Can I Be the Custodian of My Own IRA?
Self-directed IRA custodians are responsible for safeguarding assets held within an individual retirement account and conducting investment transactions on its owner’s behalf while adhering to IRS regulations. Custodians may charge fees for their services including maintenance charges as well as transaction-based charges such as commissions or loads.
Custodians typically only enable non-prohibited investments approved by their IRA owners. You can find a list of approved custodians on the IRS website.
Banks
Banks may act as custodians for individual retirement accounts (IRA), however it’s essential that they adhere to strict banking regulations when acting as custodians for an IRA account. These include quarterly statements, document processing services and IRS compliance services as part of these regulations.
Additionally, banks often lack the capacity to store alternative assets due to a lack of standardized paper contracts that represent them. Therefore it is vital that you find a custodian that does not charge asset- or transaction-based fees which could significantly lessen the return of your investment portfolio over time.
There are custodians with both reasonable fees and knowledgeable specialists ready to address investor inquiries online or over the phone, such as Madison Trust. Madison Trust boasts some of the lowest IRA custodial fees in the industry and boasts specialists with Certified Investment Service Professional (CISP) training who possess in-depth knowledge about various alternative asset classes; thus providing answers that are financial rather than sales-driven.
Mutual Fund Companies
Custodians for Individual Retirement Accounts can include banks, trust companies or any entity approved by the Internal Revenue Service. Custodians may not offer advice or recommend investments, but will manage and safeguard the assets in your account while keeping records and transaction histories. Some IRA custodians specialize in alternative investments like real estate, private placement securities or precious metals which may pose additional risks.
Make sure the company you select as an IRA custodian is legitimate by consulting the IRS list of authorized custodians.
Fees should also be carefully considered when choosing an IRA custodian, so make sure they are transparent about their fees, such as annual maintenance fees, commissions for making trades and load charges on mutual funds. Furthermore, it would be prudent to verify any information contained within your statement such as prices or asset values – this can be achieved by seeking second opinions from independent experts who could offer an expert second opinion.
Administrators
Administrators and custodians are sometimes confused. An IRA administrator does not directly handle assets; rather, they serve as the front-end of the process to open an IRA account and help navigate any applicable rules and regulations – for which they may charge a fee. Administrators must adhere to IRS requirements as well as regulations by their state regulating body.
When searching for an administrator, make sure that they prioritize customer service and offer clear communication. Be sure they possess knowledge about any types of investments you are interested in such as real estate, private equity, cryptocurrency or precious metals that might require alternative asset investment classes like these.
Make sure that they provide the retirement account type that meets your needs – individuals may require traditional or Roth IRAs while business owners might benefit from a Solo 401(k), SEP or SIMPLE IRA. Furthermore, make sure they provide investment options like CDs and money market mutual funds to provide optimal protection of retirement savings accounts.
Facilitators
Facilitators are non-regulated firms that focus on educating Self Directed IRA investors. Some facilitates may also help establish single-member LLCs owned by an IRA as well as connect investors to firms offering entity setup. They cannot, however, serve as custodian of your account.
Custodians must abide by stringent banking regulations in order to safeguard your assets and adhere to IRS rules. Marketable securities tend to be accepted while private investments may require separate custody arrangements.
Administrators provide services that maintain an IRA account such as tax reporting, quarterly statements and IRS compliance services. Some administrators also act as custodians; it is important to be aware which ones they are; recently we had one client switch custodians and they found they were paying per-value fees on assets they never owned despite paying per-value fees for years!
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