EP 36 – Open Forum Show

Join Mark and Mat as they answer your difficult Self-Directed retirement plan questions. Mark and Mat dive deep into all of your questions on Self Directing your Roth IRA, 401(k), Traditional IRA, Coverdell, HSA, and more. To submit your questions, listen, search for prior episodes, or sign up for their Weekly Free Newsletter, visit https://directedira.com/podcast

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Mark Kohler: Welcome, everybody, to this week’s episode of the directed IRA podcast with Mark Kohler and Mat Sorensen. I would be the mark in that equation

Mat Sorensen: And I would be the Mat. Yep. And like I said that, I guess.

Mark Kohler: No, no, that was your cue. You know, we don’t we’re not professional enough to have cue cards, so I doubt you’ve got to just feel it. So if you’re new to the show, thank you for being here. This is the Open Forum episode. We do it every two or three without sound, really. Radio ish, the open open forum show. Yeah, we done three shows.

Mat Sorensen: We just run a Sunday.

Mark Kohler: We just answer your questions from around the country. We have thousands of clients self-directing their IRAs, their 401k’s or health savings accounts, their coverdell’s. And it can get a little complicated. A lot of practical questions. So many folks just love the Open Forum Q&A because they’re like, oh, I never thought of that question. So it’s kind of nice to be a part of that community. We’re here today. Just trying to. Yeah, hit some base hits.

Mat Sorensen: Just just trying to help you set your IRA free, that’s all we that’s all we want you to do. Sit there and let it live, baby. Well, if you’re new to Self-directing, just go back to episode one. Just if you’re like, man, this is my first, I’ll cut it this and wow, that was complex. I mean, these are people’s questions that are out there self-directing trying to build their retirement. Sometimes they’re complex, sometimes they’re more easy kind of layups. We’re going to hit both sides of those today. But just know we’ve got a ton of content. Thirty or forty episodes already in the hopper. Go back to episode one and start there. And really the first ten are kind of like the ten you should start with and know and then just bounce around to what interests you.

Mark Kohler: So I OK, I’ve got a deep thought I’m going to start it off with this deep thought, then that’s going to throw out our questions. He’s going to be our emcee for today.

Mat Sorensen: So you’d be looking to give your deep thought. You’re looking for deep thoughts by Jack Candy, right?

Mark Kohler: Yeah. whoever, whoever that is. But I missed the reference. Resigned.

Mat Sorensen: You don’t remember the Saturday Night Live? That is deep thought. Oh yeah. Yeah, yep,

Mark Kohler: Yep, yep. I remember that. OK, so while you’re looking for that first question and folks, if you’d like to enter,

Mat Sorensen: I’m going to give a deep thought to after you. Are you OK now?

Mark Kohler: Here, here’s a couple. Let’s get some housekeeping out of the way. If you self-direct and any of your family members want to learn how to better control the retirement account, please share this podcast. Give us a five star. It helps other people find it. We’ve got the best-selling books on this topic in the country. We’ve been doing this for twenty years. We’re both lawyers, tax attorneys. We’ve got a trust company Directedira.com and our law firm. We’re here for you next. We’re having some workshops this fall. We’re doing a live summit. It’s what we do every six months. This one this fall is in Phoenix date Mat,

Mat Sorensen: Scottsdale, but Phoenix metro area close enough. Scottsdale, October 22nd, 23rd. It’s a Friday afternoon golf tournament, evening reception, networking, Saturday, full blast, multiple sessions at a time. Self-directing educational. Heck of a good time.

Mark Kohler: Yep. And if that date doesn’t work for you and or you’ve already been to the summit and you want to try something new two weeks before that, on October 1st, we’re going to be in Dallas for the Masters evening. And this is where we’re not actually implying that Mat and I are the Masters. This is fifty limited to fifty people only that are currently self-directing. There will be people in the room with twenty, thirty plus million IRAs and everybody is going to be networking, sharing ideas. Dinner is provided. It’s a three hour evening with just Mat and I talking high-end strategies well worth a little flight to Dallas. Spend an evening, make it a tax-deductible trip. That’s on October 1st. Meanwhile, I’m doing my workshops around the country that are more business in scope, which will always include a self-directed IRA aspect. Those are in Chicago, Orange County and Honolulu one day in Dallas on October 2nd. Get to our website. You can find out more about them and sign up. They are limited in seating each one. My workshops are 100 people, the summits at fifty. And what’s the limit on the IRA summit? Did you say 250

Mat Sorensen: Yeah we’re about two hundred times? About the limit there. So and we sold out. We sold out most years, so. Yeah. So get on it.

Mark Kohler: Yeah. Very affordable. These aren’t, you know, 5000 dollars, you know, mastermind weekends. These are several, two to three hundred dollars, maybe four or five at most on some of these for some tax deductible. Great time. All right, so that’s housekeeping and here’s my deep thought, OK?

Mat Sorensen: Ok, I got

Mark Kohler: A life coach, famous life coach. Say, Self-direct your thoughts like you self-direct your IRA. Mm hmm. So thought management is really at the core of life coaching and choosing what thoughts you’re going to think about every day and making sure you’re choosing thoughts that create the right feelings and actions in your life and which ultimately create the right results and controlling your thoughts no matter what crappy circumstance you might be in. So that’s the kind of the same story with your IRA, your 401k self-direct it. You get to choose what your IRA invests in. You get to choose what your brain spends its time thinking about. You’re in control. Very empowering.

Mat Sorensen: Yeah, that’s what I love about Self-directing is you have the freedom to do what you want. Don’t feel like you’re in a box of the to just pick these options on the menu, you know, go off menu. You know, you’re like, hey, I want some real estate, but I don’t want it in a big reit with a bunch of other people with huge fees and everything. Can you just hold the huge fees and other crappy oversell of if you sold all the properties that would even be worth what it is? Can I just buy a property directly with my IRA. Yeah, but you need a Self-directed IRA. OK, so

Mark Kohler: That was a deep thought brought to you by a famous life coach PC. I just give a shout out to PC. I’ll leave it at that. OK. OK. All right. Mat, what’s your time.

Mat Sorensen: I get my deep thought. OK, now this is from this my deep thoughts from Jack Candy. Deep thought for those who remember SNL, deep thoughts. I’m going to try to the voice. OK, if you saw two guys named Hambone and Flippy, which one do you think like dolphins the most? I’d say Flippy, wouldn’t you? You’d be wrong, though. It’s Hambone. I don’t know why I think that’s so funny, but

Mark Kohler: I think my deep thought was a little more meaningful.

Mat Sorensen: So I think it was who was it on SNL that read these? I think it was Darrell Hammond. They can’t remember, but they were hilarious. So deep thoughts by Jack Candy. All right. OK, well, let’s get into your questions. We’ll stop messing around here, OK?

Mark Kohler: And relax,

Mat Sorensen: Ok? Yeah, me. All right. Let’s just do it. OK, all right. Just give them some instruction here, OK? You’re on deck, ok. Oh, you’re on deck. You’re not up yet. I’m just getting ready. So if you ever want to ask a question, these or others are coming from go to Directedira.com/podcast. There’s a big button that says submit a question and you can type in your question there. You can see previous ones. Others have asked and we’re just going to hit them on the show here today. So we’ll be running through those that have been asked. I do have some email ones that we do get because that’s the old-school way we used to do it. So I got some here, an email that we’ll be asking to. All right. Let’s start out with some cool Solok Roth IRA questions. These questions are from Mark, a series of questions that are really good, that teach some concepts that might seem a little counterintuitive about the Solok that’s Roth that I think it’s important that people know, because they can mess it up because it’s a little counterintuitive. All right. So here’s why he said he’s been basically watching some of our educational stuff, our classes talked about. He wants to buy real estate with his solo Roth 401K account, and he wants to get a non-recourse loan to buy it. His question is, does it incur any UDFI or UBIT tax? OK, now the answer is there’s no UDFI on Solok buying leveraged real estate. Let me say that again, there’s no UDFI tax on solo for one case buying leveraged real estate. Can I have UDFI find a Solok? Yes, you can. But you won’t have it when you buy leverage real estate, so I clients say Mat, I want to loan someone money with my Solok, but I’m going to have someone loan me money at eight percent and I’m going to loan that money out at 12 percent to someone else I’m going to make the spread in the middle of 14 percent for my Solok, can I do that? Yeah, you can do it. You’re going to beautify. But also little kids don’t have you Fimat. They don’t unleveraged real estate purchases. And that’s it. That’s the only way you get around UDFI, that little narrow category. OK, now here’s another misconception on Sola(k)s. Hey, man, I want to flip some properties I’m gonna use a Solok because I don’t pay UBIT. Yeah they do, no I thought if you do real estate with a Solok, you don’t pay. You bet. I want to flip like ten properties. No, you still have UBIT. Again, the only difference on Solok is in this in the taxes is UDFI on leveraged real estate. Now if you don’t know what that is. We had a prior podcast on taxes that can apply to retirement accounts. There’s a tax called UDFI that applies. When you leverage an IRA, you get a loan with an IRA to buy a bigger asset. You didn’t use your retirement fund or you had to bring in some debt. There’s a little tax that can apply in that scenario to IRAs. So that’s question number one from Mark. Now, question number two I’m sending your way. OK, OK. He says, I also want to verify my understanding that a solo 401k Roth does have RMD’s. But he asked at age 70 and a half, it’s now 72. I do want to cover RMDs or do you want me to?

Mark Kohler: No I can do it. And correct me if I’m wrong. My understanding is that if you have a 401k. We’re going to assume you’re currently employed, see, the only reason you’d have a 401k, per se, folks, is if you’re actively employed somewhere because you have to have a business that sponsors the 401K. So when a solo 401k, you’ve got a small business, you adopt a solo 401K, by the way, we do these very, very affordably full service in a kind of a dock service only call us if you’re interested so you can set up the solo for one K, be the trustee and self-direct it all day long, but you have to have a business sponsoring it. Well, what’s a 401k for employees. So you’re an employee of the company, you have a 401k as long as you’re employed. And you have this 401k, no RMD’s are required now. Why make that distinction rather than just saying there’s no RMDs in a 401k is because that’s not really true. It’s like you could be left employment and have a 401k, but you don’t have a job. You just have this old 401K that’s just sitting there. Mat wouldn’t you have to start taking RMDs out of that because you’re no longer employed?

Mat Sorensen: Isn’t that the case? Exactly right. Yeah. So then there’s a big misconception because a lot of people think but Mark, it’s a Roth 401k. You don’t take RMDs from Roths. Yeah. Roth IRAs have no RMD Roth 401ks are subject to RMD even when you hit 72. The only exception being what Mark mentioned there is you’re still employed. The still employed thing is an exception for 401(k)s. So even if you are solo(k)s, if you’re still employed at 72, you’re still getting a W-2 from that company that has that 401k. You’re going to be OK avoiding RMD and you’re going to claim that you’re exempt because you’re still employed even though you’re 74 years old now, still working, running your small business. I love it.

Mark Kohler: And some of you may say, well, how much do I have to pay myself? Theoretically, a dollar, I mean, you might pay yourself,

Mat Sorensen: You’re not to be employed, you have to be employed. And I don’t know if you got to meet the hourly rule of the 19 hours a week or not. But but but what I say is, is you’re gonna need a W-2. Yeah, that’s sure. To try to make sure you’re working and RMD by the way, is this money you have to take out of your account when you reach 72 for traditional IRAs? Roth IRAs are exempt from RMD, but traditional IRAs also all 401(k)s, your Roth accounts, your traditional accounts. But remember the 401(k)s, like Mark mentioned, if you’re still working and employed, even when you hit 72, you can be exempt from RMD. All right. So Mark asked the follow up questions, he says, and he talks about how Roth IRAs do not have RMD’s. That’s correct. He says, I want to know if it’s possible to transfer funds or assets from a solo, a Roth solo 401k to a Roth IRA. And what fees and hurdles may be encountered? OK, now this is another tricky question. That’s why I’m like Mark asks a few tricky questions. If you just apply the traditional understanding and logic, you’re going to screw these up. So that’s why Marks questions sorry if these seem technical or just diving right in here today. OK. Roth 401k accounts can be rolled over to Roth IRAs, so let’s say you’re 72 and we get this all the time and you’re like, crap, I got to start taking RMD. I’ve got a rental in my Roth Solok, but I don’t want to start taking RMD yet I’m not working anymore. I want to just close the Solok down. Can I roll that property over and put it into the Roth IRA? Yes. OK, you do. It’s called an in-kind roll-over transfer from the Solok over to the Roth IRA. Now your Roth IRA owns it. The Roth IRA has no RMD. So if you have any assets, whether it’s a self-directed asset like real estate or a private stock or Crypto or whatever, and you’re hitting 72 and it’s in a Roth 401K, you’re like crap. I don’t want have to take RMD roll it out. You can get over to the Roth IRA by doing an in-kind transfer of that asset. Now you cannot go the other way. You cannot move assets in a Roth IRA over to a Roth solo 401k. Lot of clients think that they can do that. It’s a one way street only 401k, a Roth IRA Roth 401k to Roth IRA.

Mark Kohler: Now, if I may, Mat, are we done with Mark’s questions at this point? Yep.

Mat Sorensen: Ok, Mark, got all your money’s worth by up on a one hour consult, Mark you’re welcome.

Mark Kohler: You bet. I’m looking at questions here on my. Yeah, looking at questions here on my phone. And I’m also feeling kind of prompted to talk about for just a moment, a question I received yesterday from a long-term client of ours, Michael, he knows who he is. He’s a regular listener of our podcast. He asked a question kind of similar in this vein of what Mark’s doing in a sense, you know, business, what are my limitations type question? So, Michael, yesterday on a phone call said, hey, my partner, I have this business that’s really doing well better than we expected. Can I transfer that business into my Roth IRA? I just heard about Peter Thiel and how he had his IRA and PayPal or Facebook. I said, no, you cannot do that. It would be prohibited. You already own that business and it’s already an ongoing concern. And he goes, but Mark, you talk about what’s called opportunity shifting. Can’t I shift that opportunity into my Roth and let my Roth get all the upside when it goes up in value even further? And here’s the difference. I said, yes, I want you to opportunity shift. Undeveloped, ongoing concerns, not a business that’s already making money and has value. So if you have an idea and you’re like, oh my gosh, this could make a lot of money and I don’t have to provide sweat equity, I could bring on a partner that could do the heavy lifting. We could hire a person to do the work. Yes, we might have to deal with UBIT tax or not, I don’t know. But if you have an opportunity that isn’t an ongoing concern yet, let’s let your Roth do it. That’s what Peter Thiel did. That is Roth do it. But if you have an ongoing concern now or even a rental property that you own now, it ain’t going in your retirement account. Sorry, folks.

Mat Sorensen: Tangent off of that is I get a lot of people that like but Mat, I want to start this new business, but I want to own it 100 percent and work in it like Peter Thiel did. Or maybe I’ve got two partners and we’re 50 50 and I want my Roth IRA to own 50 percent, my partner’s Roth IRA and they’re 50 percent. And then we’re going to work in it and run this new startup. OK, can’t do that either. Probably. I mean, it’s possible there’s some technical rules there. But Peter Thiel had like a ton of partners that investors think that if you ever heard of the PayPal Mafia and Elon Musk and Max Levchin and all these other famous people that have since started multiple other successful companies since PayPal was it Reed Hastings, I mean, like that that little group of people, they were all co-founders. All right. So they nobody was over 50 percent. They were all minority partners. It was it was more easy to execute that strategy than it is. Hey, it’s just me doing this for me and one partner that the rules at 50 percent or greater are complicated. Let’s just say that. So so that’s the that’s the restraint there. But all right. Let me go to a question from Don. He says, hey, guys, got another question for you. I’ve heard many times that I can partner with my retirement account since I’m a partner in the property personally, am I able to be a guarantor on a loan to buy the property? Does the owner does the answer change based on whether there’s ownership, 90/10, 50/50 and so forth? All right, now it’s true, you can partner to buy real estate with your IRA, so let’s say you had a property for one hundred thousand, you were going to buy you put in fifty thousand from your IRA and you personally put in fifty thousand. You go buy the property for one hundred grand. Well, let’s say it’s actually a three hundred thousand property, but you put one hundred thousand down between your IRA and you personally. You have to get a non-recourse loan. You cannot guarantee it. I know you’re in there personally, but you’re in there personally for the dollars you put in. And so if you still go in and guarantee that loan, your IRA is also in the deal. It’s effectively guaranteeing debt that benefits your IRA. That’s going to cause an extension of credit prohitive transaction. So avoid that. And just as a general tip for everyone else, you may not be familiar if you’re buying an asset with the loan real estate being the most common one, that loan must be nonrecourse. You can not guarantee the loan. It’s not in your personal name. It’s the IRA getting it or your IRA LLC, and it’s not roundoff. Your credit. The lender is going to analyze the property and the rental income and they’re going to make you put 30 to 40 percent down. You’ve got other episodes and shows on now on nonrecourse loans, resources at DirectedIRA.com of five different banks that do nonrecourse loans to IRAs or IRA/LLCs or Solok buying rental real estate. So lots of other resources there, Don.

Mark Kohler: Ok, awesome. Great answer, man. Watch watching Mat up at the plate, hitting these little home runs and doubles and triples. It’s exciting.

Mat Sorensen: Ok, all right. This one’s for you, OK? This one’s not a fastball, but it’s a it’s at least 80 miles an hour. All right. I’m ready. All right, guys, this is my IRA is invested in a syndication that is building a complex of townhomes. We really like them and want to purchase one for ourselves, temporarily as a residence and then as a rental. Is it a prohibited transaction to purchase the townhomes in this complex from the syndication that are IRA is one investor in.

Mark Kohler: Ok, if we were on a consultation, this is Tom, right? Yep, Tom, first question I would ask Tom is there I have several. The first question is, are going to ask is how much does your IRA own in the syndication? Now, when he says the word syndication, the typical response I’m going to get is somewhere B, typically between one, two or three percent.

Mat Sorensen: Yes, he’s below 10, probably.

Mark Kohler: For those that don’t know a syndication, it’s like a a big hedge fund. It’s a big conglomerate, whatever. And they got a little investment fund.

Mat Sorensen: Yeah, it’s an LLC that has one hundred people in it.

Mark Kohler: Yeah. So if you invest in syndication, you’re IRA’s ownership percentage is probably going to be quite small. Number two, I asked him, do you have any other owners in the syndication yourself or with family members or other retirement accounts? And if he says no, it’s just our IRA, it owns three percent. OK, so far so good. And then I would ask, do you work on this little project? I mean, are you on salary? Are you a principal? Did you help build the syndication or are you involved as a founder? And he goes, nope, I just we just found out about it. And we love the project. They’re going to build a hundred townhomes. We just decided we might want to buy one personally and live in it or make it a rental. OK, to me, he answered my three golden questions correctly. I would say go for it. Would you agree?

Mat Sorensen: Yeah, totally.

Mark Kohler: Yeah. All right. Now if I may Mat if he said, oh well, my IRA or a combination of my own family members or other IRAs, we own close to 40 to 50 percent. I’d go, hmmm, we’re in the shades of grey now and that shades of grey, but yeah, too dark.

Mat Sorensen: Don’t read the book. That’s not going to help you on this question. Fifty Shades of Grey is you know, the answer is not in there. Yeah. At least on this question.

Mark Kohler: Yeah, we’re not saying it’s a bad book, but we’re saying it’s not going to help you with this question. Shades of gray now. And what we’ve said is you may go, well, what hasn’t the IRS said what the percentages were? Where it’s no good. Nope. It’s a very subjective analysis of a lot of facts and figures that involve control and ownership and blah, blah, blah. So it kind of gets greater and greater as you get close to 50 percent and it’s really white and clear around that three percent, five percent in the syndication.

Mat Sorensen: Yeah, OK. Yeah, I always tell clients when you’re below 10 percent, it’s, you know, the cases out there, the private letter rulings, people have asked the IRS, it’s usually not prohibited unless you’re doing something weird. If you’re buying the townhome at the price that the developers sell and everyone else, you’re going to be fine. And so but when you’re in that eleven to forty nine percent, it is these thirty nine shades of grey there of we don’t know. It depends on a lot of other factors. And frankly, the IRS age and the tax court judge, you might get on that case and then of course fifty percent or more we know it’s going to be prohibited because it’s going to be just like you’re transacting with your own IRA.

Mark Kohler: Yeah. Now the third question I asked, was he in control, a manager on salary, a founder that could cause problems? You said, well, I only own three percent. Yeah, but I’ll go. Yeah, but you’re the frickin founder. You’re on salary. You’re getting you may be involved in property management and that could cause a problem. So but if you answer those three questions in the in the negative, none of those were affirmative. Then you would get your Self-direct ID card and you’d be allowed to travel on a cruise ship or around the country with a so-called vaccinated Self-directed ID card. You’d be good to go. OK, you know, bring in a little current event, OK? Yeah.

Mat Sorensen: If you’re listening to this podcast three years later, I thought I was going to be asking

Mark Kohler: About contagion worldwide contagion. Yeah, we don’t get a wristband. We get a card with the CDC logo up in the corner. Yeah, we give a little legal tip here. If you forge a vaccination card, the FBI has come out now and been very clear that if you forge a vaccination card, it is the. Forgery or manipulation of a government document? And you may say the vaccination card is a government document because, yes. Of the CDC logo up in the right hand corner. So even though it’s a crappy piece of paper and some receptionist at your doctor signed it for you when you got it and you thought, this is it, there’s no barcode, there’s no QR code, what the hell? I could have just wrote one out myself. Yes, but if you get caught, there’s up to five thousand dollars in penalty or a five year prison sentence. And it’s a federal crime.

Mat Sorensen: It’s like, oh, is this my my vaccine card? No, that’s my recipe for cookies.

Mark Kohler: Sorry. Let me give you the other one.

Mat Sorensen: Oh, oh. it’s the vaccine card. Let’s see one cup sugar, half cup chocolate chips. Oh no. That’s the wrong one. All right. Here’s a question from Lenny. I think you’ll like this one. Mark says, hello, Mark Mat, I have a question for you I just started my solo 401K and Self-directed IRAs. And I have some rentals that are in an LLC that also has my kids, Roth IRAs as partners in it. My question in question is, how should I grow my retirement account to make it easy for my kids to inherit my account? My next question is how will my retirement account be treated when my kids inherit it, that they are the partners in this LLC? Will they be prohibited and how will they handle the membership interest of their inherited IRA? I love this question like right now.

Mark Kohler: Can I comment first on Lenny? Yeah, I haven’t heard anybody with the name of Lenny since probably the Laverne and Shirley. Those were the days oh Corey. You know, Laverne and Shirley Correy, who’s a millennial. I thought you’d be like who the freak is Laverne and Shirley? Laverne and Shirley was a wonderful show that played for a half hour either before or after happy days in the afternoon after I got home from school. And kind of I love Laverne and Shirley. OK, I’m going to give you a little quiz. What was Laverne’s OK, here’s the here’s the L no you can do it. You can do it. Everybody out there. If we were on a live podcast, people would answer this immediately to win a book. What was Laverne’s favorite drink in the show Laverne and Shirley?

Mat Sorensen: A Shirley Temple.

Mark Kohler: Oh, my gosh. Lenny and Squiggy was a squeaky Corey? Lenny and Squiggy, Lenny and Squiggy. I know it’s something else. We’re the neighbors, the neighbors of Laverne and Shirley. This is like pre friends like friends. These two girls, Laverne Shirley, lived together and Lenny and Squiggy. I think you’ve got great lasting. OK, this favorite drink Corey do you know what it was? Pepsi and milk.

Mat Sorensen: Ok, mixed or like two separate drinks,

Mark Kohler: No, she’d mix them together.

Mat Sorensen: That’s weird. I didn’t care to know that. That’s weird.

Mark Kohler: Well, you know, I think it’s one of you. I’ll give you some more trivia about Laverne and Shirley. And just a moment like Pepsi. OK, well, I said Pepsi Cola and Pepsi.

Mat Sorensen: Pepsi, I think one per podcast is enough.

Mark Kohler: Oh, ouch. OK, all right. So Lenny me get back to Lenny’s question. You’re distracting the listeners. Go ahead.

Mat Sorensen: Ok, my contractor’s name, by the way, is Lenny. Really? Yeah. Well, I talked to him yesterday, actually.

Mark Kohler: So squiggy Squiggy.

Mat Sorensen: Do you have any interest in Lenny’s question?

Mark Kohler: Not really. I just want to talk about Laverne and Shirly.

Mat Sorensen: But all right. Why don’t you just have a Pepsi and milk and

Mark Kohler: It’s called a milk and Pepsi.

Mat Sorensen: Oh, look, Pepsi, I’ve got to call

Mark Kohler: It the right thing. Milk and Pepsi. If you haven’t tried it, everybody do it tonight in honor of Laverne and Shirley. I’ll give you one other tidbit after you answer Lenny’s question. You get it all right.

Mat Sorensen: Yeah, I’ll answer Lenny’s question. You’re definitely in a different world right now. OK, Lenny, I love what you’re doing. First of all, I hope your kids appreciate it, because, you know, I always wish my parents would give me a Roth IRA and throw me in an LLC, the pot real estate, and then be like, oh, how do we get your how can you get my account when I pass away? I mean, that’s just, you know,

Mark Kohler: And I have a good tip here. I have a good tip here. OK, you

Mat Sorensen: Go. OK, I hope I don’t have to do with Laverne and Shirley, but no. Or Pepsi and milk either way. OK, ok. So what happens when you pass away? Your kids will inherit your account if they’re the beneficiaries on your beneficiary designation form. So let’s say you have two kids and you want them to inherit your account, you would list them. Each is fifty percent beneficiaries on your solo 401K, that’s what you got in the deal on your side. Or if your IRAs are in there on your on your IRA, it doesn’t matter. Now since there are you all in an LLC, what’s going to happen is you pass away. Let’s say that you’re Solok owns forty percent of the LLC and then your kids are going to get inherited IRAs from the 401k. They inherited IRAs and these could be traditional or Roth, depending on what your solo 401K was. You didn’t say, but it could go either way. And, but they’re going to get inherited IRAs now. They would each get an inherited IRA that owns 20% if you own 40% total in your Solok and each kid got fifty percent, they’re going to each get their own inherited IRA account and it’s going to own twenty percent their existing Roth IRAs that may own the other sixty percent or whatever it may be, stays at whatever it owns and the LLC keeps on going. You don’t need to do anything. You’re Solok kind of goes away and dies and these inheritance IRAs come in and take over that ownership percentages. No tax, nothing. Now remember, on these inherited IRAs, there’s going to be a 10 year window of when you’re going to need to close these out. So inherited IRAs. Now you have a ten year window from when you inherit it, you’re going to distribute the funds. The nice thing about inherited IRAs now is that you don’t have to take RMD at all until ten years. You then take a distribution. It used to be you could take a you could stretch out the IRA over the lifetime of the person that inherited it. You had to take RMD every year. Now, though, is get a 10 year window to take it out. But there’s no RMD at all. So that’s a good way for them to inherit those accounts. You have to change the LLC, LLC still in the property. They’re going to get a ten year window to just keep that operation going.

Mark Kohler: Ok, all right. Well, I’ve got another I’ve got a tip here on this very topic from a phone call yesterday. You make me like men get a lot of phone calls yesterday. You really only had three. I think I had three calls yesterday amongst my craziness of working through my pile on my desk. And this is from Sherry. She is older and I know she appreciates Laverne and Shirley. So a little shout out to her. She has fourteen grandkids. All right. And she asked this very question, she said, well, Mark, I’m she’s in her 80s. She goes, I’m too old for Roth. And I go, No, you’re not I go let me quote the infamous Dave Ramsey. If you’re still breathing, you can still be saving. And so I love that point. And she goes, well, what would I do? And I said, if you want to save and maybe leave a legacy with your kids, why don’t you set up 14 Roth accounts and you could put seven grand in this year, seven grand next year. So that’s 500 each this year, 500 each next year. You could have fourteen thousand dollars in 14 different Roths. And each grandkid is a beneficiary of that Roth. And they have this 10 year amazing window to use it after you’re gone. But you can leave a legacy and teach them about investing or whatever you’re into, and I’ll leave it at that. And I had a great conversation about it. And so this is right along with Lenny’s point. You know, the inherited IRAs are quite amazing and inherited. Roth is like the creme de la creme. And for those of you that are older and you’re thinking, I could do that, I could set up a Roth and just name what, that Roth for each kid or grandchild or great grandchild, lots of them. Do you like that? Can you live with that?

Mat Sorensen: I like that. Are those kids are going to have to have some earned income, but. Yeah.

Mark Kohler: Hold it, she has earned income, she’s setting up a Roth and making them the beneficiaries to inherit.

Mat Sorensen: Oh, I missed that part at the front end.

Mark Kohler: Do you like that better? And I guess what she does have earned income. So she could set up 14 Roths. Now, the only drawback in all this, if I was had a quiz, if I had

Mat Sorensen: This, I guess

Mark Kohler: 500 bucks a kid times 2 over the next two years,

Mat Sorensen: We could do up to seven thousand because he’s over 50.

Mark Kohler: Yeah. And I was like when she told me 14 grandkids, I was like, that’s perfect. Know 14 divided by seven, you know, and I got I’m ready to go or sorry, seven grand 514 is 500 a year. OK, but anyway. The drawback would be if I was to quiz a room, I go, what the drawback be is you’ve got some admin costs. I mean, you set up 14 Roths and you have to say, what am I going to invest it in? Where am I going to set them up and what am I going to put in them? So you’ve got to think through that and make sure that it’s economic. But if you’re like, heck, I don’t care about the administration costs per say, what I’m trying to do is leave a legacy. I’m trying to leave a concept.

Mat Sorensen: Yeah, I mean, I would only do the 14 accounts. If you’re going to have them involved with you right now and you kind of want them to learn and they can do their own thing with their own account, make their own investments with you if you’re just going to do it anyways. I just do it in one and list 14 beneficiary’s. You can do that. And then when you do pass away those, that one account will be split into 14 one for each of them.

Mark Kohler: Oh, that’s a good idea too Mat. Yeah man. Good heads. Their minds are better than one. That’s good. Yeah. OK, let’s see if you can really pass the test. All right. OK, now if Sherry was listening, she should listen. She’s a listener of the show. I know she could get this. OK, here’s your question, Mat. What does Laverne and Shirley, the movie Big and the movie League of Their Own have in common?

Mat Sorensen: Tom Hanks,

Mark Kohler: No, Tom Hanks was not in Laverne Shirley, he was not even born yet. He was born. OK, OK.

Mat Sorensen: I don’t know. I don’t know Laverne and Shirley. OK, I don’t I don’t know that show. I you reference and I’ve obviously heard it before. I know happy days a little bit. OK, but now Laverne and Shirley guy now big. Yeah. That that’s Tom Hanks, right. Yeah. It’s Matthew that it

Mark Kohler: Has Tom Hanks in both of them

Mat Sorensen: And a league of their own. Yeah. I made a

Mark Kohler: Two out of three. You got two out of three. OK, here’s the answer. Laverne and Laverne and Shirley was Penny Marshall, beautiful woman. She really looked great for years. The days she died, she was after Laverne and Shirley because she had such good name recognition. She became a director. She was the director of Big and League of their Own. Oh, I don’t know who knew?

Mat Sorensen: I didn’t know that

Mark Kohler: Penny’s daughter was a client of mine a few years ago. So we were doing some estate planning. I had a chance to talk to Penny Marshall at one point and her daughter was in a league of their own as well. Wow. Is a little small world

Mat Sorensen: full of fun facts today.

Mark Kohler: Yeah, that was all related to Lenny, all related to Lenny, who was on Laverne and Shirley.

Mat Sorensen: Shirley is, I guess. All right. Are you on Earth today, Lenny? Yeah, yeah, yeah.

Mark Kohler: Okay, OK. I’ll give you one other. I’ll give you one other question in a minute. This is these are old timer questions.

Mat Sorensen: Ok, OK, we’re doing OK. All right. Well, that’s actually all the questions I had to hit for today’s episode unless you have any other on the self-directed front. Not on Laverne and Shirley. Trivia question. Those don’t count after another. I think you need to do a third podcast Mark Laverne and Shirley Fanclub podcast.

Mark Kohler: Oh my gosh.

Mat Sorensen: I think you need an outlet, a different outlet. These these fun facts.

Mark Kohler: Ok, I’ve got I’ve got one more for you, but let me see self-direct. That’s OK. You are just you are not playful today. You know, I’m really frustrated by that.

Mat Sorensen: Oh, I did have one question. Sorry. Let me hit this one. This OK, this, this, this is from Louise. OK, hopefully not a character in Laverne and Shirley says Hi Mat and Mark instead of converting a regular IRA into a Self-direct and Roth IRA LLC. Oh OK. Which would take going from a traditional IRA, I presume, to a Self-direct an IRA converting to a Roth IRA, then setting up an LLC. All right. That’s what you need to do it. Can you instead have a loan against that certain amount? That way it wouldn’t be taxable since it’s a loan. Thank you very much for in advance for applying with all the different scenarios, the cover on your podcast. OK, so the short answer is no. So whenever you start thinking of ideas of, hey, I’ve got money in my retirement account, but I want to get it to use it personally and it’s like I know I can’t take a distribution because it’d be taxed. Why don’t I just loan myself the money? The IRS thought of that in the IRAs. You cannot loan yourself money from your own IRA that’s prohibited. The IRS doesn’t trust you with that. They think you’re just getting around the distribution rules. Even if you pay interest on it, it ain’t going to work in an IRA. Sorry, Luis, you don’t have a choice. The IRA is basically to invest for the long term. It’s not used for you to pull money out personally unless you just take the distribution to pay the tax and penalty. Now you can take a loan from a 401k. So if you got a 401K from a day job, you can usually loan yourself half the balance not to exceed fifty thousand dollars. If you want to set up a solo 401k, you could set up a solo 401k. If you’re self-employed with no other employees, you have some small business side hustle, whatever, and you have no employees. You could set up your own solo 401K for yourself and your business because you’re such a great employee. You could roll your traditional IRA dollars into the Solok and then you can take a loan from the Solok to yourself personally. Use it in the business, pay off high-interest debt, go to Vegas, you know, wherever the heck you want with it. You’ve got to pay it back to the Solok, though, over five years. So that’s your option there. Luis can’t do it on the IRA. It is possible. Loan yourself money, though, in a solo 401k if you qualify for the solo 401k. We got lots of episodes on the solo 401K on the podcast history here and on our sister podcast Main Street Business Podcast.

Mark Kohler: Man Great answer, good job. Mat Sorensen That was a little sting move your show.

Mat Sorensen: Was that, was that sting

Mark Kohler: You’ve seen the movie sting? The sting. With Robert Redford and Paul Newman, know what, I don’t you’re killing me with the sting, you got to watch it. That’s right. See what’s on the first

Mat Sorensen: Sneakers with Robert Redford.

Mark Kohler: That was good. Yeah, yeah, yeah. OK, now. All right. This is still related to Lenny because Lenny was a guest on Happy Days. Now I know you know, happy days. So for all you new people for all you young people, Corey, you might be able to get this one. What does Happy Days and Arrested Development have in common, Ron Howard? OK, fair enough. Sorry, Ron Howard is the narrator.

Mat Sorensen: It definitely does not. I’m sorry. Sorry, sorry.

Mark Kohler: But that was the answer to my question.Ok, that’s one of them.

Mat Sorensen: Henry Winkler.

Mark Kohler: Henry Winkler. Who is Henry Winkler in Happy day’s? He’s the Fonz and who is he in Arrested Development.

Mat Sorensen: What’s the lawyer’s name? I don’t know that he’s a hilarious, though, in wrestling. Yeah, he’s

Mark Kohler: Hilarious. He’s I want to say Barrois or what?

Mat Sorensen: No, he’s not. There’s not. Rob, Rob, Rob, Rob. Ablate is how he’s the actor that plays that. But anyways, it’s a is it a Barry Zucker corn or something like that.

Mark Kohler: We have to figure it out. All right. OK, but there you go. See, Lenny was a guest on Happy Days. Ron Howard later narrated Arrested Development, but Henry Winkler was the lawyer in for George Bluth and did a terrible job, by the way. Well, there’s a there’s some trivia all from Lenny. So we should dedicate this show to Lenny.

Mat Sorensen: Yeah. Lenny, thanks for your question today. Barry Zucker Corn. Yeah, it’s Barry Zucker Corn. That’s always good job.

Mark Kohler: Good job. See, I can recall that one I was thinking about blah blah, blah, blah, blah, whatever.

Mat Sorensen: Yeah. Which was Scott BAEO. That’s who was Rob Lowe. Rob Lowe with Scott

Mark Kohler: Baio in Arrested

Mat Sorensen: In Arrested Development. Yeah.

Mark Kohler: Ok, he was another attorney on the show.

Mat Sorensen: Yeah. And it was.

Mark Kohler: Oh well see folks, you get more than you bargained for. You get a little bit of entertainment. We, we love to quote movies, but we really did TV shows today. I think it was TV shows,

Mat Sorensen: You know, dynamic like that, you know.

Mark Kohler: Yeah. So, Lenny, thanks for your question. You made the show what it is today without you, but yeah. Wouldn’t have happened. Yeah.

Mat Sorensen: So so if anyone still listening, thanks for joining the Direction podcast today

Mark Kohler: For that one person still on the show, Lenny and Sherry,

Mat Sorensen: You guys better give us a five star review. Yeah, but now thanks everyone for listening. We try to keep it light here. We know the topics can be complex, a little boring, but they’re important. I mean, the number one asset that you’re going to have to retire on is going to be your retirement account. Social Security is not going to cut it. We want you to take control of your retirement, teach all the tools to do that, invest in the stuff you know, that’s what we’re all about. You can open up accounts, of course, at our company directed IRA. We’re doing that every day, helping clients across the country invest in what they want to set your IRA free, go to DirectedIRA.com and remember the workshops we are coming up that we to the front end get over to our websites. MarkJKohler.com DirectedIRA.com, MatSorensen.com. There’ll be info there and sign up for our newsletter. Well, you’ll get updates on all those and we’ll see you next week and our podcast

Mark Kohler: And self-direct your thoughts and your IRA was a pen.

Mat Sorensen: Take control of your thoughts and your retirement. Thank you, Everyone.


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