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How do I close a Self Directed IRA account?

San Bernardino, CA |
Filed under: Business

I opened this SDI to invest money in my nephews business. He used all of the money to start, but the business folded up, my account shows the original value even though there is no money in the account? I would like to close the account because I am getting charged 10% of the original value yearly but the investment firm will not let me close it? My nephew doesn't want to file bankruptcy and I can't close it unless I prove one of the following. FINANCIAL HARDSHIP, PROOF OF DEVALUATION, DEATH, OR TOTAL DISABILITY?? What can I do????? Please help! I currently owe the invesment firm 2 years of fees.

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Attorney answers 3

Posted

Your investment account should come with a TPA: third party administrator services. The TPA can help you walk through the steps and paperwork needed to shut down your account. Your nephew's company may need to send a letter on company letter head that the business is no longer a going concern and that the final tax return has been filed. It would be great if he dissolved the company but dissolution documents should not be required for your situation. If your SDI group does not put you in contact with a helpful TPA, then ask for the legal department. You will need to be persistent to get this resolved. Make it a weekly or daily to do item, as your fees will continue to run monthly invoices.

I wish your investment had paid off for you and hope you find a way to put your retirement money to work for you in the future. SDI programs are great opportunities when they can work to your benefit.

All the best- B

This information is general and will change according to your facts. While this information may apply to your situation, without more facts I can not encourage you to rely on this information. I am not your attorney. No attorney client relationship exists. You should hire an attorney for your specific business matters.

Posted

None of what you say makes much sense. I don't understand how you could have opened a SDI to invest money in your nephew's business. What type of business was it? Was it a publicly traded stock?

I also don't understand how the investment company is charging 10%. The fee is astronomical in comparison to the average industry charges.

Last, you may close an IRA anytime you want. You may have to pay taxes and penalties if you are under 59 1/2, but you can close it.

This answer does not, nor is it intended to, create an attorney-client relationship or constitute attorney advertising. Rather, it is offered solely for information purposes. Since the facts of each case are different, it is critical to consult with qualified counsel with whom information can be shared and assessed under an attorney-client privilege, so that competent advice can be obtained on which you can make informed decisions.

William Bronchick

William Bronchick

Posted

With a self directed IRA, you can invest in private companies so long as it is not a disqualified transaction. A nephew is normally not a disqualified party.

Posted

The fee is charged not on the amt of cash in the account, but based on the value of the investments in the account,, Normally with a SDI, you are responsible for reporting to the custodian the value of the investment. each year. If the business went belly up and the loan is not getting paid back, then the value is zero. You need to update this with your custodian, although they may charge you a minimum fee to keep the account active. Talk with your custodian and your CPA.

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