Royalty investing with a self-directed IRA is similar to investing outside of an IRA, with a few minor differences. Here is a basic overview of the steps involved in purchasing royalties with an IRA:
- Open up your IRA with a self-directed IRA custodian and add funds by depositing cash or rolling over funds from an existing retirement savings account.
- Select your preferred royalty investment and request forms needed for purchase from the seller.
- Since you and your IRA are separate entities, you will want to title the investment in the name of your IRA rather than your name personally. Confirm the correct title of your IRA with your IRA custodian before purchasing the investment.
- Purchase the investment by filling out the necessary form to send funds from your IRA to the seller. Your IRA custodian will retain important records related to the investment to ensure their safety.
- Once your IRA owns the investment, all profits go through the IRA, allowing you to manage the investment.
If you decide to sell your investment, complete the necessary form(s) to direct your IRA custodian to sell on behalf of your IRA based on the sales terms you have negotiated. Proceeds from the sale will then be returned tax-free or tax-deferred back in to your self-directed IRA.