Self Directed IRA

A self-directed IRA puts you completely in control of your financial future, allowing you the freedom to invest in asset categories that you know and may understand best. The purpose of a self-directed IRA comes from the numerous investment options available. You are not limited to just stocks, bonds and mutual funds, but - with Weston Banks Wealth Partners - you are given an array of money managers.

How a Self-Directed IRA Works

Investing with a self-directed IRA isn’t very different from investing outside of a non-qualified account. There are some rules and variances to be aware of, but Weston Banks via First Clearing custodian (with nearly 60 years of self-directed IRA experience) strives to make the process easy. 

1. Establish and fund an account with Weston Banks via First Clearing. For many accounts, what you need is a signed application of First Clearing, IRA enrollment form, and a copy of your driver’s license. 
2. Identify your IRA Investment. After you’ve identified your preferred manager and are ready to make a purchase, complete a managers investment form with a Weston Banks IRA specialist. We need to make sure money is also in your account before purchase.

Choosing a Custodian- First Clearing

While your Prospera Financial Professional will be responsible for servicing you and your account, our clearing firms also play an integral role in the services we provide.  First Clearing's responsibilities include: handling the delivery and receipt of securities purchased or sold in your account; processing and executing your transactions; performing centralized cashiering, bookkeeping, and execution functions for your account; maintaining custody of all your securities and funds once they are in your account; receiving and distributing dividends and other distributions to you; extending credit margin accounts; and preparing your account statements.

SIPC Protection
First Clearing is a member of the Securities Investor Protection Corporation (SIPC), a nonprofit, Congressionally chartered membership corporation created in 1970. SIPC protects clients against the custodial risk of a member investment firm becoming insolvent by replacing missing securities and cash up to $500,000, including up to $250,000 in cash, per client in accordance with SIPC rules. (Note that SIPC coverage is not the same as, nor is it a substitute for, FDIC deposit insurance; securities purchased through First Clearing are not FDIC-insured.) For more information about SIPC, please visit sipc.org.

Excess Coverage Maintained by First Clearing
Above and beyond SIPC coverage, First Clearing maintains additional insurance coverage through Lexington Insurance Company, an AIG Company (referred to here as “Lexington”). For clients who have received the full SIPC payout limit, First Clearing’s policy with Lexington provides additional coverage above the SIPC limits for any missing securities and cash in client investment accounts up to a firm aggregate limit of $1 billion (including up to $1.9 million for cash per client). In other words, the aggregated amount of all client losses covered under this policy is subject to a limit of $1 billion with each client covered up to $1.9 million for cash.

FDIC Insurance Limits
Current FDIC insurance covers a depositor for $250,000, but through our convenient, automated service you get even more protection. At First Clearing, cash deposits are covered by FDIC insurance for a total of at least $750,000 if you are enrolled in our Bank Deposit Sweep Program.* Through this program, un-invested cash balances (principal and interest) are automatically deposited, or “swept,” into three affiliate banks. Depositors are covered for up to $250,000 per owner at the first affiliate bank plus $250,000 per account in each of the two additional affiliate banks – triple the coverage you would receive at one bank.

Rules and Regulations

If you don’t follow the rules for self-directed IRA’s, you may risk the tax-deferred status of your account. This could lead to the disqualification of the IRA and result in severe tax consequences.

Call your tax advisor or your Weston Banks IRA professional at 800-990-5581 to request a copy of the rules and regulation for self-directed IRA’s.

FAQ’s

What is a Self-Directed IRA?

Technically speaking, a Self-Directed IRA is not any different from any other IRA (or 401k), however what makes a self-directed IRA unique is the available investment options.

Most IRA custodians only allow approved stocks, bonds, mutual funds and CDs. A full-service self-directed IRA custodian allows those types of investments in addition to real estate, notes, private placements, tax lien certificates and much more. Weston Banks Wealth Partners and First Clearing currently only allow certain approved stocks, bonds, mutual funds, and CD’s. There are alternative options available to you if you would like to invest in other transactions, such as real estate, which we would be happy to discuss with you over the phone. For more information on holding real estate in an IRA, please see this blog post.

What are the benefits of a Self-Directed IRA?

In addition to the numerous IRA benefits (tax-free/deferred profits, possible tax deductions, asset protection through beneficiaries, and estate planning), you are able to invest in investments that you know and understand, which - through the power of compounding interest - will create lasting wealth for you and your family.

Why haven’t I heard of a self-directed IRA before?

Self-directed IRAs may seem new to you, but they have been around since the IRA was created back in 1974. Investing in alternatives to stocks, bonds, and mutual funds has always been allowed by the IRS (see IRS Publication 590). Self-Directed IRAs have not received large attention because most custodians who offer IRAs (banks and brokerage firms) only allow traditional investments at their firms.

Can I be assured that self-directed IRAs are allowed under IRA rules?

As long as you follow relevant rules, the answer is yes.

There are specific regulations regarding IRAs and, in particular, self-directed IRAs that you should be familiar with to ensure compliance.

There are certain types of transactions that you cannot perform through an IRA. Most importantly, the IRS prohibits “self-dealing,” which includes investments in which you or your family members of lineal descent have prior ownership. For more information, please see Self-Directed IRA Rules.