Most of us want to help family members – especially with issues in our realm of experience. But helping family members with their IRAs creates a problem under the “prohibited transaction” rules of the Internal Revenue Code (the “Code”). (Similar issues arise in connection with retirement plan accounts under the ERISA rules, but as we discuss later, the consequences aren’t quite as severe. Thus, our focus in this article is on IRAs.)
In our experience, this problem is not well-known and will come as an unpleasant surprise to many. To help you make sense of this, we are getting a little deeper into the legal weeds than we usually do.
Continue reading “Family Members as Investors in IRAs and Plans”