We are beginning to see the inexpensive DIY products for the development of the IRA LLC offered to self-directed IRA investors unfortunately, the enticing price tag may become the Fly Trap of the self-directed world luring penny concerned investors into an uncontrollable IRS audit. There are three big problems with this product.
1) The operating agreements and instructions are incomplete, misinterpreted which could position the investor for an audit.
2) There is no where to go to for support.
3) Most of the custodians listed as acceptable recipients will not accept the submitted format.
While this may work in a DIY television studio, is it sound judgment to place your hard earned retirement in the hands of a website with no identity or support structure? The owner of the oldest DYI version is Wyoming registered LLC with no disclosure as to who the members are with a fulfillment center that does all the work. You might ask your self why is that a problem? What if you were moving from one state to another and your present residence is Texas and new residence is Nevada. If you ordered the DIY version you would receive a Texas operating agreement without asking you which state you preferred. I can testify to that since I bought one.
You are now the owner of the wrong documents for the wrong state. What if a procedural change needs to be effected or perhaps you wanted to add a contingency manager to the LLC? What support is available? None, there is no way to reach the author. How about the local attorney? Not likely, they would have to investigate the effect of the changes as it relates to the tax code. There goes your savings and it still may not be correct. Now all of your carefully laid plans of saving money of been thwarted. Professional help is now looking less expensive!
How about ongoing support? If the producer is not willing to provide a phone number or other contact information then how do you keep up with tax code changes?
I read a blog entry the other day in one of the large investor blogs about an investor who did not want to pay our price nor that of our competitor. So he did some research and explained to his investment club what he had discovered and some of the information was right and some was wrong. He received slaps on the back for unearthing information and saving himself a few dollars. It seems to me that he could have much better spent that time finding an asset to invest in, something he was proficient at rather than sharing half correct information that may eventually come back to bite him and his friends who decided he was the next investment procedural sage.