Year-end is a busy time, yet in our holiday preparations we should not overlook tax year requirements, a few of which have December 31 cut-offs. For self-directed investors this could mean fair market valuations (FMVs) of their self-directed accounts.
Ready to submit your FMV? Log in to your Client Portal and follow the instructions below.
What Are Fair Market Valuations?
A fair market valuation is the assessed value of an asset at a given point in time. As the financial custodian for your self-directed investments, New Direction Trust Company is required by state and federal regulators to provide an accurate market valuation of the assets held in your account. To accomplish this, we ask account holders to submit an FMV as of December 31 for each tax year. NDTCO uses this information to complete IRS Tax Form 5498, which we provide to clients after the tax filing deadline (Form 5498 also reports contributions, which can be made for a given tax year until that year’s filing deadline). While some assets have readily available FMVs, you may need to engage the services of a qualified third-party valuator who can accurately assess the value of an asset held in your self-directed IRA, 401(k), or HSA.
Do I Need to Seek FMV Information?
|Which Assets Qualify?
If your account holds one of these assets,
you DO need submit an annual FMV
|Which Assets are Exempt?
If your account holds one of these assets,
you DO NOT need submit an annual FMV
|Real Estate – Individual properties, regardless of their purpose (rental, buy and hold, etc.), may fluctuate in value over a given year.||Private Loans – NDTCO designates the current remaining balance due of a private note as its FMV.|
|Private Equity – The value of your self-directed plan’s equity position may change depending on the recent success of the private company.||Public Equity – Publicly traded stocks, mutual funds, and ETFs carry public market values and needn’t be independently valued.|
|Checkbook IRA – The cumulative FMV of your account-held LLC (or other such entity) is formed by the individual FMVs of any assets owned by the LLC/entity.||Precious Metals – NDTCO designates the up-to-date spot values of your account-held items as the current FMV of said items.|
|Other Assets – Your tax-advantaged plan can hold oil/mineral rights, lumber rights, livestock, and just about anything else you can think of!|
It’s worth pointing out that if you elect to take an in-kind distribution of real estate, private equity, a Checkbook IRA, or another non-exempt asset to satisfy a required minimum distribution, you will need to obtain a new, current FMV of that asset for value reporting purposes.
If you have any questions on whether your account-held asset(s) will necessitate an independent FMV, please give our office a call at 877-742-1270 to confirm.
Once the value is determined you must request and receive valid supporting documentation. Examples of valid supporting documentation include:
|Asset Type||Supporting Documentation Examples|
|Checkbook IRA||Documentation options my vary for these assets. Give us a call at 720-797-2246 if you need clarification.|
Please note that e-mail communications, advertisements or similar marketing materials, expired documents, and Schedule K-1s do not constitute valid supporting documentation.
How to Submit Your Fair Market Valuations
When you know the FMV of your asset(s) and are ready to submit your documentation as of December 31, you can easily do so through your client portal:
- Log into the online Client Portal.
- On the Overview page, find the appropriate asset and click on the “Valuate” link in the righthand column. If this is a real estate holding, you will need to click “Take Action” and then “Valuate.”
- Provide any requested information and upload your supporting documentation.
- Agree to the Terms & Conditions and click “Submit.”
If you choose to submit the paper Fair Market Valuation Form, your valuator will not have to sign it. Your supporting documentation, however, will still require your valuator’s signature or, if applicable, must be printed on company letterhead.
Please don’t hesitate to give us a call at 877-742-1270 to address any questions or concerns you may have about acquiring and submitting an FMV. You can also submit a message directly to our staff through your Client Portal.