What is a self-directed account?
In 1975, as part of the Employee Retirement Income Security Act of 1974 (ERISA) and the creation of IRAs, self-directed IRAs were also permitted. At that time, qualified plans, such as Defined Benefit, Profit Sharing and Money Purchase Pension Plans, were self-directed. The investments of choice were most commonly real estate and notes. The self-directed portion of the retirement industry continues to evolve and today is an accepted investment diversification strategy.
Investors can purchase a wide variety of assets that comply with the federal rules guiding permitted transactions through IRAs and 401(k) plans. The term "self-directed" simply means that you, as an individual, have complete control over selecting and directing your own IRA or 401(k) investments. Most banks limit a client to the scope of their traditional investment products (mutual funds and stocks). Preferred Trust does not limit clients to proprietary products or restrict them to traditional investments, which provides clients with more choices and opportunities.
Once established, your account can buy real estate, notes, limited partnerships, commercial paper and many other types of assets. With a self-directed IRA, you make all of the decisions regarding your investments. Self-directing your IRA does require a custodian or administrator to complete the documents required to establish your account and purchase your investment.
IRA owners are not permitted to be the Trustee or Custodian of assets for their IRA. Consequently, the government has appointed certain financial institutions to handle the accounting and reporting of IRAs. Preferred Trust Company, LLC is governed by the State of Nevada Financial Institutions Division and all applicable IRS regulations.
