What if I want to close my account without clearing the asset values first?

We understand that closing a Self-Directed IRA (SDIRA) can sometimes feel complex, especially if your investments have lost value or become difficult to manage. While you do have the option to close your account without clearing asset values first, it’s important to understand the consequences of doing so.

What Happens If You Close Your Account Without Clearing Asset Values?

If you choose to close your account without first verifying and clearing the values of any remaining assets, the following will occur:

1. Submission of a Distribution DOI Required

   • Any remaining assets and cash in your account will not be automatically distributed.

   • You must submit a Distribution Direction of Investment (DOI) to request the distribution of any cash or assets held in the account.

   • Once the DOI is processed, the assets and cash will be distributed at their last known values.

   • This distribution will be reported to the IRS and is considered a taxable event.

2. Potential Tax Consequences

   • Since the distribution is treated as taxable income, you may owe taxes on the total amount of the assets and cash distributed.

   • If you are under age 59½, an additional 10% early withdrawal penalty may apply.

3. Inability to Reclassify Assets Later

   • Once a distribution is processed, the IRS considers it final. If an asset was mistakenly valued too high, you may still be responsible for paying taxes on the distributed amount.

Preferred Option: Completing the Asset Valuation Process First

To avoid unintended tax consequences, you may want to consider clearing asset values before closing your account:

• If an asset has no value, you can provide documentation from the asset sponsor confirming this. If documentation is unavailable, a third-party valuation can be obtained using IRA funds.

• If an asset still holds value, you have options to transfer, sell, or distribute it appropriately before closing your account.

• Once all assets are cleared and any remaining cash is transferred or withdrawn, the account can be closed smoothly and in compliance with IRS rules.

We're Here to Help

Closing your account the right way ensures that you minimize tax liabilities and avoid complications. If you need guidance on your next steps, our support team is happy to assist you.

We want to help make this process as smooth as possible for you—please reach out if you have any questions!