5 (of many) things you cannot do with your IRA – ever:
1. Transfer an IRA to a spouse. Unless incident to a divorce judgment, you may not transfer an IRA to your spouse. Doing so creates a taxable distribution. (Oh, and you can’t transfer it to anyone else either.)
2. Retitle your IRA to your trust for estate planning purposes. Only individuals can own an IRA. Your trust is not an individual. So, changing the owner of your IRA from you to your trust is a taxable distribution.
3. Pledge your IRA as security for a loan. You are not allowed to use your IRA as collateral for a loan. If you do, you’ve made a “deemed” distribution from the IRA, a taxable event.
4. Lend money from your IRA to yourself or a family member. IRAs are prohibited from lending money to any “disqualified persons.” “Disqualified persons” include the account owner, members of the IRA owner’s family, and certain business entities owned by the IRA owner.
5. Invest IRA funds in collectibles. “Collectibles” include artwork, antiques, gems, stamps, and coins (with certain narrow exceptions). Any IRA funds invested in collectibles are deemed to have been distributed from the IRA, a taxable event.
Generally, when IRA assets are used in a prohibited transaction, the IRS treats them as having been distributed from the IRA on the first day of the year in which the transaction took place. The amount of the distribution must be included in the IRA owner’s income for that year and, if the owner is under age 59½, early distributions penalties will apply.