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A woman going through divorce discovered that her husband had quietly moved $340,000 from a rollover IRA into a self-directed structure years earlier, using it to purchase two rental properties held inside an IRA-owned LLC. Because the properties were titled to the LLC rather than to him personally, she initially struggled to get a clear picture of what the retirement account was actually worth. Her attorney eventually confirmed that the real estate was fully part of the marital retirement assets, regardless of how the ownership was structured.
A self-directed IRA with checkbook control works by having the IRA own a single-member LLC, with the account holder serving as manager. That LLC then holds title to whatever the IRA invests in, whether that is real estate, a private loan, or another alternative asset.
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On paper, the properties were owned by an LLC rather than by the IRA custodian directly, which is exactly what checkbook control is designed to do. That structure did not shield the assets from the divorce, but it did mean her attorney had to specifically request LLC operating agreements and property records to get a full accounting, rather than a simple account statement showing a cash balance.
Standard IRA statements from a brokerage show a balance and a list of holdings. A self-directed IRA holding real estate through an LLC instead requires the custodian's account statement, the LLC's operating agreement, and current valuations of the underlying property, since the LLC itself does not trade on any public exchange.
Her attorney ultimately had to request a formal valuation of both rental properties as of the relevant date, since the custodian's own statement only reflected the last self-reported value the account holder had submitted, as required under IRS reporting rules for self-directed accounts that require custodians to file Form 5498 based on year-end fair market value.
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Her husband maintains he never disclosed the properties simply because he did not think to mention an account he considered separate from their day-to-day finances, not because he was trying to conceal anything. Whether that explanation holds up is now a matter for the court, but the properties themselves were never actually hidden from a legal disclosure standpoint, since they were reported annually to the IRS through the account's own filings.
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