated with the seller. It’s also important to have a CPA or Attorney make sure that the investment will not be considered a prohibited transaction. If you have a question about the definition of prohibited transactions, please click here: http://www.irs.gov/irs-drop/rr-06-38.pdf.

After reviewing the documents with your attorney or tax professional, have the purchase agreement sent to Sunwest Trust for signature. Instruct Sunwest Trust to sign the documents and return them to the title company or whoever is closing your real estate purchase. If earnest money is needed, you will need to direct Sunwest Trust to send the earnest money to the title company. Earnest money is considered part of the purchase. Make sure that you do not pay the earnest money out of your own pocket because this will be considered commingling funds and therefore a prohibited transaction.

Once you have scheduled your closing date, make sure to have the title company send the documents to Sunwest Trust for signatures. If the title company needs the original documents back, please make sure to give Sunwest Trust time to sign the documents and get them returned in a timely manner. We can always send documents via FedEx if necessary; just instruct us on what you would like us to do. The signed documents will serve as your proof of investment and we can either wire the money to the title company or send them a check, whichever you would prefer.

I hope this entry was helpful. If you would like to see a checklist of how to purchase or sell real estate out of your IRA, click on “Self-Directed IRAs” at the top of the screen and then click on “Real Estate Checklist” on the left-hand side of the screen.

This past year we’ve done a number of new things to improve the overall health of our company.  The biggest thing was working with a company called The Solutions Group.  They provide an online program in which you earn “Life Points”.  Life Points can be earned for many different things, such as cardio sessions, blood donation, dental exams, reading self-improvement books, participating in organized runs/bicycle rides, quitting smoking, etc. 

The emphasis of the program is not only to be physically fit, but to also live a balanced life and be mentally healthy too.  Each item on the list is assigned a Life Point value and each time we reach a certain goal we earn gift cards, cash, extra days off from work and other prizes.  Sunwest Trust pays for 100% of the program, which also included a risk assessment and blood tests before we started the program.

For the past few years we have had a workout room in our office that was equipped with cardio equipment for cycling and running/walking, but this year we decided we had out grown that space.  We decided to expand to a larger room and build an entire training facility.  The workout room is complete with kettle bells, TRX, medicine balls, dumbbells, Physioballs, balancing discs, resistance bands, etc. 

Twice a week we have a personal trainer come to our office right after work to teach Circuit Class.  In the classes our trainer emphasizes core strength and cardiovascular exercise through a series of stations that use bodyweight resistance.  The classes are open to all employees and their families.  The classes have become so popular that we may have to tear down another wall in the workout room to accommodate everyone.

A couple of our employees are unable to participate in the Circuit Classes because of certain physical conditions.  For these employees we have another personal trainer that comes in during office hours to do one-on-one sessions that are specific to their needs.  We want to make sure that no one is being left out.

We still provide monthly free healthy lunches and chair massages for all employees, which have always been a favorite around here.  Our masseur has even told several of our more devoted Circuit Class attendees that they feel much more “muscle-y” lately.  In addition to the monthly lunches we also do several healthy pot lucks a year.  Each employee brings in their favorite healthy dish and is encouraged to share the recipes with everyone.

Sunwest Trust sponsors a soccer team and a softball team that many of our employees play on.  We also participate in several organized Run/Walks throughout the year.  Our favorites are the Run for the Zoo and The Race for the Cure. 

We also still provide full healthcare and dental insurance for all employees, which sounds boring compared to all the fun this we do, but definitely an important part of our company’s overall health.

We had our first annual Sunwest Trust Chili Cookoff last week and I wrote about it in our monthly newsletter. We have had a ton of requests for the winning recipe. Here is Cary & Marisa's winning recipe. Enjoy!

Cary & Marisa's Chili Recipe:

Ingredients:

6-8 slices of bacon

2 pounds of ground beef

1 large onion (white, chopped)

1 large green bell pepper (chopped)

4 cloves of garlic (finely chopped)

¼ cup of chili powder

1 tablespoon ground cumin

2 teaspoons paprika

2 teaspoons dried oregano

2 tablespoons tomato paste

12 ounce bottle amber beer

2 tablespoons unsweetened cocoa powder (if you can find cocoa chili powder use that)

1 28-ounce can whole plum tomatoes (crushed by hand)

1 ½ cups of beef broth

2 15-ounce can chili beans (undrained)

1 tablespoon hot sauce (more or less if desired)

Cook bacon until crisp. Crumble to desired size (1/2 inch or smaller), keep 1 to 2 tablespoons of bacon grease. In a large saucepan or Dutch oven, brown the ground beef with your choice of seasoning (salt, pepper, onion powder, garlic powder). Drain and set aside. In same large pan, heat bacon grease, sauté bell pepper and onion under medium/high heat until soft (approx. 5 min.). Add garlic and 1 teaspoon salt (cook 2 min.). Add chili powder, cumin, paprika, oregano and tomato paste (cook 5-7 min.). It should look “brick red”. Add small amount of water if it starts to clump together. Add beer and simmer until reduced (about 3 min.). Stir in ground beef; add cocoa powder, tomatoes, beef broth and beans and bring to a simmer. Cook under low heat until thick (about 80-100 min.). Add hot sauce and bacon. Season with salt and pepper if desired.

Over the last month we’ve had a contest here in the office to see how many times our employees could find the phrase “Sunwest Trust does not provide tax or legal advice” on our website, YouTube channel, setup paperwork, blog, etc.  For each time that an employee found this wording, they were paid a small prize.  With one week left to go in the contest our employees have found that phrase 153 times and I’m sure that they’ll find even more this week. 

Even with all this repetition, people will still call asking for tax and legal advice.  We provide you with tons of FREE videos, blogs and newsletters that explain the IRS rules regarding IRA and 401(k) investing, but we cannot provide tax or legal advice.  Make sure to take advantage of all the free resources we provide.

Please be sure to read everything that you sign and make sure to speak with a CPA or tax professional before making any investments.  Also make sure to visit our blog and YouTube channel (http://www.youtube.com/sunwestira) for the most up to date information about IRAs and Individual 401(k)s.

Whether or not your IRA is protected if you file for bankruptcy depends on what state you live in. Click on this link to find out if you are protected in your state:
http://www.journalofaccountancy.com/Issues/2006/Jan/ProtectRetirementAssets#state

Please remember that Sunwest Trust does not provide tax or legal advice. If you have any questions about this please consult a CPA or a tax attorney.

Inherited IRAs can be handled in a few different ways, depending on the beneficiaries relationship to the deceased IRA account holder. There are three types of beneficiaries: spouse, non-spouse or non-person beneficiary. Spouse is pretty self-explanatory. A non-spouse would be anyone other than a spouse and a non-person beneficiary would be a family trust, estate, charity, etc.

If you are a spouse beneficiary, you will have the following options:

• Treat IRA as your own
• Five-year rule (must take out the entire balance of IRA within five years)
• Single life expectancy (take funds out over your life expectancy based on the IRS life expectancy table)
• Distribute as lump sum

If you are a non-spouse beneficiary, you will have the following options:

• Five-year rule
• Single life expectancy
• Distribute as lump sum

For non-person beneficiaries, they will have the following option:

Five-year rule

Here's the link to the January newsletter:

 

http://myemail.constantcontact.com/News-from-Sunwest-Trust--Inc-.html?soid=1103699411254&aid=mWDKq4f3rvI

 

If you want to be added to the email list, send your email address to dustin@sunwesttrust.com.

 

 

In a Self-Directed IRA, it’s very important how your assets are titled. If an asset is titled incorrectly, it could cause IRS problems and possibly lead to taxes and penalties. It’s important to remember that you do not own the assets in your IRA; your IRA owns them. All assets in your IRA should be titled to the correct owner, which would be "Sunwest Trust Custodian FBO your name IRA".

It’s also important to note that all documents pertaining to the purchase of any asset should be signed by Sunwest Trust on behalf of your IRA. For instance, if you are purchasing a piece of real estate, the title company will initially send Sunwest Trust a copy of the purchase agreement titled to "Sunwest Trust Custodian FBO your name IRA". When it comes time for the closing, the title company will send all of the closing docs to Sunwest Trust to sign on behalf of the IRA. The client or the title company will also need to give directions on how they would like the documents returned (i.e. overnight mail, regular mail, fax or email).

If you are using an IRA LLC, the rules are a little different. With an IRA LLC, all of your IRA funds will be held in a checking account set up for the LLC. Instead of taking title to the assets in the name of the IRA, you will take title in the name of the LLC. Since the IRA owns the LLC, the assets will still technically be owned by the IRA. The manager of your LLC will sign all documents pertaining to the purchase of an asset.

Please remember that Sunwest Trust does not provide legal or tax advice, nor do we sell or endorse any investment products. This blog is simply meant to provide general information to our clients and prospective clients.