Who Can Be the IRA Trustee?
An IRA trustee or custodian, as it’s commonly known, is the institution responsible for administering your IRA account. It could be any number of banks, financial institutions or registered trust companies.
A trustee can oversee your IRA investments and offer financial advice. A custodian acts solely as an administrator who does not give advice regarding investments.
Who Can Be a Trustee of an IRA?
An IRA trustee (also referred to as custodian) is the institution responsible for administering your IRA, such as a bank, credit union, financial institution or trust company approved by the IRS as an IRA trustee. A custodian must ensure your account remains compliant with IRS reporting requirements as well as maintaining and overseeing it appropriately.
Many IRA owners opt to transfer their IRA assets into a trust instead of leaving them directly to beneficiaries, for various reasons. They could be worried that an inheritance might be wasted by beneficiaries, or may wish to reserve certain funds for specific uses such as education.
An additional reason is that trusteed IRAs offer additional protection from creditors than direct distribution to beneficiaries, though it should be noted that this doesn’t eliminate having to take Required Minimum Distributions each year as these funds must still be distributed from the IRA itself.
Who Can Be a Co-Trustee of an IRA?
Trustee of an Individual Retirement Account (IRA) refers to any financial organization that adds trust language into an IRA and administers it according to those provisions both before and after death, serving as trustee.
Trusted IRAs present one key drawback: beneficiaries’ assets cannot be moved from one provider to the next. This may become problematic if their beneficiary experiences either poor service from or superior support from their current trusteed IRA provider.
An IRA trusteed by another party also creates some additional but minor tax complications. This stems from its nature as a conduit trust; consequently, distributions must be “looked through” directly to its beneficiaries rather than extended over their life expectancies.
An individual trust may provide greater flexibility and possibly stronger protection from spendthrift tendencies for beneficiaries of an IRA, though working with an experienced attorney to draft such an arrangement is often necessary.
Who Can Be a Beneficiary of an IRA?
An IRA beneficiary could include anyone eligible, such as a spouse, child, parent, grandchild or another EDB. An IRA trustee and custodian are two separate entities who manage the account – trustees may provide full investment management while custodians might not.
Assigning an IRA to a trust is possible, but certain criteria must first be fulfilled for it to qualify as such. These requirements include being classified as either an accumulation trust or conduit trust and irrevocable with EDB beneficiaries. Distributions from an IRA with such a beneficiary could either stretch over their lives or occur immediately based on one single life expectancy table at age 70 1/2.
Non-spouse beneficiaries who inherit an IRA must begin taking RMDs according to a 10-year schedule set forth by its previous owner.
Who Can Be a Custodian of an IRA?
Custodians play an integral role in maintaining IRA accounts by keeping records and following IRS regulations. Custodians may include banks, trust companies or any entity approved by the IRS to act as custodian. When investing in alternative assets through an IRA account, finding a custodian who specializes in those investments is vital; many IRA custodians may only offer traditional investments rather than self-directed IRAs (SDIRAs) while others will custody both forms. When selecting a custodian consider fees charged and how long they have been in business as these factors when selectinging an ideal custodian for your investments.
Select a custodian who allows for maximum flexibility when it comes to using your SDIRA. A custodian should also be capable of handling the look-through rule, where distributions to trust beneficiaries may be counted and stretched over their expected lifespan or shorter time frames such as 10 years depending on special circumstances. But be wary of fake custodians that may attempt to steal your money!
Categorised in: Blog