Private Stock: 5 Responsibilities of Self-Directed Investors

Private investments are one of the preferred assets held by IRA Resources clients. That gives us a lot of insight into what it takes, from an administrator’s perspective, to ensure that transactions go smoothly. Our trained staff knows how to handle all the reporting and recordkeeping for your private investments, so you can rest easily knowing your retirement account is in our capable hands.  

But that doesn’t let you, the self-directed investor, completely off the hook. You have some ongoing responsibilities as well. Here are the top five that you should keep in mind:

1. Make sure the entity (company, LLC, or LP) sends two copies of all statements, reports, and notices: one to you and another directly to IRA Resources. We use our copies for the “fair market valuation” reporting required by the IRS. You should keep your copies for your own records. IRA Resources cannot be certain of asset value without this valuation form. It is the investor’s responsibility to verify correctness of these statements. 

2. Check your IRA Resources statements for accurate fair market value (FMV) of your asset to make sure it is being reported to the IRS accurately. 

3. Submit supporting documentation to IRA Resources if additional funds are needed for the investment (for example, a capital call letter requesting additional funds). The specific documentation required depends on the transaction being processed. You can find all our forms, or contact an IRA Resources representative and we’d be happy to help. 

4. Make sure you have enough liquidity in your self-directed IRA in case funds are needed to pay expenses or take a distribution. Sometimes there are unexpected expenses, and if you’ve met your contribution limit for there year it can be a tricky situation to navigate. A transfer or rollover may be an option depending on your situation. If you happen to find yourself without enough cash in your account to pay an expense, we’d be happy to help you figure out the best way to handle the situation. However, do not pay for these expenses from your personal accounts— this is a prohibited transaction and will have tax consequences. 

5. Monitor your account statements and all correspondence from the entity related to your investment. IRA Resources does not vet investments therefore we do not know what is or is not typical behavior for your account or investments. It is your responsibility to monitor these accounts and investments to ensure correctness. 

If you have any questions regarding rules for private placements or private stock in self-directed IRAs, the rules,  and your responsibility as an investor please reach out to us. You can give us a call at 888-322-6534 or send us an email. We look forward to assisting you in securing your financial future in any way we are able.