Investing Your IRA



Investing Your IRA - Real Estate

How do I purchase real estate with my IRA?

Please refer to the following checklist for step-by-step instructions on purchasing real estate with IRA funds: Real Estate in an IRA.

How should my IRA-owned property be titled?

Title is held in the name of “Madison Trust Company Custodian FBO [Your Name]”.

How do I pay real estate expenses (such as taxes, insurance, etc.)?

All expenses associated with your IRA investment must be paid for with IRA funds.

You will instruct Madison Trust Company to pay expenses by completing an Expense Payment Request Form. You will attach a bill or invoice to ensure that the payment is delivered to the appropriate address. To protect your account from fraud, Madison will process the request after receiving verbal confirmation from you.

Alternatively, the IRA LLC can retain the services of a management company to manage the property, pay expenses and receive property income.

How do I deposit rental income into my IRA?

Please complete a Deposit Information form notifying Madison Trust of the incoming funds.  In Section B, please select “Deposit from Investment” so that deposit is classified correctly.

I need additional funds to purchase a property. Can I obtain financing?

Yes, you may obtain financing; however please keep in mind the following:

  1. The loan should not be issued by a Disqualified Person as that would constitute a prohibited transaction with negative tax consequences. 
  2. Additionally, the loan must be non-recourse. This means that the loan is backed by the property and not by the borrower personally. One cannot personally guarantee a loan issued to their IRA as that would constitute a prohibited transaction. 
  3. Lastly, when an IRA uses leverage to purchase an investment then the earnings attributable to the leveraged portion are subject to UDFI (Unrelated Debt Financed Income) and the filing of Form 990-T is required. 
Can I live in a home which I purchase with my IRA funds?

No. 

All investments made by your IRA are to benefit your IRA exclusively and not yourself personally. Living in the home violates IRS rules and would constitute a Prohibited Transaction. 

How do I make an earnest money deposit?

You will provide a copy of the Purchase Agreement along with an Investment Authorization form to Madison Trust. Madison will forward the earnest money deposit to your broker or escrow agent.

Who signs the closing documents?

You will sign the closing documents in your capacity as the accountholder. Madison Trust Company will sign the closing documents as well, in its capacity as custodian. 

Does Madison Trust Company file the Deed with the county clerk’s office?

No. It is the accountholder’s responsibility to ensure that the Deed is recorded with the county clerk’s office where the property is located, although this is usually handled by the escrow agent/attorney.

How do I sell a property to a third party?

IRA owned property should only be sold to Non-Disqualified Persons. You can find a list of Disqualified Persons here.

Please refer to the following checklist for information on selling a property owned by your IRA to a third party: Selling Real Estate Flowchart.

How do I distribute a property to myself personally?

Please provide Madison Trust with the following items:

  1. Property Appraisal prepared by a licensed appraiser
  2. Draft of deed showing change of ownership
  3. Distribution Request

Madison will return the fully signed Deed to you for recording at the appropriate county clerk’s office and will issue a form 1099-R the following January.

Can my IRA invest in a Real Estate company?

Yes, your IRA can invest in a Private Placement or an LLC which conducts real estate transactions.

Does Madison Trust require a property appraisal on an annual basis?

No. We will reach out to you in January to request a year end value of your property. You can provide us with the approximate market value of the property in lieu of an appraisal.



Investing Your IRA - Private Placements

How do I invest my IRA into a Private Placement?

Please refer to the following page which provides step by step instructions on investing in a Private Placement with IRA funds.

How should my investment be titled?

Your investment should be titled as follows: “Madison Trust Company Custodian FBO [Your name][Your MTC Account #]”.

How do I liquidate my private placement investment?

You will contact your investment sponsor to complete their Redemption paperwork. Please forward the redemption paperwork to Madison Trust for countersignature. Your investment sponsor will send the proceeds to your Madison IRA.

How does my IRA fund a Capital Call?

You will complete an Investment Authorization form and provide us with a copy of the Capital Call Notice. If a Capital Call Notice is unavailable, then you can provide a Letter, Notice or an additional Subscription Agreement from your Investor Sponsor.

Where will my investment sponsor send dividends?

Dividends will be issued to “Madison Trust Company Custodian FBO [your name][your MTC Account #]” and deposited directly into your IRA. 

How does Madison Trust company handle UBIT?

K-1s issued by your Investment Sponsor will show whether the proceeds of your investment are subject to Unrelated Business Income Tax.

If taxes are due, your Accountant or Tax preparer will prepare Form 990-T.

The form will be sent to Madison Trust for signature. Madison will sign the 990-T on behalf of your IRA and file it with the IRS.



Investing Your IRA - IRA LLC

What is an IRA LLC?

An IRA LLC is a Limited Liability Company funded exclusively with retirement funds. The LLC operating agreement is generally prepared by an ERISA attorney or IRA LLC Facilitator. The Operating Agreement must include language related to IRA rules and regulations. The member of the IRA LLC is titled as follows “Madison Trust Company Custodian FBO [Your Name][Your MTC account #]. The non-compensated Manager of the LLC is generally the IRA Accountholder. IRA LLCs are a convenient tool for investments that are transaction heavy or time sensitive.  IRA LLCs offer checkbook control. This means that all activity related to the IRA Investment (such as purchasing assets, paying expenses, depositing income) is handled by the LLC Manager. All transactions that are reportable to the IRS are still handled by the custodian.

How do I take a cash distribution from my IRA LLC?

Funds are moved from your IRA LLC to your Madison IRA and then distributed to yourself personally.

  1. You will issue funds from your LLC checking account to your Madison IRA using the Delivery Instructions form. Please provide a Deposit Information form documenting the source of funds. In Section B, you will select “Deposit from IRA LLC”.
  2. Please provide Madison with a Distribution Request, requesting that the funds be sent to yourself personally. 
Can I convert an LLC which I already own to an IRA LLC?

No, as LLC ownership would be shifting from a Disqualified Person to an IRA Asset (constituting a prohibited transaction). Also, the LLC paperwork must include language related to IRS rules and regulations. The LLC Operating Agreement should be prepared by an ERISA attorney or an IRA LLC facilitator.

How do I invest my IRA into an IRA LLC?

Please refer to the following checklist which provides step by step instructions on investing in an IRA LLC: IRA LLC Checklist.

Who is the manager of an IRA LLC?

Generally the IRA Accountholder is the non-compensated manager of the IRA LLC.

Who is the member of an IRA LLC?

The IRA is the member of an IRA LLC and is titled as follows: “Madison Trust Company Custodian FBO [Your Name][Your MTC Account #]”.

Where do profits from my investments get deposited?

Profits from your investment should be deposited into your IRA LLC checking account.

How do I make a Contribution and invest it into my IRA LLC?

The Contribution is deposited into your Madison IRA and then invested into your IRA LLC.

  1. Send the contribution to Madison Trust using the Delivery Instructions form.
  2. Provide Madison Trust with a Deposit Information form to identify the deposit type. In Section B you will select “Annual contribution”
  3. Instruct Madison to invest the funds into your IRA LLC by completing an Investment Authorization form
What are my annual reporting requirements to Madison?

Madison Trust Company will reach out to you in January of each year to request the value of your IRA LLC. Madison will report this information to the IRS on Form 5498.

How do I pay expenses for my IRA LLC’s investments?

Investment expenses should be paid directly from the IRA LLC checking account.

How do I transfer funds from my IRA LLC to a different IRA custodian (other than Madison)?

First, funds must move from your IRA LLC to your Madison IRA. Then, Madison will send funds to the receiving custodian.

  1. Send funds from your IRA LLC to Madison Trust using the Delivery Instructions.
  2. Provide Madison with a Deposit Information form, documenting the source of funds. In Section B you will select “Deposit from IRA LLC”.
  3. Contact the receiving custodian and complete their non-ACAT Transfer Paperwork.
  4. Madison will send funds to the receiving custodian upon receipt of their transfer paperwork.
How do I transfer additional funds from another IRA to my IRA LLC?

First, funds must move from the outgoing IRA Custodian to your Madison IRA. Then, Madison will invest the funds into your IRA LLC.

  1. Please complete a Transfer Authorization form and attach a recent account statement from the outgoing custodian. Provide Madison with a copy of the form via Madison’s secure upload portal.
  2. Contact your outgoing custodian to liquidate the account.
  3. Provide Madison Trust with an Investment Authorization, instructing Madison to send the funds to your IRA LLC. 


Investing Your IRA - Promissory Notes

How do I issue a loan from my Self Directed IRA?

Please refer to the following checklist for step by step instructions on issuing a loan from your IRA.

Can I issue a loan from my IRA to myself personally?

No.

All investments made by your IRA are to benefit your IRA, and not yourself personally. Issuing a loan from your IRA to yourself personally is a violation of the IRC and has adverse tax consequences. 

How do loan payments get deposited into my IRA?

Payments are made by the borrower to your IRA using the Delivery Instructions form.

You will provide Madison Trust company with a Deposit Information form documenting the source of the deposit. In Section B, you will select “Deposit from an Investment”. 

How is the Lender titled on Loan Documents?

Titling is held in the name of your IRA as follows: “Madison Trust Company Custodian FBO [your name][your MTC Account #]”.

What happens if the borrower defaults on the loan?

The Lender would refer to the terms of the note and take appropriate legal action to attempt to collect the debt.

Who’s responsible to prepare a payoff statement when the loan is satisfied?

It is the accountholder’s responsibility to calculate the payoff amount and prepare a payoff statement.

What happens when the loan is ready to be repaid?

Unsecured Promissory Notes– You will provide Madison Trust with a Satisfaction of Note. Madison will sign the Satisfaction on behalf of your IRA and retire the asset.

Secured Promissory Note– You will provide Madison Trust with a Release of Mortgage or a Request of Full Reconveyance. Madison will sign the Satisfaction on behalf of your IRA. If the document needs to be recorded, then Madison will send a copy to you for recording.



Investing Your IRA - Precious Metals

What kind of metals can I purchase with my IRA?

The following is a partial list of precious metals that Madison Trust will accept: Precious Metals List.

How do I purchase metal with my IRA?

Please provide us with an Investment Authorization form instructing Madison to purchase metals on behalf of your IRA.

You will attach an Invoice from your metal dealer showing the quantity and price of the metals your IRA is purchasing.

Where will the metals be stored?

Metals will be shipped from your metals dealer to the Delaware Depository. Your IRA will maintain an account at the Delaware Depository and your metals will be stored in that account. 

How do I sell metal owned by my IRA?

The purchaser will prepare a Purchase Order showing the sales quantity and price. Please provide us with a copy of the Purchase Order along with a Sale of Asset Form. Madison will sell the metals on behalf of your IRA and deposit the proceeds into your IRA.

How do I distribute metal from my IRA to myself personally?

Please provide Madison Trust with a Distribution Request Form.

Madison Trust will instruct Delaware Depository to ship the metals to your home address.

Are there additional fees associated with holding precious metals in my IRA?

There is a $100 minimum storage fee charged annually. The $100 minimum includes the first $100,000 of investments held at the depository. Beyond that, storage fees will be billed at the rate of $1 per $1,000 of metals value.

Does Madison Trust recommend metal dealers to their clients?

No. Madison Trust is a “passive” IRA Custodian and cannot recommend Service Providers.

Have Questions?

Read our FAQs, or feel free to contact our team directly.

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3

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