The PENSCO self-directed IRA is now offered under the name Columbia Private Trust, following the custodian’s rebrand after Pacific Premier Bank merged with Columbia Bank. The account itself works the same way it always has: you use retirement funds to invest in assets outside the public markets, such as real estate, private debt, precious metals, and private company equity, while the custodian holds title and handles reporting. The 2026 IRA contribution limit is $7,500, with a $1,100 catch-up for investors 50 and older, though most self-directed accounts are funded through much larger rollovers or transfers.
Who Does What in a Self-Directed IRA
You pick every investment. The custodian holds legal title to the assets, keeps records, executes the transactions you direct, and files tax reports. Columbia Private Trust does not evaluate deals, recommend assets, or warn you off a bad one. That is the whole point of the structure, and it is also the biggest practical difference from a brokerage IRA where the firm screens what you can buy.
On the reporting side, the custodian files IRS Form 5498 each year to report contributions and the year-end fair market value of the account. That form is due by June 1 of the following year.1Internal Revenue Service. About Form 5498, IRA Contribution Information
Account Types
Traditional and Roth are both available, with the same range of permitted investments. A Traditional IRA accepts pre-tax contributions and grows tax-deferred; a Roth accepts after-tax contributions and grows tax-free, with qualified withdrawals untaxed.
Self-employed investors and small business owners can also use SEP or SIMPLE structures. A SEP IRA accepts employer contributions of up to 25% of compensation or $72,000 for 2026, whichever is less.2Internal Revenue Service. SEP Contribution Limits (Including Grandfathered SARSEPs) A SIMPLE IRA allows employee salary-reduction contributions up to $17,000 for 2026, with required employer matching or nonelective contributions.3Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
Funding the Account
Opening the account is standard paperwork: government-issued ID, a completed W-9 so the custodian can report to the IRS under your taxpayer identification number,4Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification and a decision on account type and contribution year. The consequential choice is how you put money in.
Direct Contributions
Total 2026 contributions across all your Traditional and Roth IRAs cannot exceed $7,500, or $8,600 at age 50 or older. Excess contributions trigger a 6% excise tax for every year the excess remains in the account.5Internal Revenue Service. Retirement Topics – IRA Contribution Limits Direct contributions alone rarely fund an alternative-asset purchase, which is why most investors rely on the next two methods.
Rollovers From Employer Plans
A direct rollover from a 401(k), 403(b), or similar plan sends the money straight from the old plan administrator to the new custodian, with nothing withheld.6Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions An indirect rollover pays the check to you, and the plan administrator must withhold 20% for federal taxes. You then have 60 days to deposit the full original amount, which means covering that withheld 20% out of your own pocket. Miss the deadline or come up short, and the IRS treats the undeposited portion as a taxable distribution, with a possible 10% early withdrawal penalty under age 59½.7Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans
Trustee-to-Trustee Transfers
Transfers move funds directly from an existing IRA at another custodian to Columbia Private Trust. The money never touches your hands, nothing is withheld, and there is no annual cap on how many you can do. One trap: the IRS limits you to one IRA-to-IRA rollover in any 12-month period, aggregated across all your IRAs. Trustee-to-trustee transfers are exempt from that rule, so if you are consolidating multiple IRAs, use transfers rather than rollovers to avoid accidentally triggering a taxable event.6Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
Once the account is funded and cash has settled, the custodian executes purchases on the IRA’s behalf. You cannot buy an asset personally and move it into the account.
What the IRA Can and Cannot Hold
The IRS does not publish an approved list. It defines what is prohibited and leaves the rest fair game. Common self-directed holdings include residential and commercial real estate, raw land, tax liens, private debt secured by real property, and equity in private companies such as LLCs and limited partnerships.
Precious Metals
An IRA can hold physical gold, silver, platinum, and palladium, but only bullion meeting minimum fineness set by reference to commodity exchange delivery requirements. In practice that means gold at 99.5% purity, silver at 99.9%, and platinum and palladium at 99.95%. Certain U.S. Mint coins (American Gold Eagles, Silver Eagles, and Platinum Eagles) also qualify.8Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts Metal must be held by a third-party depository, not in your home or a personal safe deposit box.
Prohibited Assets
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.9Internal Revenue Service. Investments in Collectibles in Individually Directed Qualified Plan Accounts Life insurance contracts are separately barred under IRC Section 408(a)(3).10Office of the Law Revision Counsel. 26 U.S.C. 408 – Individual Retirement Accounts S-corporation stock is effectively off-limits as well, because IRC Section 1361 restricts S-corp shareholders to individuals and certain qualifying trusts, and an IRA trust generally is not one of them.11Office of the Law Revision Counsel. 26 USC 1361 – S Corporation Defined
Prohibited Transactions Are the Biggest Risk
The compliance area that destroys the most self-directed IRAs is prohibited transactions. The IRA has to operate as an entity completely separate from your personal financial life, and neither you nor anyone close to you can benefit from its assets outside of legitimate retirement distributions.
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 covers any entity in which those individuals collectively own 50% or more.12Office 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. Buying a property from a parent, hiring your child to manage an IRA-owned rental, or spending a weekend at a house the IRA owns are all violations.
The consequence for IRAs is unusually harsh. The account loses its tax-exempt status as of January 1 of the year the violation occurred, and the entire fair market value on that date is treated as a distribution to you, taxable as ordinary income, with a possible 10% early withdrawal penalty under age 59½.13Internal Revenue Service. Retirement Topics – Prohibited Transactions On a $500,000 account, the combined tax and penalty can easily exceed $200,000. There is no correction mechanism once the violation happens.
UBTI, UDFI, and Form 990-T
IRAs are generally tax-exempt, but that exemption does not cover income from an active business or from debt-financed investments held inside the account.
Unrelated Business Taxable Income (UBTI) arises when your IRA invests in an actively operated business rather than passively earning rent, interest, or dividends. Owning a membership interest in an LLC that runs a restaurant or a service company is a typical example. The IRA’s share of that operating income is taxed at trust rates and paid from the IRA’s own funds.
Unrelated Debt-Financed Income (UDFI) is a subset of UBTI that hits when your IRA buys an asset with borrowed money. IRAs cannot take on recourse debt, so real estate purchases inside an IRA use non-recourse loans. Even then, the portion of income and capital gains attributable to the borrowed funds is taxable.
If gross unrelated business income reaches $1,000 or more, the custodian files IRS Form 990-T and pays the tax from the IRA.14Internal Revenue Service. Instructions for Form 990-T (2025) The account needs enough cash to cover the bill.
Fees and Cash Minimums
Self-directed custodians charge significantly more than conventional IRA providers. Columbia Private Trust’s published annual administration fee is 0.30% on the first $1 million, 0.15% on the next $4 million, and 0.10% above $5 million, subject to a $750 annual minimum. Each asset transaction runs $175. Roth conversions cost $150. Account closure is $225 plus reregistration costs for each asset.15Columbia Private Trust. Fee Schedule
The custodian also requires a minimum uninvested cash balance: $1,000 for accounts without real estate, $5,000 for accounts holding real property. Falling below triggers a $75 quarterly fee. The reserve exists because the IRA has to pay its own property taxes, insurance, maintenance, and any tax obligations. Personal funds cannot cover IRA expenses.
Annual Fair Market Valuations
Every self-directed IRA must report the fair market value of its assets at least once a year, and the custodian uses those valuations on Form 5498.16Internal Revenue Service. Valuation of Plan Assets at Fair Market Value Publicly traded securities value themselves. For real estate, private company interests, and other alternatives, you generally need a credible third-party appraisal. Miss the deadline and the custodian may order one at the account’s expense.
RMDs When Your Assets Are Illiquid
Traditional, SEP, and SIMPLE self-directed IRAs are subject to required minimum distributions starting at age 73. The IRS makes no exception for illiquid holdings. If your IRA owns an $800,000 rental property and your RMD is $30,000, you still need to move $30,000.
You have three practical options. Aggregate the RMD across all your Traditional IRAs and take the full amount from a liquid one. Distribute a fractional interest of the illiquid asset in kind by retitling it from the IRA to your personal name. Or, if you have earned income, contribute cash and immediately withdraw it, subject to the annual contribution cap.
The lesson is to plan liquidity alongside the investment. Sinking an entire IRA into one illiquid asset and then failing to distribute enough triggers a 25% penalty on the shortfall, reduced to 10% if corrected within two years.
Checkbook Control LLCs
Some investors form an LLC owned entirely by the IRA and use its bank account to make investments directly. Writing checks from the LLC account can speed up time-sensitive deals like real estate closings without routing every step through the custodian.
The IRA becomes the LLC’s sole member, and you serve as manager. Every prohibited transaction rule still applies to the LLC’s activities, and the operating agreement must include IRA compliance and prohibited transaction provisions. The custodian still holds title to the LLC membership interest and files the reports. Checkbook control adds LLC formation and maintenance costs in exchange for faster execution; it does not reduce your compliance obligations.