Checkbook LLCs, Trustees, and Choosing the Right Retirement Plan


Description

In this session, I walked you through the controversial world of checkbook LLCs — what they are, how they started with the Swanson case, and why attorneys are split on whether they’ll hold up long term. We talked about the risks, the fixes, and why I lean conservative when it comes to using them. I also compared checkbook LLCs to trusts, explained why the trustee structure may be safer, and gave you strategies to protect yourself if the IRS ever cracks down. Then we looked at the different employer retirement options — SEP, SIMPLE, Solo 401(k) — and which ones make the most sense depending on whether you’ve got employees. Finally, we wrapped up with the importance of getting your Roth IRA open immediately so you can start the five-year clock ticking.


Key Takeaways

  • Checkbook LLCs let your IRA own an LLC, with you as the manager writing checks — but this is a gray area.

  • Swanson v. Commissioner allowed it, but Rollins v. Commissioner showed the risks — this loophole could close.

  • If you set up a checkbook LLC, it’s safer to have someone else (not you or a disqualified person) as manager or trustee.

  • Trustees can become disqualified persons once they’re in control — so fund the LLC fully upfront.

  • Trust structures may be safer than LLCs because the investor isn’t the manager.

  • If one IRA is disqualified, your other IRAs remain safe — diversify.

  • Solo 401(k)s give better checkbook control and allow loans (up to $50k), unlike IRAs.

  • SEP and SIMPLE IRAs require employer contributions to match employee contributions — be cautious if you’ve got staff.

  • A Roth IRA never forces withdrawals — Traditional and employer plans do.

  • Get your Roth open early to start the five-year clock, even with a small contribution.


Action Steps / Exercises

  1. Case Study Reading: Google and read Swanson v. Commissioner, Rollins v. Commissioner, and the Adler opinion letter. Write down the key lessons from each.

  2. Risk Check: If you’re considering a checkbook LLC, outline the pros and cons — and identify a non-disqualified manager you could appoint.

  3. Plan Selection Drill: If you own a business, list whether a SEP, SIMPLE, or Solo 401(k) fits you best. Include whether you have employees.

  4. IRA Diversification: Map out how you could split funds into multiple IRAs so one mistake doesn’t sink everything.

  5. Five-Year Clock: If you haven’t opened a Roth IRA yet, set a deadline this month to open one and make even a small contribution.