Protection from Creditors and Borrowing

Protection from Creditors and Borrowing - estate purchase...

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Protection from creditorsMany states have laws that prohibit judgments from lawsuits to be satisfied by seizure of IRA assets. For example, IRAs are protected up to $500,000 in Nevada from Writs of Execution.[11] However, this type of protection does not usually exist in the case of divorce, failure to pay taxes, deeds of trust, and fraud. Assets in the IRA must have been deposited before a lawsuit exists to receive this protection.[citation needed] [edit] BorrowingAn IRA owner may not borrow money from the IRA except for a 2-month period in a calendar year. [12] Such a transaction disqualifies the IRA from special tax treatment. An IRA may incur debt or borrow money secured by its assets but the IRA owner may not guarantee or secure the loan personally. An example of this is a real
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Unformatted text preview: estate purchase within a self-directed IRA along with a non-recourse mortgage. According to one commentator, some minor planning can turn the 2-month period mentioned in the preceding paragraph into an indefinite loan.[13] Income from debt-financed property in an IRA may generate unrelated business taxable income in the IRA. The rules regarding IRA rollovers and transfers allow the IRA owner to perform an "indirect rollover" to another IRA. An indirect rollover can be used to temporarily "borrow" money from the IRA, once in a twelve month period. The money must be placed in an IRA arrangement within 60 days, or the transaction will be deemed an early withdrawal (subject to the appropriate withdrawal taxes and penalties) and may not be replaced....
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This note was uploaded on 02/29/2012 for the course ECON 4223 taught by Professor Johnp.willen during the Spring '12 term at UCLA.

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