What is Checkbook Control? Self-Directed IRA LLCs Explained

Many self-directed IRA investors have heard the term “checkbook control,” but they aren’t quite sure what it means or how to establish it. Learn about this popular retirement investing strategy below, and see how you can take advantage of it with your self-directed IRA.

What is Checkbook Control?

“Checkbook control” refers to a self-directed IRA investor’s ability to manage his/her IRA funds with the ease and convenience of a checkbook. Rather than contacting your account administrator to direct your IRA funds, with checkbook control you can simply pull out your checkbook and write a check to manage your assets.

How Does it Work?

Checkbook control requires that you set up an LLC (Limited Liability Company) in the name of your self-directed IRA. Your self-directed IRA LLC will then be its own business entity in the eyes of the government. The LLC will still be subject to certain regulations, but will allow more flexibility than a standard self-directed IRA.

By electing yourself Managing Member of the LLC, you will be in charge of the business checking account, which is funded with the cash (uninvested funds) from your IRA. You will hold the checkbook that is linked to the business checking account, which means you will have a checkbook linked to your IRA funds.

Checkbook Control in Action

Mark has a self-directed IRA LLC that he uses to invest in real estate. One of his properties needs an emergency repair, and he is able to deal with the situation immediately because he has checkbook control of his IRA funds.

Instead of contacting his administrator/custodian to direct funds toward the repair, which can take anywhere from 2-5 days, Mark simply writes a check from his LLC. His tenant’s are pleased by the swift solution, and Mark did not run the risk of a prohibited transaction since he wrote a check from his LLC. (Writing a personal check, in this case, would be prohibited.)

This strategy offers the significant advantages of speed and convenience. Manage your self-directed IRA funds with ease when you set up an LLC with checkbook control.

Note that The Entrust Group does not sell or create LLCs. Visit the IRS website to learn more about establishing an LLC, or talk to an Entrust representative to learn more about setting up checkbook control.