EP 354 – Staying Out Of Trouble with Nathan Long

NCS 354 | Quest IRA

NCS 354 | Quest IRA

On this topic of Money Mondays with Quest IRA, Scott talks with CEO Nathan Long about how to stay out of trouble with your self-directed IRA LLC and some things to do keep it clean. Proposing two major options, they delve deep into the trust and getting a 401(k). They also talk about a big announcement concerning Nathan’s company and the values they are about to bring to more people. Nathan shares some of the bad stories that he experienced with clients, while showing some great insights that he learned from his mistakes.

Listen to the podcast here:

Staying Out Of Trouble with Nathan Long

We’re excited as always to hang out with the man, the myth, the legend CEO of Quest IRA, Mr. Nathan Long. 

Thanks for having me.

Our topic is all about Staying Out Of Trouble.

What I want to talk about is how do we take title to discount a note inside an IRA and do it safely while not spending too much money on Quest fees? It’s not my favorite subject, but it’s an important one. I think a lot of people get confused. What I’m alluding to is the area of what we call in our business checkbook control IRA. A lot of stuff has been out there for years over the internet about how the best way to buy any assets under a self-directed IRA is to form an LLC. Make yourself the managing member of the LLC and then you can buy and sell whatever assets that you need. Usually, the people that are setting these up are charging a lot of money for the LLCs. They don’t have a very good understanding of some of the dangers that could occur when that happens.

They are going to give a gun, but not providing a gun education course to go along with it.

One of the things is whenever I try to talk about this, I always ask what is it that you are trying to accomplish? Because if anyone says, “This is the way to do it.” They’re probably confused. A lot of people get confused. They actually think that I’m against LLCs and the IRA and that’s not what I’m against. If I could explain the problem and then we can get up to the solution. Why is it that we can’t form an LLC? The problem becomes with who is the managing member of the LLC? There are people that are disqualified to the IRA and those people include yourself, your spouse, your children and your parents. Their spouses and companies, those people who own, control and manage are highly-compensated. By definition, being the managing member of an LLC, you are creating a disqualified person to the IRA. What could be the dangers of that? People have been doing this for a while, “I know Bob and he didn’t get in any trouble with it.” The danger is, it could be viewed as a prohibited transaction, blow up your entire IRA, have lots of fines and all of this.

Pay the IRS a lot of fees. We don’t want to lose that aspect.

I’ve always been asked, “Do you see that happen very often?” Honestly in the past, it hasn’t happened that often but let’s look at some current state of the union. The government’s looking for money. In this particular subject, it’s a good point for them because the amount they stand to collect can be very large. Then tuning up for this as I like to say. There is something different in 2018 that’s never occurred in the past. In the past, as self-directed companies, we would always report what the value is on a Form 5498 to the IRS. We have to report the value of the account. Now, they’re not only having as report the value but the value and whether it’s a single manager LLC, it gets a special code. I want to know what the assets are inside of it. There’s a reason the government’s gathering this information. There’s the problem. I think that having an LLC in there where you’re the managing member could create a lot of problems for you. We go back to why is it that we want to do this? There are several good reasons to have an LLC in an IRA. One of them is it could be easier to use. It’s more accessible to what we call the checkbook. In other words, you’ve got the checkbook, I need to write to buy an asset. I want to buy a note. I have to send that wire off or do something like that. I’m in control and all of those types of things.

NCS 354 | Quest IRA

Quest IRA: People want the 401(k) because they think it’s cool, but they haven’t taken the time to legitimize it.


One would be checkbook control and the other is it could be cheaper on the custodian fees. If I have an LLC, the custodian charges to buy the LLC and hold that one asset in there versus buying and selling a bunch of assets. Those are the reasons why you’d want one and those are the reasons why I think that they could be a problem. Let’s talk about it. For some people saying, “I want a checkbook LLC,” because someone told them to is often the answer. Whereas, what they’re investing in is one note or two notes a year. In that case, maybe direct ownership in the IRA is a better way to go. Your more advanced students that are buying a lot of notes and stuff, I think that an entity in there makes sense. I’m not against the entity. What I’m against is, who’s the managing member? Take the time to change the managing member. Make it your brother or friend, a financial partner or an employee; anybody other than you, your spouse, your children or parents, lineal ascendants and descendants or their spouses. One of the ways that we can solve it is to simply put someone else’s into that managing member and you can have the checkbook control that you’ve been desiring. Another way that a lot of your students use is rather than going through the expense of a trust, they use an LLC and they use a trust.

Trust is great for notes.

Trust is good because they’re free. You can fill it out, you file for an EIN for banking purposes only and then that trust can hold those assets. What’s the problem with trust is you can’t do additional funding like putting money in, but you can just dissolve them and build another trust. If you want to see for education purposes only, a trust with some special IRA language though it’s a fill-in-the-blank form, send me personally, an email at Nathan@QuestIRA.com and I’ll send you a copy of a trust document that’s often used for IRAs. That should be a personal property trust so it should work well for a lot of you. One of the solutions is just go ahead and have the LLC and have the trust. Fund it the same way, just you not be the managing member or you not be the trustee of the trust. That’s one solution.

Another solution, one way is some of our clients can qualify for something called a Solo 401(k). Not everyone, you have to have self-employment income. You have to be able to legitimize that account. It will show on your tax return that you have income and make it current your contribution to it. If we could do that, we can roll in our SEP IRAs or traditional IRAs or 401(k)s or 403(b)s. All of those tax-deferred accounts can be rolled in to a 401(k). With that particular account, you can hold direct access. You get the checkbook and it’s okay because you’re the trustee of a 401(k). You get to break rules that you can’t have with the IRAs. You can have an LLC in there and be the managing member or you could just do direct ownership because you have the checkbook of the 401(k). The problem is that some people want the 401(k) because they think it’s cool, but haven’t taken the time to legitimize it.

We had Rebecca Miller on the show and she did a great job going through those type of plans. She did a great job breaking it down. She’s good. Every time I’ve been to an office that she was in, we were having a meeting or something like that, she’s always on the phone with somebody going through those steps. She’s like, “I got off the phone.” It’s not a short conversation of 30 seconds.

Those don’t cost you anything. You call and have a free consultation with Rebecca, even if you have a plan with another provider that you maybe have gotten enough information about. The education that the Quest IRA specialists have for you is free for you at We Close Notes whether you’re our client or not. Just call up if you have any questions. It doesn’t matter if you’re with us or someone else. We want you to make sure that you’re getting the education to know how to do these things or to use those things.

We talked about having a trust or having a Solo 401(k). Is there another option for them? Are those the two major options for them?

I think that most of the time if you’re doing enough notes, you probably want to look at some type of entity in there. You still have the issue with the fair market value. We’re going to have to show what’s inside once a year so we can value it at Quest. It will just ease up the expenses that you’ll have at Quest and make it a little bit easier because you’ve got to be quick. We work as quick as we can in the business but no matter what, it still takes time to tell us to do something and go through the steps.

You have a huge announcement at the Austin Grand Opening and you’ve got some big stuff happening here.

We’re switching over. We will be a full-fledged trust company. We’re regulated through the Texas Banking Commission. We changed our name from Quest IRA to Quest Trust Fund Company. That’s a big boy step for us. We’re happy about it. Changing from a third party administrator to a trust company. It doesn’t mean too much to most of our clients to tell you the truth. Other than at the same time we’re introducing a lot of new systems and speeding our systems up. The ACH is going to be faster. You’ll be able to view your account better and easier coming up.

NCS 354 | Quest IRA

Quest IRA: You don’t learn and get to where you are now unless you’re making mistakes.


For people who don’t know, if you’ve got current investments, you don’t have to change anything. People can make their payments out to Quest IRA. You don’t have to re-title anything. You’ll still be able to do that, but it just gives you a lot of great other options to do some other stuff out there.

We have phone apps coming out that will help too.

If you tried the ACH and you found it to be slow in the past, try it again coming up because they found ways to speed it up tremendously. It’s easier, it’s more advanced every month. We made enough payments out to our investors and we love it. You’ve got Fright Night coming up, which is October 25th, I believe.

Are you going to come to that?

I am.

You’ve got a story?

I’ll have a story. I’ve got plenty of stories. I might be surprised if everybody come as the green giant Shrek. I’ve got a secret thing we’ll be doing.

This is one of my favorite events that we ever put on all year long. It started with the idea that I got so tired of all the gurus talking about how they make so much money and they always do this, they always do that. It’s where we all know they made some mistakes because I know I’ve made a lot of mistakes too.

You don’t learn unless you’re making mistakes.

You didn’t get there unless you made some mistakes. I want to hear the bad stories. I want to hear where you messed it up or the frightening stories. In October, once a year we come in, we get the guests and the deal is they have to tell us a story where they messed up. We can learn a lot more from the mistakes than you can in the things that have gone right. I think that it’s important. It’s gotten bigger and bigger. We expect about 500 people this year.

That’s not just blowing smoke. In 2017, you had over 400. You had a great catered event, open bar and then you had an amazing dance party afterwards. I hang out until 11:00 at night. We were there and a few other people shared their stories. There were some good stories and some bad stories, but everything was very learnable and there are some great lessons learned from everybody. The best way to get registered for that is going to QuestIRA.com.

You do have to register out there because we are having free food and drinks and so we have to know how many people are coming so you do have to be registered. You can’t just show up at the door as you do at some events.

You can always find out the other events going on in Dallas, Houston and the Austin office. I’m looking at actually doing a couple events out there. I’m actually going to go from doing an online event to a local event a couple times next year just because you begged me to. If you have any questions or curious about it, pick up the phone and call 855-FUN-IRAS. It’s always great to hang out with the Quest crew. Thanks for joining us. If you love what you’re reading, feel free to share it. Leave us a five-star review on iTunes or drop us an email at Scott@WeCloseNotes.com. Thanks, Nathan. We’ll see you all at the top.

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About Nathan Long

NCS 354 | Quest IRAMr. Nathan Long serves as the Executive Chief Executive Officer of Quest IRA, Inc. Mr. Long served as Executive Vice President of Quest IRA, Inc. He has been with Quest for five years.




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