BENEFICIARY GUIDE

Real Estate

The Process

Step 1: Open an IRA with New Direction Trust Company

This allows us to communicate with you and share documents back and forth in a secure manner when logged into our client Portal.
Complete the Inherited IRA Election Form (IEF), which provides us with your beneficiary type (designated or eligible designated) and authorizes the internal transfer of assets to your IRA.
Provide a copy of the Death Certificate. This can be done securely through the messaging center in the client portal if not provided previously

Step 2: Review the assets you have inherited from the decedent

NDTCO will provide you with a copy of a statement from the decedent’s account.
NDTCO will provide you with a copy of the deed we have on file for the property.
If there is more than one beneficiary, the account will need to be divided according to the beneficiary designation.
Review the Real Estate Investment Guide.

Step 3: Review the IRS rules surrounding holding Real Estate in an IRA

Disqualified Persons/Entities – Certain people and entities are considered Disqualified and are not able to have certain interactions with your IRA or the Real Estate within it.
Prohibited Transactions – There are actions that are prohibited and could result in the distribution of this asset from your account. A prohibited transaction applies to all disqualified persons and entities. Please review the Prohibited Transactions and Self-Directed Investing page.
Managing Property Expenses – All expenses for the property are the IRA’s responsibility and may not be paid for by personal funds.
Managing Property Income – All rent payments or other income is to be paid directly to the IRA. It cannot be collected personally and sent to the IRA.
For more details on these and other important topics, review the IRS Rules and Regulations and the Real Estate Investment Guide.

Step 4: Determine which option you want to complete for your inherited Real Estate

Move the real estate to your IRA. You will need to prepare a new deed. Keep reading for more information on how to prepare a deed.
Distribute the real estate to yourself personally – this will be reported to the IRS as income. You will need to prepare a new deed.
Liquidate the real estate. You will work with a real estate professional to sell the property.
Move the sale proceeds to your IRA. At this time, you can re-invest or transfer to a new custodian.
Distribute the sale proceeds to yourself – this will be reported to the IRS as income.

BENEFICIARY GUIDE

Additional Important Information

Paying expenses for the Real Estate prior to sale or movement to the new IRA

All expenses for the real estate, including, but not limited to; HOA, Insurance, Property Tax, Repairs and Appraisals, need to be paid from the decedent’s IRA account.
When there is an expense, notify your Life Events Specialist and upload a copy of the invoice in a portal message.
You will receive a One Time Payment Authorization Letter from DocuSign, which allows you to request the payment to be made from IRA funds.

Deed Information

You can work with a real estate professional to assist you with preparing a deed.
- NDTCO does not provide Deed Preparation Services.
- If there is more than one listed beneficiary on the decedent’s account, the property will be divided according to the same percentage as the beneficiary designation. This percentage of ownership will need to be listed on the deed as well.
- If you are going to distribute the IRA, the deed should be titled to you.
- If you have a Traditional or Roth IRA, the title of your IRA owned real estate is:
  - NDTCO, Trustee, FBO (CLIENT NAME) (Roth or Trad) IRA
- If you have an Inherited IRA, the title of your IRA owned real estate is:
  - NDTCO, Trustee, FBO (CLIENT NAME) Bene – (DECEDENT NAME), Dcdt (Roth, when applicable) IRA
- The legal address for your IRA is:
  - 1070 W Century Dr.
  - Louisville, CO 80027
We will need two copies of the deed; one should be a clean copy with no signatures. The other deed should be signed “Read and Approved” by all beneficiaries. NDTCO will sign the deed.

Distributing your Real Estate

You will need to provide NDTCO with a new deed (see instructions in previous section)
You will need to provide NDTCO with a full appraisal that is less than 12 months old.
If there is a mortgage on the real estate, the mortgage will need to be refinanced or paid off by the decedent’s IRA funds. You will need to work with the mortgage company to refinance the loan to yourself personally.
You will complete a Distribution and Notice of Withholding Form.
- NDTCO will provide instructions at the appropriate time.
NDTCO will sign the deed and will send it to you.
- If there is more than one beneficiary receiving the property, you will need to let NDTCO know who to send the signed deed to.
- We will need two copies of the deed; one should be a clean copy with no signatures. The other deed should be signed “Read and Approved” by all beneficiaries. NDTCO will sign the deed.
You will file the deed with the county and will be responsible for paying the filing costs.
There are fees associated with this distribution, which you can find on our fee schedule (link below).
The value of the real estate, plus any cash that may be in the account, will be reported to the IRS.
See the NDTCO Fee Schedule for any associated fees for a distribution.

Liquidating your Real Estate

You choose a Real Estate Agent to list the property. The seller should be named to match the same titling on the current deed. A copy of the deed will be sent to you in the portal.
You will sign the Listing Agreement, as the beneficiary, and provide NDTCO a copy of the agreement.
Once you have a signed contract for the property, let your Life Events Specialist know. They will send you a Sell Direction Letter through DocuSign. You can upload a copy of the signed contract to the DocuSign Document or upload it through the messaging center in the client portal.
An NDTCO Real Estate specialist will work with you and the title company to finalize the sale of the property. They will communicate with you through the portal messaging system.
All sale proceeds will be deposited into the Decedent IRA account.
See the NDTCO Fee Schedule for any associated fees for the liquidation.

Internal Movement of Assets to your IRA

If you liquidated the real estate, the cash will be moved to your IRA account within one week of receiving the funds from the sale.
- You will be provided with information on how to distribute or transfer to another custodian. You can also keep the cash in your NDTCO IRA or re-invest in another asset.
To move the real estate to your IRA, you will need to provide NDTCO with a full appraisal less than 12 months old.
If there is a mortgage on the real estate, the mortgage will need to be refinanced or paid off by the decedent’s IRA funds. You will need to work with the mortgage company to refinance with a non-recourse loan in the name of your IRA. For more information What is a Non-Recourse Loan?
If you are moving the real estate into your IRA, NDTCO will sign the Deed.
- The filing costs will be paid from the decedent IRA. Information will be provided on how to accomplish this and how to file the deed.
You will need to provide NDTCO with Verification of Insurance.
- Your IRA needs to be named insured or the first paid on the policy.
- NDTCO will need to sign the insurance contract.
Once NDTCO receives both verification that the deed has been recorded and the insurance is contracted, the property will be moved to your IRA account. You will receive notification through the portal that this has been completed.
Other considerations:
- If there was a property manager, or you plan to use a property manager, we will need a copy of the agreement and the property manager will need to complete a Property Management Agreement. This is a DocuSign Document that will be emailed to them.
- If there was a lease on the property, you will need to make an amended lease for the tenant. You or the property manager can sign this lease. Please upload a copy through a portal message.
- If the property is owned by more than one party, the income and expenses need to match the same percentages of ownership according to the deed.
You will want to review the Guide Real Estate Investment Guide to make sure you are familiar with IRS and NDTCO guidelines on IRA Owned Real Estate.

NOTE: NDTCO understands there is a lot to consider when inheriting Real Estate in an IRA. We would like you to provide us with a decision as to if you plan to sell or keep the real estate within 60 days from when you complete the Inherited IRA Election Form. An NDTCO Life Events Specialist will work with you during this process, but it is going to take time and attention on your part. We ask that you communicate with us regularly on the steps you have taken. Any inaction or non-communication for 6 months may result in the decedent account being found not in Good Standing and may be distributed to the beneficiary at the last reported value. The beneficiary would be responsible for any taxes as a result.

FAQ

How long does the process take?

This will be in part dependent on how quickly the beneficiary acts and completes the steps that they are required to complete. In addition, it will depend on what the beneficiary is planning to do. It takes time to get an appraisal or to sell property.

Why does NDTCO have to sign the deed for a sale or internal transfer?

The decedent’s IRA owns the real estate so an authorized signer for NDTCO must sign on behalf of the IRA.

Can I be the property manager for my IRA owned Real Estate?

No, neither you nor any disqualified party or entity can be the property manager for the property. This would be considered a prohibited transaction. Review the Real Estate Transaction Guide for more information.

Do I have to pay taxes on the rental income of my IRA Property.

In some situations, your IRA may need to pay taxes. Please refer to this article and check with your CPA to find out if this is something you need to file. Calculating UBIT on Real Estate Investments.

May I do repairs on the property in preparation to rent or sell the property?

No, neither you nor any disqualified party or entity can do repairs on the property. This would be considered a prohibited transaction. However, you may use cash within the IRA to contract a non-disqualified party to complete repairs on behalf of the IRA. Review the Real Estate Transaction Guide for more information.

The property needs a new refrigerator. May I buy a new refrigerator and then be reimbursed from the IRA?

No, neither you nor any disqualified party or entity can purchase or pay for anything on the property and be reimbursed. However, you may use cash within the IRA to contract a non-disqualified party to complete repairs on behalf of the IRA. Review the Real Estate Investment Guide for more information.

What happens if I do a prohibited transaction.

NDTCO has a great article covering this topic. Real Estate IRA – How the IRS Treats Prohibited Transactions. It is not intended to be all inclusive, so you will want to check with a trusted CPA or tax attorney, or the IRS Website: Retirement Topics – Prohibited Transactions | Internal Revenue Service.

Can NDTCO advise me on what to do with the assets I have inherited?

No, NDTCO is a non-fiduciary custodian and cannot provide tax, legal or financial advice. You will want to talk with a trusted CPA or tax attorney if you need advice.

Will I have to pay taxes on the real estate since I inherited them?

Moving your Real Estate to your IRA is not a taxable event. At some time, you may choose to distribute your assets. If the decedent had a pre-tax account, such as a Traditional or SEP IRA, the distribution is typically taxable. If they had a Roth IRA, then the distribution may not be taxable. You will want to check with your trusted CPA or tax attorney to understand what tax rules apply to the account you have inherited.

Will NDTCO notify me when I need to take a distribution and how much I need to take?

Generally, a designated beneficiary must distribute the entire account within 10 years after the date of death. There are multiple options for an Eligible Designated Beneficiary. You should consult your trusted CPA or a tax attorney to make sure you understand your options, whether RMDs are necessary, and the consequences for each. It is the responsibility of the account holder to understand when and how much needs to be distributed from an IRA they have inherited.

Are there any fees associated with this process?

We do not charge our application fee to beneficiaries of NDTCO clients. There will be fees for the internal transfer, a sale, or distribution. Our fee schedule outlines all NDTCO fees associated with your account. It can be reviewed here Fees – New Direction Trust Company.

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