IRA Rules . . . Simplified

The People And Investment Restrictions You Need To Know

The IRS guidelines allow you to invest your IRA savings in almost anything, with the exception of collectibles and life insurance contracts.

Two key terms you’ll want to remember about Self-Directed IRA investing are ‘self-dealing’ and ‘prohibited transactions.’  In general terms, self-dealing refers to a transaction that can provide you with a financial benefit, instead of your IRA, which is a no-no. A prohibited transaction is any improper use of your IRA by you or anyone the IRS has defined as a disqualified person (i.e. parties related to your IRA).

The following lists parties related to your IRA and those not related to your IRA. Your IRA can make allowable investments with non-related parties only. Please keep in mind that a related party is not the same as a relative within the IRA guidelines.

Related Parties to your ira
  • You (account holder)
  • Your spouse
  • Your natural parents and/or your adoptive parents
  • Your natural grandparents
  • Your natural children and/or your adopted children
  • The spouses of your natural children
  • Any fiduciary of your IRA
  • Any people providing services to your IRA
  • Corporation, partnerships, trusts, or estates in which you own, directly or indirectly, at least 50%
Non-Related Parties to your ira
  • Your brothers and sisters
  • Your spouse’s brothers and sisters
  • Your spouse’s parents
  • Your spouse’s grandparents
  • Your stepchildren
  • Your spouse’s stepchildren
  • Your grandparent’s spouse, if not your natural grandparent
  • Your aunts, uncles, and cousins
  • Your ex-spouse/life partner

Below are common types of prohibited transactions between a related party (disqualified person) and an IRA which should always be avoided.

  • Borrowing money from the IRA
  • Selling, exchanging, or leasing property to the IRA
  • Receiving compensation for managing property held by the IRA
  • Using the IRA as security for a loan
  • Transferring plan income or assets to disqualified persons

Do you know who your Self-Directed IRA can and cannot do business with?
Our Related Parties Worksheet makes it easy.

DOWNLOAD HERE