How do I remove a worthless asset from my IRA?

Investments don’t always perform as expected, and in some cases, assets held in a Self-Directed IRA (SDIRA) can lose all financial value. When this happens, it is important to formally remove these worthless assets to ensure accurate account records and compliance with IRS regulations.

What Is a Worthless Asset?

A worthless asset is an investment that has lost all financial value or has no realistic chance of recovery. This can happen due to:

A company filing for bankruptcy or being dissolved
A court order ceasing business operations
A ruling from a regulatory body declaring the investment non-viable

If an asset is deemed worthless, AET can update its value to $0 or assist in removing it from your account.

Steps to Remove a Worthless Asset from Your IRA

To remove a worthless asset from your SDIRA, follow these steps:

Gather Required Documentation – Provide evidence proving the asset's worthless status (see specific asset types below).
Submit Documentation – Upload supporting documents through your AET online portal under the asset management section.
Certify Accuracy – Confirm that the information submitted is accurate to the best of your knowledge.

🚨 Important: Proper documentation is required to ensure compliance with IRS regulations and maintain accurate IRA reporting.

Asset-Specific Instructions for Removing Worthless Assets

📌 Wholly Owned LLCs
To remove a wholly owned LLC, provide:
✔ LLC Dissolution document
✔ Final bank statement showing all funds returned to the IRA
✔ Final valuation confirming a $0 remaining value

📌 Private Loans
To remove a worthless private loan, provide:
✔ Bankruptcy discharge documents for the borrower
✔ Proof of failed collection attempts
✔ Valuation report from a qualified third-party professional confirming a $0 value

📌 Real Estate
To remove a worthless real estate asset, provide:
✔ Recorded deed in lieu of foreclosure
✔ Trustee’s deed (if applicable)
✔ County tax deed showing property sale for outstanding taxes
✔ Final valuation report confirming no remaining value

📌 Private Placement Memorandums (PPMs)
To remove a worthless PPM investment, provide:
✔ Final K-1 from the company
✔ Statement from an investment partner confirming a $0 value (must be notarized on company letterhead)
✔ Formal valuation report from a qualified third-party professional

📌 Tax Liens
To remove a worthless tax lien, provide:
✔ Proof that the tax lien has expired
✔ Property owner’s bankruptcy discharge documents
✔ Sale or foreclosure records showing property ownership change
✔ Formal valuation report confirming a $0 value

What If You Can’t Provide Documentation?

If you are unable to obtain documentation proving the asset is worthless, AET may not be able to update the value to $0. However, independent valuation services can formally assess alternative assets, which may help meet documentation requirements.

Why Should You Remove Worthless Assets?

Even if an investment has no financial value, formally updating or removing it from your IRA has benefits:

✔ Accurate IRS Reporting – AET reports IRA asset values to the IRS annually, which impacts Required Minimum Distributions (RMDs) for applicable accounts.
✔ Account Management – Keeping your IRA up to date ensures that it accurately reflects your financial position.

Final Steps

1️⃣ Submit required documentation through your AET online portal
2️⃣ Certify the accuracy of the information
3️⃣ AET’s compliance team will review your request (processing time: 3-5 business days)
4️⃣ Once approved, the asset will be removed from your account

If you have any questions or need assistance, please contact AET Support. We are here to help you manage your SDIRA investments efficiently.