Roth IRA holding nonpublic stock?
It seems to me that a IRA or a Roth IRA can hold nonpublic stock. I assume one must be carefui not to create a related party transaction and that the purchase and sale must be arms length transactiions.
How difficult and costly is it to locate a custodian for a Roth or Traditional IRA where the investment is not publicly traded?
Thanks
Jim M
Permalink Submitted by mk foss on Tue, 2011-09-27 20:44
In my experience it’s both costly and difficult to find custodians that will hold nonpublic stock. A large custodian like Schwab or Fidelity will only allow customers with large balances to have nonpublic stock in their retirement accounts – by large I mean more than $250,000 often more than $1,000,000. I looked into it when contemplating the purchase of a local bank stock – the bank knew of some custodians that would hold the stock but there was an initial fee to open the accuont plus ongoing charges of $300 per year in addition to a minimum cash balance in the account other than the nonpublic stock.
This is just my experience – maybe someone has had a better result.
Permalink Submitted by Bruce Steiner on Wed, 2011-09-28 03:54
Our experience has been similar to Mary Kay’s, though we look at a cost of a few hundred dollars a year as a modest price for the client to pay to accomplish his/her objective. There are several trust companies that will allow this. It shouldn’t be hard to find one. Your lawyer, or the tax/estates group in his/her law firm, should be able to help you.
We’ve had clients invest their IRAs in various assets other than marketable securities, including private mortgage loans, large blocks of thinly traded companies, and hedge funds.
As the original poster noted, the IRA owner has to be careful to avoid the prohibited transaction rules.