In which order should things happen?
1.Open an IRA and make sure it will have cash in it in time to make your investment. (Read below for help, and click here to Get Started.)
2.Draw up an offer/contract using your IRA's name.
3.Request that PENSCO Trust fund the earnest deposit from the funds in your IRA if needed.
4.Send closing documents to PENSCO Trust so we can fund the close.
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Before you shop around.
If you haven't already established and funded a PENSCO Trust IRA,
you will want to begin there. Before moving any further, you will
at the very least, need to open an account so that you have your
IRA's 'name' to work with. For it is your IRA that is shopping around
for property - not you!
Establish.
As soon as PENSCO Trust receives your Application for an IRA, we will
process it and email you with your new account number. Your IRA's legal
'name' is "PENSCO Trust Company Custodian F.B.O. 'Your Full Name'
'IRA' (or SEP IRA, Roth IRA, etc.)'Account #' ". For example: “PENSCO
Trust Company F.B.O. Mary J. Investor, IRA, Acct. IN123”.
With this new name, you may begin to hunt around for a good real estate
investment.
Fund.
At the same time PENSCO Trust receives your Application , we should
also receive some indication of how you plan on funding your new
IRA. Because the time it takes for PENSCO Trust to receive funds
can vary greatly, please read the guidelines below for help, and
take this waiting period into consideration when planning your investment
timeline. (Your PENSCO IRA cannot make a purchase before funds reach
PENSCO Trust and have cleared the banking system.)
Via Transfer If you have decided to transfer other IRA
funds into it, we will have forwarded on your completed Transfer
Request Form(s) to your current custodian(s) to initiate the transfer(s).
You should expect this method to take anywhere between a week and
a month, depending on your custodian. Most take approximately 3-4
weeks to process your/our request. Click
here for a full explanation.
Via Direct Rollover If you have decided to roll over funds
from a previous 401(k) or other qualified plan, you will need to
submit an Application to PENSCO Trust in order to open your new
IRA, and contact your current plan administrator. Ask them what
you need to do to initiate a "Direct Rollover" to an IRA.
Once you have requested this ‘direct rollover’, you
should expect this method to take anywhere between a week and a
month, depending on your administrator. Most take approximately
3-4 weeks to process your request. In some rare cases, they will
want us to send a ‘letter of acceptance. If they indicate
that they need us to do so, simply complete sections I, III, and
VI of PENSCO Trust’s Direct Rollover Form, and submit with
your application. Click
here for a full explanation.
Via Cash Rollover Another way to move IRA funds from your
current custodian to PENSCO Trust is a cash rollover. If you are
in a hurry, this is most likely the fastest method of moving cash
between accounts. You will need to request a taxable distribution
from your current custodian. If possible, ask them not to withhold
taxes (because you are going to cancel out the taxable event). You
will then endorse that check over to your PENSCO account by signing
the back and making it payable to "PENSCO Trust Company Custodian
F.B.O. 'Your Full Name' IRA". To avoid tax and/or penalty,
you must deposit this check into your new IRA within 60 days. Note:
You are only allowed to use this method once every 12 calendar months
per IRA. This method takes only as long as it takes you to get a
distribution and mail it in with your Rollover Certification Form.
Click
here for a full explanation.
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Drawing up your offer.
You must draw up all offers and/or contracts so that the buyer's listed as your IRA. Your IRA should be treated as an investor separate from you, and its name - not yours - should be used anywhere on the offer that describes the portion it is buying. Whether it is the sole buyer, or buying as a tenant in common, the documents should be vested correctly. The IRA's title is "PENSCO Trust Company Custodian F.B.O. 'IRA Owner's Full Name' IRA 'Account Number'". You are not allowed to transfer a contract drawn up in your name into your IRA's name.
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Funding a deposit.
When your IRA purchases property, your IRA must fund any deposit
or earnest funds necessary. To authorize PENSCO to put down a deposit
from your PENSCO IRA, simply mail
or fax in our Investment
Authorization Form for Non-Publicly Traded Investments (using
the legal description of the property as the "Name of Investment"),
and a copy of the purchase contract. If you need to rescind your
instructions, please complete and attach the Payment
and Funding Instructions.
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Closing time.
At closing, you, the IRA owner, must read, approve and sign all documents before sending them to PENSCO for the final custodial signature. After checking for your signature of approval, a PENSCO Officer will finalize the sale by signing the documents on your IRA's behalf. The signed documents will then be returned to the closing agent, along with funds, for processing.
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Fundamentals to remember.
All documents must be vested correctly:
PENSCO Trust Company Custodian F.B.O. 'Your Full Name' IRA 'Account Number'
Purchases should be transacted under PENSCO Trust's Tax ID: 02-0526633
The initial deposit, any increased deposit, expense item, and
all closing costs must be authorized for payment using our Investment
Authorization Form for Non-Publicly Traded Investments.
The IRA Owner or any other prohibited party in relation to the IRA
should not make any deposits from personal funds.
If financing, the IRA's loan must be a non-recourse loan.
Again: Contract of sale, counter offers, etc. should all be in PENSCO
IRA's name, read, approved, and signed by the IRA owner (will then be
signed by PENSCO). Note: Contract cannot be reassigned from the individual
to the individual's IRA (or other prohibited parties); this could be
construed as a prohibited transaction or improper contribution.
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Processing requirements and suggested documentation.
PENSCO would like to see the following documents prior to funding the close:
Click
here for a printable PDF of this checklist.
-
Proposed Preliminary Title Report (or Chain of Title) with full property description (i.e. legal description and street address
-
Funding Instructions - we recommend funding by wire
-
Evidence of Title Insurance
-
Phase I or Phase II Environmental Report (depending on circumstances)
-
If you obtain fire and liability insurance then we would like you to forward a copy of this to PENSCO as well
- Property Appraisal (if acquired by lender)
-
PENSCO Trust's own form: Investment Authorization Form for Non-Publicly Traded Investments. Use for funding, deposits, earnest money, and balance due.
- If you need to rescind your instructions, please complete and attach the Payment and Funding Instructions.
PENSCO Trust would also like:
1. An independent escrow (usually your Title Company or Attorney)
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(The foregoing is a general discussion. It is not intended, and should
not be relied upon, as an opinion or advice on any legal, tax or investment
aspects of IRAs. An IRA owner considering an IRA investment in real property
should consult with his or her own advisor.)
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