Removing A Worthless Asset From My Self-Directed IRA

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Unfortunately, sometimes an asset you've invested in doesn't end up paying off. If the company has gone bankrupt or just lost its value, you may want to consider removing the asset from your account— especially if you'll need to take your required minimum distribution (RMD). Talk to a financial professional and if this is what you need to do, here's the process: 

What's Considered a Worthless Asset?

 A worthless asset is an asset that has, or likely has, lost all value, and the chance of recouping the investment is very low. If your asset or assets qualify, their value in our system will be updated to reflect the change, then they’ll be distributed to your personal name at $0.

Why Am I Being Charged If My Asset Is Worthless?

Your account may be charged even though your asset is worthless if we were never notified of the change in value. Unless you update your investments by submitting a fair market valuation form, we won’t know to make these changes and your account will still show the previous value. Remember, these are self-directed investments and IRAR does not manage the assets for you.

IRAR may be willing to waive any unpaid past due fees back to the date the asset lost all value if this can be determined.

 

Relevant: How to Properly Report the Fair Market Value (FMV) of your Self-Directed IRA

 

How Do I Remove A Worthless Asset?

To get this asset removed from your account, we'll need you to submit:

  • Our Fair Market Valuation Form
    • Review the section on the form for worthless assets 
  • Supporting documents showing the asset's value
    • For example: an account statement showing zero value, court documents verifying bankruptcy, or a cease and desist order from the SEC or other government agency

Be sure to check both boxes on the form, indicating whether you're closing your IRAR account as well as removing the asset.

At IRA Resources, there is no cost for updating the value of the asset to $0, but if an in-kind distribution is required there is a $100 processing fee. If this distribution is to close the account, termination and other past due fees (if any) may apply.

 

What About Assets In Receivership?

Figuring out the value for assets being held in receivership can be complicated. Due to the individual nature, these are handled on a case by case basis. Please reach out to an IRA Resources Representative with specific questions on how to update the value of these assets.

Relevant: How to Take a Distribution or RMD from your Real Estate IRA

 

What If I Can’t Show My Asset Lost Value?

In some instances, you can’t find or receive the necessary back up documentation to show an asset is worthless. Unfortunately, we can’t update the value of an asset without official documentation that shows the new value. However, there are firms that provide IRA appraisals or valuations for alternative assets— you can explain the situation and see what’s involved in getting a formal evaluation of an asset. There is a cost for these services but, depending on your situation, it might be worth it.

 

In a Nutshell

Even if you've given up on recovering your funds, there's still value in getting the asset removed from your account. We report the value of your IRA to the IRS yearly, which can impact the amount of your required minimum distribution.

We'd like to help you keep your retirement on track for your future, in the good times and the bad. At IRAR , we aim to answer all of your questions. If there’s still something you’re wondering, we’d love to help. 

 

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