Spice Up That IRA

There's another liquidity issue. Once the IRA owner reaches age 70-1/2, he or she must start making withdrawals. That's no problem if there is cash or liquid assets in another IRA, since the required minimum withdrawal can be made from any one of these accounts. Still, the trustee must be able to value the property so the minimum can be calculated. In the absence of other liquid assets, all or a portion of the real estate in this IRA might have to be sold, perhaps in a difficult market.

Finally, if you're going to invest in real estate inside your IRA, do it only with a small portion of your funds, and in a separate account, so all your assets won't be penalized if the IRS disallows your real estate investment.

The Cost of Independence

There are costs to setting up this type of IRA. Entrust charges a one-time $50 fee to open the account, plus a one-time charge of $95 for the purchase of property. There may also be fees for wire transfers of money to settle a real estate deal. Then there is an annual fee of $250 a year for each asset, no matter what its value is. You can contact Entrust at www.TheEntrustGroup.com or (888-340-8977) to find your nearest local office.

Competitors have similar services and fees. They include: FiServ Trust Company (800-962-4238), Sterling Trust (800-955-3434) and Equity Trust (888-382-4727).

Buying alternative investments inside your IRA may be too complex for most people. But if you're willing to do your homework and follow the rules on real estate investing in your IRA, the trust companies are ready to help. And that's The Savage Truth.