Part 1

Most people have some form of retirement account into which they have saved up funds over the years.  It may be an IRA or a 401K or a 403(b) or even a Roth IRA, but the common feature of all these accounts is that they allow you to contribute tax free money into the account, which is then invested and will accumulate the earnings tax free until you retire or begin to take the money out of the account.  Most accounts are invested by the custodian of the account, who may give a list of choices of investment, or may just invest them mutual funds based on your risk preference.  Many people have lost significant amounts in the recent market downturns and are confused about how they should invest.  The stock market is very unstable, but fixed instruments are paying historically low returns right now.

No one can say what the best investment strategy is now, but a new way of allowing the owner of the account to make the decisions for him or herself is becoming very popular.  It is called a Self Directed IRA LLC.  Just as the name implies, this means that an LLC will be set up and then the money from your IRA will be transferred to the bank account of the LLC where you will be given checkbook control over the investment of your funds.  You can’t use the funds for your personal benefit, or engage in what are called “prohibited transactions”, (more on this later) but you can invest real estate, oil and gas, foreign transactions and many other things that are not available through a traditional custodian like Fidelity or your local bank.  Generally speaking, the only investments you can’t make are in insurance or collectibles.

10 Steps to a Self Directed IRA

In order to set up and make investments from your own Self Directed IRA LLC it will be necessary to complete the following steps:

• Form a Limited Liability Company (LLC) in the state of your choice.
• Prepare a specialized Operating Agreement that meets the specific requirements for a Self Directed IRA LLC.
• Establish a Self Directed IRA account with an independent IRA Custodian that permits truly self directed IRA investments.
• Fund your new Self Directed IRA custodial account or transfer funds from your existing retirement account to the new custodial account.
• Direct your new Self Directed IRA Custodian to make an investment in your new Self Directed IRA LLC.
• Find a suitable investment vehicle in which you want to make your investment.
• Purchase the new investment in the name of your new Self Directed IRA LLC.

By using this simple method your Self Directed IRA LLC can invest in real estate and other investment vehicles without the red tape normally involved in obtaining approvals and without the administrative fees normally involved when using your IRA directly to make the investment.

Call or e-mail if you would like more information or stayed tuned for part 2 with more details on a Self Directed IRA LLC

What Happens if you die without a will in Texas?

If you die without a will (“intestate”), in Texas, the state will ‘write one for you’. That is known as the law of descent and distribution. Contrary to popular belief, your estate will not go to the state (“escheat”), unless no heirs can be found. Your estate will be responsible for the costs of searching for your heirs, and for the legal costs of an ‘attorney ad litem’ whom the court will appoint to represent unknown and missing heirs.

More likely than not, the court will also appoint an Administrator to handle your estate, and the administration most likely will be a dependent administration; i.e. the Administrator is subject to court supervision in the administration of your estate. The Administrator must apply to the court for every action the Administrator wishes to take, the court may grant permission after a hearing, then the Administrator has to report back to the court on the actions taken, and the court then may approve the actions after a hearing. All those costs of administration are borne by your estate before any distribution is made.

Distribution is based upon marital status, presence or absence of children, whether the children are of the decedent and/or of the marriage, if parents or siblings survive, and the type of property in the estate.  Note that adopted children are considered as natural-born, and sometimes may inherit from their natural parents as well as their adoptive parents. Children of the surviving spouse, but not the decedent’s natural children, are not heirs at law unless adopted by the decedent.  Only children of the decedent, and of the surviving spouse, are “children only of the marriage”

The following chart shows intestate distribution in Texas (click link below to open a printable PDF):

Texas Intestate Succession

Texas Intestate Succession chart (printable PDF)