The PENSCO self-directed IRA now operates under the name Columbia Private Trust, following the custodian’s path through Pacific Premier Trust and the Pacific Premier Bank merger with Columbia Bank. The account itself works the same way it always has: you open a Traditional, Roth, SEP, or SIMPLE IRA, fund it, and direct the custodian to buy alternative assets like real estate, private debt, precious metals, or interests in private companies. The custodian holds title, keeps records, and handles tax filings. It does not vet your investments, warn you about bad deals, or stop you from making a compliance mistake that can wipe out the account.
That last point is the single most important thing to understand before you open one of these accounts. The freedom to invest in anything the Internal Revenue Code doesn’t prohibit comes with the full weight of IRS compliance resting on you.
How the Account Is Structured
A self-directed IRA splits responsibility between two parties. You choose every investment. The custodian holds legal title to the assets on the IRA’s behalf, executes the transactions you direct, keeps the books, and files the required tax forms, including IRS Form 5498 reporting contributions and year-end fair market value.1Internal Revenue Service. About Form 5498, IRA Contribution Information
Columbia Private Trust does not evaluate investment quality or recommend assets. That is the defining feature of the self-directed structure, and it is why these accounts cost more and require more attention than a brokerage IRA.
Traditional and Roth IRAs are the common choices. Both allow the same range of alternative investments; the difference is only when and how the money is taxed. SEP and SIMPLE IRAs are available for self-employed individuals and small-business owners, with the same latitude on investment selection.
Funding the Account
Three funding methods are available, and the one you choose matters more than most new account holders realize.
Direct contributions are capped. For 2026, total contributions across all your Traditional and Roth IRAs cannot exceed $7,500, or $8,600 if you are 50 or older. Exceeding the limit triggers a 6% excise tax on the excess for every year it stays in the account.2Internal Revenue Service. Retirement Topics – IRA Contribution Limits Because most alternative investments require far more than that, contributions alone rarely fund the account.
Rollovers from a 401(k), 403(b), or similar employer plan are the first scaled funding option. A direct rollover sends the money straight from your old plan to Columbia Private Trust; nothing is withheld. An indirect rollover, where the plan cuts a check to you, triggers mandatory 20% federal withholding and starts a 60-day clock to deposit the full original amount into the IRA. You have to make up the withheld 20% from your own funds. Miss the deadline or come up short and the undeposited portion becomes a taxable distribution, with a possible 10% penalty if you are under 59½.3Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans
Trustee-to-trustee transfers move funds directly between IRA custodians. The money never touches your hands, no tax is withheld, and there is no annual limit on how many you can do. The IRS limits you to one IRA-to-IRA rollover in any 12-month period across all your IRAs combined, but trustee-to-trustee transfers are exempt from that cap.4Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions If you are consolidating several existing IRAs into a single self-directed account, use transfers rather than rollovers.
Once the cash has settled, you direct the custodian to purchase investments. You cannot buy an asset personally and then move it in.
What the Account Can Hold
The IRS does not publish an approved list. The law defines what is prohibited and everything else is permitted. In practice, self-directed IRAs commonly hold residential and commercial real estate, raw land, tax liens, private debt secured by real property, and equity in private LLCs and limited partnerships.
Precious metals are allowed with strict purity rules. Gold must be at least 99.5% pure, silver at least 99.9%, and platinum and palladium at least 99.95%. American Gold Eagles, Silver Eagles, and Platinum Eagles qualify as well.5Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts The metal has to sit with a third-party depository. Your home safe or a personal bank deposit box doesn’t count.
Several categories are off-limits. IRC Section 408(m) treats any IRA purchase of a collectible as an immediate taxable distribution equal to the purchase price. Collectibles include artwork, rugs, antiques, stamps, most coins, gems, and alcoholic beverages.6Internal Revenue Service. Investments in Collectibles in Individually Directed Qualified Plan Accounts Life insurance contracts are separately barred under IRC Section 408(a)(3). S-corporation stock is effectively excluded as well: IRC Section 1361 limits S-corp shareholders to individuals and certain qualifying trusts, and an IRA trust is not among them outside a narrow bank-stock carve-out.7Office of the Law Revision Counsel. 26 USC 1361 – S Corporation Defined
Prohibited Transactions and Disqualified Persons
This is the compliance area that destroys more self-directed IRAs than any other. The IRS enforces a bright line between your IRA and your personal financial life, and the penalty for crossing it is severe.
A “disqualified person” under IRC Section 4975 includes you, your spouse, your parents and grandparents, your children and grandchildren, and the spouses of your lineal descendants. It also includes any entity in which these people collectively own 50% or more.8Office of the Law Revision Counsel. 26 U.S. Code 4975 – Tax on Prohibited Transactions The IRA cannot buy from, sell to, lend to, or provide any economic benefit to a disqualified person. Common violations include buying real estate from a parent, hiring your child to manage an IRA-owned rental, or spending a weekend in a vacation home the IRA owns.
The consequence for IRAs is harsher than for employer plans. The entire account loses its tax-exempt status as of January 1 of the year the violation occurred. The full fair market value on that date is treated as a distribution to you, taxable as ordinary income, with a possible 10% early withdrawal penalty on top if you are under 59½.9Internal Revenue Service. Retirement Topics – Prohibited Transactions On a $500,000 account, that single mistake can cost $200,000 or more. There is no corrective mechanism after the fact.
Taxes That Can Hit Inside the IRA
IRAs are generally tax-exempt, but two kinds of income break that exemption and generate a tax bill the account itself has to pay.
Unrelated business taxable income (UBTI) arises when the IRA invests in an actively operated business rather than receiving passive rent, interest, or dividends. A common example is a membership interest in an operating LLC running a restaurant or a service company. The IRA’s share of operating income gets taxed at trust rates.
Unrelated debt-financed income (UDFI) is a subset of UBTI that applies when the IRA uses borrowed money to buy an asset. IRAs cannot take on recourse debt, so real estate purchases inside the account have to use non-recourse loans. Even then, the portion of income and gains attributable to the borrowed funds is taxable. The debt-financed percentage is the average outstanding loan balance divided by the property’s average adjusted basis, applied to the net rental income.
If the IRA generates $1,000 or more in gross unrelated business income from either source, the custodian files IRS Form 990-T and pays the tax from the IRA’s assets.10Internal Revenue Service. Instructions for Form 990-T (2025) The account needs enough liquid cash to cover the bill.
Fees, Cash Minimums, and Annual Valuations
Columbia Private Trust charges substantially more than a brokerage IRA, and the fees come in several layers. The published schedule includes an annual administration fee tied to total asset value: 0.30% on the first $1 million, 0.15% on the next $4 million, and 0.10% above $5 million, with a $750 annual minimum. Each asset transaction incurs a $175 processing fee. Roth conversions cost $150, and account closure runs $225 plus reregistration costs for each asset.11Columbia Private Trust. Fee Schedule
The account must also carry a minimum uninvested cash balance: $1,000 for accounts without real estate, $5,000 for accounts holding real property. Fall below that and you pay a $75 quarterly fee. The cash matters for a practical reason, too. The IRA needs liquid funds to pay property taxes, insurance, maintenance on any real estate it holds, and any UBIT the account owes. Every expense tied to IRA assets must be paid from the IRA itself. Never from your personal checking account.
Every self-directed IRA has to report the fair market value of its assets at least once a year. The IRS requires it, and the custodian uses the figures when filing Form 5498.12Internal Revenue Service. Valuation of Plan Assets at Fair Market Value For publicly traded securities the valuation is automatic. For real estate, private company interests, and other alternative assets, you typically need to provide a credible third-party appraisal. Fail to submit one on time and the custodian can order an appraisal at the account’s expense.
RMDs With Illiquid Assets
Traditional, SEP, and SIMPLE self-directed IRAs are subject to required minimum distributions starting at age 73. The IRS grants no exception for illiquid holdings. If the IRA owns an $800,000 rental and the RMD comes to $30,000, you still have to get $30,000 out of the account somehow.
Three paths are available. You can aggregate the RMD across all your Traditional IRAs and take the full amount from a different, liquid account. You can take an in-kind distribution, retitling a fractional interest in the property from the IRA to your personal name. Or, if you have earned income, you can contribute cash and immediately withdraw it, subject to the annual contribution cap.
The sensible move is to keep enough cash or liquid assets in the account to cover annual RMDs as you approach distribution age. Investors who put everything into a single illiquid asset and then cannot carve out a piece of it face a 25% penalty on the shortfall, reduced to 10% if corrected within two years.
Checkbook Control LLCs
Some self-directed IRA investors form an LLC owned entirely by the IRA and run investments through the LLC’s bank account. This “checkbook control” structure lets you write checks directly for time-sensitive deals, like a real estate purchase that needs to close quickly, without routing each transaction through the custodian.
The IRA invests its cash into the LLC as sole member, and you serve as the LLC’s manager. Every prohibited transaction rule still applies to anything the LLC does, and the operating agreement needs provisions addressing IRA compliance. The custodian still holds title to the membership interest and files the required reports. Checkbook control does not reduce your compliance obligations. It adds the cost of forming and running an LLC in exchange for faster execution.