Self-directed independent retirement accounts (IRAs) are restricted by Internal Revenue Service rules relating to the types of transactions the account can engage in and the people with whom permissible transactions can take place. The IRS has very specific rules in this area, identifying certain people, known as disqualified persons, with whom the self-directed IRA cannot transact business, and certain types of investments, known as prohibited transactions, that are specifically off limits. Disqualified persons include the self-directed IRA account holder's parents and spouse, and prohibited transactions include investments in art or stamps, as described by New Direction IRA Incorporated.Continue Reading
Disqualified persons include some, but not all, of the account holder's direct relatives. For example, parents, spouses, children and grandchildren are considered disqualified persons, but siblings, nieces, nephews, aunts and cousins are not. The spouse of a child or grandchild is also a disqualified person, but the spouse of a sibling is not. The account holder him or herself is also a disqualified person. Friends and parents-in-law are also not considered disqualified persons, notes IRA Financial Group.
Prohibited transactions for a self-directed IRA provides a scope for what investments are considered legal for the account. Life insurance is a prohibited transaction for a self-directed IRA account. Investments in antiques or valuable alcoholic beverages are also prohibited.Learn more about Financial Planning