Including Private Placements in Your Self-Directed Retirement Plan? Check Out Our Asset Kits

Published on March 20, 2018

A private placement is an investment opportunity, typically offered by privately held companies and small businesses that are seeking to raise capital from individuals. These entities may include partnerships, land trusts, certain types of corporations, and startups.

If you have a self-directed retirement plan, you can include private placements in your investment portfolio. In this scenario, the self-directed IRA invests directly into the business, partnership, or other entity, with terms worked out between the parties (typically via a subscription agreement). The entity gets needed capital and the self-directed investor diversifies his/her retirement portfolio by including this nontraditional investment within the retirement plan.

Private placement asset kits

Next Generation offers step-by-step help with a private placement asset kit, for those who are investing their IRA directly into a private entity. These kits are available online or via email as a PDF.

In the asset kit, you’ll find all the requirements needed to authorize a private placement through your self-directed plan custodian/administrator:

• Buy direction letter (instructs your custodian/administrator to make a purchase on behalf of your account)
• Private placement instruction letter (asks the account holder to acknowledge specific requirements associated with the investment)
• Private placement investor advisory notice (requires the entity to acknowledge they are aware a retirement plan is making the investment)
• Request for relevant additional documentation such as:
  • Certificate of good standing or articles of formation for the entity
  • Subscription or operating agreement

As with all self-directed investments, the account holder sends instructions to the custodian/administrator. Our team will review the documentation and the asset to verify the investment is being made within our guidelines; this administrative review takes between two and five business days, depending on the transaction’s complexity and provided we have all original, correct documents. Upon completion of this review, Next Generation will send the funds on behalf of the IRA to the entity. Remember that the IRA is the investor in the transaction; all income and expenses related to the asset flow through the self-directed retirement plan.

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