How to Sell an Investment Within Your SDIRA

Estimated reading time: 9 minutes

A self-directed IRA (SDIRA) empowers you to delve into a wide array of investment options, including real estate, precious metals, private equity, and promissory notes. 

There are moments when you, as an investor, may find it necessary or advantageous to sell an investment within your SDIRA. Perhaps you're looking to rebalance your portfolio in response to market shifts, or maybe it's time to realize profits from a successful investment. Whatever your reasons, understanding the process of selling an investment within your SDIRA is crucial. 

In this blog post, we'll guide you through the key considerations and steps involved in selling an investment from your SDIRA, helping you to make informed decisions that bolster your retirement planning strategy.

Table of Contents

• 6 Things to Consider Before Selling Any Investment
• How to Sell Private Equity
• How to Sell Precious Metals
• How to Sell Real Estate
• How to Finalize a Private Lending Investment
• Need Help? Don’t Hesitate to Reach Out

6 Things to Consider Before Selling Any Investment

Compared to an IRA from a bank or brokerage, selling an investment within your SDIRA offers a unique set of opportunities and challenges.

Before you sign on the dotted line, here are some essential points to keep in mind:

Explicit Direction Required: SDIRA providers like Entrust require your explicit direction to sell an investment within your account. We operate under your command and will not initiate sales or other transactions without clear, written instructions from you.

Avoid Transactions with Disqualified Persons: Selling SDIRA-held assets to disqualified persons can lead to the disqualification of your entire IRA. If you’re under the age of 59½, this entails a 10% early withdrawal penalty. If the account is tax-deferred, it could mean a hefty tax bill at the time of disqualification. As a reminder, disqualified persons include, but are not limited to, spouses, children, fiduciaries, and even your personal funds.

Maintain Liquidity for Expenses: If your SDIRA holds investments like real estate that incur ongoing expenses (repairs, renovations, insurance, etc.), ensure there's enough liquidity within the IRA to cover these costs until the sale is finalized.

Title Correctly: When selling an asset held by your SDIRA, ensure that the title is correctly held in the name of the SDIRA, not your personal name. This is crucial for maintaining the tax-advantaged status of the account.

Compliance and Documentation: As an SDIRA administrator, Entrust keeps detailed records of all recent transactions within your account. However, you should also maintain your own records of all communication and relevant documents with the buyer. These can be invaluable in the case of a dispute or IRS audit down the line.

When In Doubt, Ask Questions: Better safe than sorry. If you’re an Entrust client and have questions about the process, don’t hesitate to reach out to our experienced Client Services team. Simply fill out our Contact Us form or call us at (800) 392-9653, option 1.

How to Sell Private Equity in Your SDIRA

The first step to sell a private equity investment from your SDIRA at Entrust is to find a trusted buyer and remind them to use the appropriate titling format when sending payment. 

Ensure that it is made out to: [Client Account #] The Entrust Group Inc FBO [Client Name] 

After that, all that’s left to do is complete the Private Equity Sell Direction Letter to offload the investment from your IRA.

Here’s a step-by-step guide to help you navigate the process:

1. Complete the Account Information Section

Fill in your personal and account details as they appear on your SDIRA account application. This includes your name, account number, account type, email address, and daytime phone number.

2. Specify the Investment Name

Under the "General Asset Information" section, describe the investment you're selling (e.g., name of the LLC, joint venture, or private stock).

3. Fill in the Payor Information

If another party is sending funds to your Entrust account for the purchase, provide their details, including name, company (if applicable), address, email, and fax. Specify how the funds are being sent (Wire, ACH, Check, etc.).

4. Select the Type of Sale

Choose whether this is a full sale (the investment will be completely removed from your account) or a partial sale.

5. Indicate the Payment of Fees

Decide how you will cover any associated fees (via credit card or directly from your Entrust account). If using a credit card, provide the required card details or indicate if you will use the card on file.

6. Sign the Document

After reviewing all the information for accuracy, sign the document to authorize the sale and the payment of fees. Include the date next to your signature.

7. Acknowledge the Investment

Read the investment acknowledgement section carefully. This part confirms your understanding of the responsibilities and limitations of the Administrator or Custodian regarding your investment. Sign and date this section to acknowledge your agreement.

8. Submit the Form

After completing the form, review it to ensure all information is accurate and complete. Submit the form to the specified contact information, usually via email or fax, as provided on the form.

9. Wait for Follow Up

How to Sell Precious Metals in Your SDIRA

Once you’ve found a buyer for your precious metals assets, the only thing left to do is complete a Precious Metals Sell Direction Letter. 

Follow these steps to ensure you accurately convey your instructions:

1. Contact a Precious Metals Dealer

1. Their resulting purchase order/invoice will be used to complete the Precious Metals Sell Direction Letter.
2. A copy of the invoice/purchase order must be included with the Precious Metals Sell Direction Letter.

2. Fill in Account Information

Input your name, account number, account type, email address, and daytime phone number as registered on your SDIRA.

3. Provide Precious Metals Dealer/Buyer Information

List the dealer's name, address, phone number, fax, and representative. If you authorize Entrust to accept transaction completion details from the dealer without your verification, initial the indicated area.

4. Detail Your Sell Instructions

Specify the metals you're selling, including the quantity and descriptions (e.g., "1 oz Gold American Eagle" or “4 oz Silver Canadian Maple Leaf), along with the expected sale amount in dollars.

5. Complete Delivery Instructions

Indicate where the metals should be delivered after the sale, including the dealer's depository and account number. 

6. Enter Current Depository Information

Include the name and location of the current depository holding your precious metals.

7. Acknowledge Investment Terms

Read the investment acknowledgement section carefully. It outlines your understanding of the self-directed nature of your account, the roles of the administrator and custodian, and your responsibility for the investment decisions and due diligence.

8. Sign and Date the Form

After thoroughly reviewing the form for accuracy, sign and date it to confirm your instructions and acknowledge the terms outlined in the document.

9. Submit the Completed Form and Purchase Order/Invoice

Send the completed form and supporting document via one of the following delivery methods:

1. Fax: (866) 228-4009
2. Email: preciousmetals@theentrustgroup.com
3. Mail: The Entrust Group, 555 12th Street, Suite 900, Oakland, CA, 94607

Ensure you keep a copy for your records.

10. Follow Up

In a few business days, we will reach out to confirm the receipt of your sell direction letter. If a week has passed and you have not heard anything, get in touch so we can keep you informed on the status of your transaction.

How to Sell Real Estate in Your SDIRA

Selling real estate is a bit more complicated than selling private equity or precious metals, or completing the payments on a promissory note. 

Once you’ve located a reputable buyer for your SDIRA-held real estate, they will draw up a purchase contract. Entrust will sign on behalf of your retirement plan. 

Then, it’s time to complete your Real Estate Sell Direction Letter. This will instruct Entrust to liquidate a portion or the entirety of the asset.

By following this step-by-step guide for your Entrust account, you may complete the process seamlessly:

1. Fill in Account Information

Enter your name, account number, account type, email address, and daytime phone number as they appear on your account application.

2. Choose Review Processing Option

Decide between a normal or expedited review request for your transaction documents. An expedited review incurs an additional fee.

3. Specify Entity Responsible for Closing

Provide details of the escrow company, title company, or attorney handling the transaction. Include the company name, contact name, phone, fax, email, expected closing date, and file/escrow number.

4. Provide Investment Information

Include the parcel number or lot/block number of the property, along with the property address, city, state, and ZIP code. Indicate if there's a carry-back note or if the property is debt financed, and fill in the relevant sections accordingly.

5. Detail Lender Information (if necessary)

If the property is financed, provide lender details. If there are multiple lenders, include information for each.

6. Include Buyer Information

List the name(s) of the buyer(s) purchasing the property from your SDIRA.

7. Select Type of Sale

Choose whether it's a full or partial sale of the real estate, including contract sale price and the approximate cash to be received.

8. Seller Closing Costs (if applicable)

1. Detail the amount, if any, to be sent to escrow for closing costs. 
2. Specify the payment method, whether wire, check or cashier’s check, as well as delivery instructions.

9. Special Instructions and Payment of Fees

Indicate any special instructions for the transaction and choose how you will pay the associated fees (Entrust account, check, or credit card). If paying by credit card, fill in the card details.

10. Sign the Investment Acknowledgement

Read and understand the disclosure regarding the self-directed nature of your account and the responsibilities of the Administrator or Custodian. Sign and date the document to acknowledge your agreement and direct the completion of the sale as specified.

11. Submission

Review the completed form for accuracy, then submit it via one of the following methods:

1. Fax: (510) 587-0960
2. Email: forms@theentrustgroup.com
3. Mail: The Entrust Group, 555 12th Street, Suite 900, Oakland, CA, 94607

12. Follow Up

After submitting, keep in touch to confirm receipt of the Sell Direction Letter and to track the progress of your real estate sale transaction.

As mentioned, selling real estate is a bit more complex than other assets. A proper sale requires a few additional forms beyond the Sell Direction Letter. The minimum closing documents include:

1. Purchase Contract 
2. Warranty/Grant Deed
3. Preliminary Title Report
4. Estimated Closing Statement (if applicable)

Finally, to ensure the process goes smoothly, take extra care with the following instructions:

1. Provide the closing entity with a copy of the Real Estate Sell Direction Letter.
2. Use the recorded Deed for proper document titling.
3. Before sending to Entrust for signature, ensure that all pages of each document are notated “Read and Approved” with your signature and date. Please do not sign where indicated; that space is where Entrust will sign. Instead, please sign and date in a blank space on the document, such as the margins.
4. All sale documents, including entity formation papers for buyers that are entities, must be received by Entrust for compliance and record-keeping.
5. Documents should arrive at least three to five business days before the closing date for normal review processing. For expedited review processing, you may pay a $150 fee. In this case, documents received before noon (Pacific Time) will be reviewed next business day.
6. Sale proceeds should be payable to The Entrust Group, Inc. FBO [Client or Plan Name], Entrust Account #, and mailed to our Oakland office with the final Settlement Statement, if applicable.
7. If the property involves recurring payments (loans, HOA dues, taxes) from the Entrust account, clients must instruct Entrust in writing to stop these payments, either by:
   1. Email: EAICM@TheEntrustGroup.com
   2. Fax: (510) 587-0960, Attention: Cash Management.

If you’d like more information on selling real estate, check out our webinar replay with David Coe, owner at Coe Real Estate Group.

How to Finalize a Private Lending Investment

Completing the Note Payoff form is necessary when making the final payment on a note. This leads to a $0 balance and the removal of the asset from your account. If you’re making a regular payment on a note, you’ll want to complete the Deposit Coupon instead.

Here's a step-by-step guide to completing the Note Payoff and offloading the note from your IRA:

1. Complete Account Information

Fill in your name, account number, account type, email address, and daytime phone number as they appear on your account application.

2. Select Processing Instructions

Choose between a normal or expedited review request. Expedited review incurs an additional fee in exchange for faster processing.

3. Provide Payoff Information

1. Enter the name of the borrower or entity as it appears on your account.
2. Indicate the percentage of ownership.
3. Specify if the note is secured or unsecured. If secured, provide the address of the securing property.
4. Fill in the final payment amount and the original note amount.

4. Remind Payor of Titling Format

Remind the payor to use the appropriate titling format when sending the final payment: Payable to: [Client Account #] The Entrust Group Inc FBO [Client Name]

5. Select Funding Method

Choose how you will send the final payment to Entrust: wire, check, or ACH. If sending a check, specify the sender’s name. If completing an ACH or wire, indicate the originating bank name, sender’ name, and date sent to Entrust.

6. Prepare and Submit Required Documents

Prepare a demand statement and Full Reconveyance, signed "read and approved." These documents should be attached to the Note Payoff when submitted to Entrust.

7. Sign the Investment Acknowledgement

Carefully read the investment acknowledgement section, which outlines your understanding of the self-directed nature of your account and the responsibilities of the Administrator or Custodian. By signing, you acknowledge that you have not received any investment advice from Entrust and that you are responsible for all due diligence.

8. Submit the Completed Form

Review your completed form for accuracy. You can submit it via fax, email, or mail using the contact information provided:

1. Fax: (510) 587-0960
2. Email: forms@theentrustgroup.com
3. Mail: The Entrust Group, 555 12th Street, Suite 900, Oakland, CA

9. Follow Up

After submission, keep in contact with Entrust to confirm receipt of your sell direction letter and to track the status of your note payoff transaction.

Need Help? Don’t Hesitate to Reach Out

Selling an asset from your SDIRA can be an exciting time, as years or even decades of gradual investment finally come to fruition. However, any tiny confusion during this time can be frustrating, even for experienced investors.

Remember, we’re here to help. 

If any aspect of the selling process leaves you puzzled or uncertain, get in touch with our knowledgeable Client Services team. Our experts are here to help clarify any questions you may have and give you the education you need to maintain compliance with the IRS regulations.

Simply fill out our Contact Us form or give us a call at (800) 392-9653, option 1.