It is possible to roll over funds held in an IRA or 401k, to a regulated Custodian with self -directed IRAs accounts. This money can then be used to finance property in Costa Rica. To do this the Beneficiary must contact both custodians, request information about the roll over and follow their instructions.
Once the real estate property has been identified in Costa Rica, the Custodian gets in contact with the local Attorney. Copies of all documents on the transaction must be sent to the Custodian, including but not limited to: title report or deed of the property, registered survey, real estate taxes and zoning from by local municipality, purchase and sale contract, articles of incorporation of the holding company to take title on behalf of Purchaser.
The purchase and sale contract should have a clause explaining the Purchaser is vesting title of the property into a holding entity to be owned 100% by the IRA Agent in its capacity as Custodian for the Self Directed IRA Account of the Purchaser.
Ideally the holding entity should be an LLC or Corporation, with 100% of its shares under ownership by the IRA Custodian. The purchaser may or may not hold a controlling position in the holding entity, depending on the guidelines from the Custodian. Nevertheless to dispose of the holding entity’s assets (the property), the Purchaser and/or controlling directors shall need the authorization of the IRA Custodian, albeit there could be negative tax consequences under the US Tax Code. It has been said that the Purchase cannot self deal with the property like live in the house permanently. These issues should be discussed with the IRA custodian prior to engaging the transaction.
Once all documents and forms are set, the IRA Custodian wires the funds to the Purchaser’s lawyer or escrow agent, with instructions to disburse at closing upon executing the purchase and sell deed, transferring title from Seller to Purchaser’s chosen entity to hold the title (corporation or LLC). Some Custodians recommend using title insurance to minimize the risk to the funds. The real estate closing costs are the same as those using private funds.
Some custodians we have interacted with are:
- The Entrust Group: self directed retirement plan services, based in Oakland, California but with offices nationwide in the US: www.theentrustgroup.com
- Omni Asset IRA: a private financial consultancy from Baltimore:
Lic. Jose Juan Sanchez
LL.M. International Law