Inheriting an IRA Through a Trust
An inheritance through a trust can help navigate around any restrictions on beneficiary ownership of an IRA account and also act as checks-and-balances against potential conflicts between trustees and financial advisors.
Trusted IRAs impose additional restrictions on beneficiaries after death – effectively locking in permanent trustees and investment managers with no option to remove them later.
IRA Custodians
IRA custodians are businesses approved by the IRS to manage retirement accounts for individuals. These custodians must comply with regulations regarding transactions and client protections.
Self-directed IRAs can be used to invest in alternative asset investments like real estate and precious metals. Furthermore, these trustees also facilitate transactions based on instructions of the IRA owner as well as taking custody of physical assets like gold.
To select an IRA custodian, potential investors should perform extensive research. This should include checking licensing and registration status with state regulatory agencies, the SEC, and Financial Industry Regulatory Authority; customer service quality; ease of navigation of online site. Lastly, speaking to an investment professional or attorney could prove invaluable – they may know of specific custodians with stellar reputations or have expertise regarding particular private investments.
IRA Administrators
The IRS-approved custodian for an Individual Retirement Account is responsible for safeguarding its assets in compliance with IRS requirements, being subject to regular regulatory oversight, audits and providing a range of services tailored specifically to IRA investors.
Licensed custodians typically offer the most comprehensive IRA services available, providing superior quality control and timely processing of investments. In fact, many licensed custodians can complete all steps from account opening to investment funding within 24 hours or less!
An administrator is a business entity that performs similar services to custodians, without being permitted to hold private investments such as real estate or precious metals. Individual or small company administrators of individual retirement accounts (IRA) are allowed to charge fees for administering them based on either percentage value of assets held within their system or flat fees per asset – these fee structures ensure compliance with IRS regulations.
IRA Facilitators
Although a trust can serve as the beneficiary of an IRA, it cannot manage or invest its assets directly; instead, a trustee must be appointed. As required under IRC Section 408(a), this must be a financial institution rather than an individual (such as family member).
Facilitators serve as intermediaries between an IRA owner and the partner custodian that actually holds their assets, providing investment advice while not engaging in prohibited transactions themselves – all for which they charge a fee.
Administrators are individuals or companies affiliated with custodians that can offer various services, including tax reporting, quarterly statements, document processing and IRS compliance services. Furthermore, administrators do not fall under the same requirements and regulations that custodians do – making their use an appealing option for self-directed IRA owners, as administrators do not fall under these same requirements and regulations of the IRS. Using an administrator can also remove the need to use disqualified parties as trustee or co-trustee for non-custodial accounts.
IRA Trustee
A trustee is charged with managing the assets of an IRA and dispersing them to beneficiaries accordingly, while also investing the post-tax proceeds as per trust terms. They must abide by any restrictions imposed by its owner such as minimum distribution rules or spendthrift provisions.
A trustee may be any individual or business, such as a brokerage firm, insurance company, bank, robo-advisor or even an IRA owner themselves. Many IRA owners establish trusts to house their retirement assets and assign that entity the role of trustee.
An IRA that designates a trust as its beneficiary can help reduce estate taxes while offering beneficiaries more flexibility, but setting one up and keeping it current involves substantial costs. Trusts tend to be more costly than custodial accounts and require near-permanent trustees (who cannot be fired later, although they may delegate investment management decisions to third parties). Furthermore, the DOL requires trustees offset these fees in order to avoid potential prohibited transaction excise taxes.
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