Can a Self-Directed IRA Hold Promissory Notes?

A self-directed IRA may hold certain promissory notes, including secured and unsecured notes, provided the asset and transaction comply with applicable requirements. The IRA may purchase an existing note or originate a new loan to an eligible borrower.The loan terms, including the repayment schedule, interest rate, and any collateral, are established between the parties and documented in the loan agreement. Payments of principal and interest must be made directly to the self-directed IRA.

Understanding Promissory Note Assets in a Self-Directed IRA

Promissory notes are written agreements in which a borrower agrees to repay a lender according to established terms. Notes held by a self-directed IRA may be secured by real estate or other collateral or may be unsecured.

The account owner is responsible for selecting the borrower, establishing the loan terms, evaluating the transaction, and conducting their own due diligence.

How Promissory Notes Work in Your Self-Directed IRA

Mountain West IRA provides administrative and recordkeeping services and does not select, recommend, research, evaluate, or perform due diligence on promissory notes or borrowers.

Select the Note or Borrower: Identify and evaluate the promissory note or borrower, establish the loan terms, and conduct your own due diligence. Confirm the transaction complies with applicable prohibited transaction requirements.
Complete & Submit Purchase Instructions: Complete and sign the applicable Mountain West IRA Purchase Kit (Direction of Investment). Review the promissory note and supporting documents, marking applicable documents "Read and Approved" with your signature and date before submitting everything to Mountain West IRA. The promissory note must identify your IRA as the lender. Do not sign where a lender's signature is required, as Mountain West IRA signs on behalf of the IRA.
Transactions Department
Phone: 208-510-0859
Email: transactions@mwira.com
Administrative Review & Authorization: Mountain West IRA reviews the submitted documentation for administrative requirements. Once all requirements are satisfied, an authorized signer executes applicable documents on behalf of the IRA.
Fund the Transaction: Submit all required documentation and funding instructions at least three business days before the requested funding date. Once complete and correct documentation is received and administrative requirements are satisfied, Mountain West IRA processes the authorized transaction at the account owner's direction.
Maintain Your Asset: All principal and interest payments must be made directly to the self-directed IRA according to the terms of the promissory note. Required loan documentation and applicable security instruments must be maintained in accordance with Mountain West IRA's administrative requirements.

Getting Started With Your Self-Directed IRA

Follow the steps below to establish and fund your self-directed IRA, submit asset purchase instructions, and understand ongoing account requirements.

Complete Your Starter Kit. Select the appropriate account application below. To request electronic signature documents, email accounts@mwira.com or call 208-314-2580.

Traditional IRA Starter Kit

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Roth IRA Starter Kit

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SEP Starter Kit

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Individual 401(k) Plan Starter Kit

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SIMPLE IRA Starter Kit

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Health Savings Account (HSA) Starter Kit

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Traditional IRA Starter Kit

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Roth IRA Starter Kit

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SEP Starter Kit

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SIMPLE IRA Starter Kit

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Precious Metals Foreign Currency Starter Kit

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Individual 401(k) Plan Starter Kit

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Health Savings Account (HSA) Starter Kit

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Fund Your Account. Fund your account through an eligible transfer, rollover, or contribution, depending on the account type and your circumstances.

Submit Your Purchase Instructions. Complete the appropriate transaction forms and provide any required supporting documentation to Mountain West IRA for administrative review.

Maintain Your Asset. Any income or proceeds generated by IRA-owned assets must be deposited into the IRA, and eligible asset-related expenses must be paid from IRA funds. Mountain West IRA provides ongoing administrative and recordkeeping services and processes authorized transactions at the direction of the account owner.

Understanding Promissory Notes in a Self-Directed IRA

The Promissory Notes IRA Guide covers purchasing existing notes or originating new loans through a self-directed IRA, including loan terms, collateral requirements, repayment procedures, and prohibited transaction considerations.

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Promissory Note Requirements in a Self-Directed IRA

Account Owner Responsibility: Account owners select the note or borrower, establish loan terms, and conduct their own due diligence.
Prohibited Transactions: Loans cannot be made to the account owner or other disqualified persons, including certain family members and related entities.
Loan Documentation: Loan terms, repayment schedules, interest rates, and any collateral must be properly documented.
Secured Notes: Loans secured by collateral require appropriate documentation of the security interest.
Loan Payments: Principal and interest payments must be made directly to the self-directed IRA.

Why Choose Mountain West IRA?

Experience Since 2006: Providing self-directed retirement account administration and recordkeeping services since 2006.

Client-Directed Administration: You choose the assets held within your account. We process transactions at your direction and maintain account records.

Alternative Asset Experience: Our team has experience administering accounts that hold a wide range of allowable alternative assets.

Educational Resources: Access guides, videos, webinars, and other resources to better understand self-directed retirement accounts.

Personalized Support: Get responsive assistance with account establishment, administration, and transaction processing.

Frequently Asked Questions

Can A Self-Directed IRA Hold Promissory Notes?

Yes. A self-directed IRA can purchase eligible existing promissory notes or originate secured or unsecured loans, provided the transactions comply with applicable IRS rules and prohibited transaction requirements. All principal and interest payments must be deposited directly into the IRA.

What Is The Difference Between A Secured And Unsecured Promissory Note?

A secured promissory note is backed by collateral, such as real estate or other property. An unsecured promissory note does not have collateral. Both types establish repayment terms, including the interest rate and payment schedule, as documented in the loan agreement.