Who Is an IRA Trustee Or Custodian?
An IRA custodian or trustee is accountable for safeguarding an Individual Retirement Account in their care, but not all custodians offer equal services.
Self-Directed IRA custodians offer non-prohibited alternative investments at the discretion of their IRA owners, such as real estate and private equity (including note investing).
Fee schedules and commissions should be carefully considered when choosing a custodian or administrator, including annual account maintenance fees, load fees on mutual funds and trade commissions.
The Custodian
Custodians of individual retirement accounts (IRAs) are responsible for safeguarding and holding title to any investment assets within an IRA, such as bank, federally insured credit union, savings and loan association or firm approved by IRS as trustee.
Some brokerage firms and mutual fund companies do not automatically qualify as custodians or trustees of IRA accounts; therefore they obtain non-bank custodial or trustee powers from the IRS. Other entities, including insurance companies, may also serve as custodians of annuities and premium IRAs.
Due to the growing interest in alternative investments (real estate, private equity, startups, precious metals, promissory notes and loans), more investors are searching for self-directed IRA custodians that are capable of supporting these investment options. Such custodians should provide clear processes for investing in these alternative assets while prioritizing customer service – you can check available custodians by researching them with IRS, SEC or state regulatory bodies.
The Administrator
Custodians play an integral part in individual retirement accounts (IRAs). This term generally refers to firms that store an IRA’s investments safely for safekeeping purposes, report tax information to the IRS and ensure all federal regulations are adhered to; however, custodians do not offer legal or investment advice.
For self-directed IRAs, select firms with experience and expertise in handling the type of investments you want to make. Be wary of fees that are unclear and lack channels of communication online or over the telephone that allow quick responses to questions you have about your account.
Due to traditional IRAs’ limited investment options of stocks, bonds, and mutual funds for account holders’ IRA accounts, investors needed other methods of diversifying their portfolio. Custodians that specialize in holding assets like real estate, private equity, startups, promissory notes and precious metals have since been established; such companies are known as IRA custodians and administrators.
The Advisor
Custodians manage a range of activities related to retirement accounts, but do not provide investment or financial advice. Their duties may include reviewing each transaction to ensure compliance with IRS regulations that protect tax-advantaged status of retirement investments, processing them according to client instructions, filing required IRS reports and offering educational materials and resources to support self-directed IRA investors interested in alternative assets such as real estate, private equity, cryptocurrency/precious metals/notes/loans etc.
When selecting a custodian, look for one who prioritizes customer service and understands the processes associated with investing in nontraditional asset types. Your custodian should respond promptly to questions you pose and offer easy-to-navigate websites; additionally they shouldn’t charge excessive fees like maintenance, load charges or commissions – be wary if they charge these as they could independently verify prices and values listed on your account statements for alternative investments.
The Fiduciary
Fiduciaries’ primary duties and responsibilities involve prudent asset management while avoiding conflicts of interest. Fiduciaries must keep accurate records, disclose any known conflicts of interest to clients, and take measures to verify the information in self-directed IRA account statements provided to clients; such steps might include engaging a valuation service or researching tax assessment records.
Ideally, when creating a self-directed IRA it is wise to look for custodians that offer a range of investments such as traditional stocks, bonds and mutual funds as well as non-traditional assets like real estate and private companies to maximize potential returns. Also look for those that charge low fees to offset the costs of investing in your account; avoid those charging annual account maintenance fees or loads as these could potentially be used by fraudsters disguised as legitimate custodians to legitimize fraudulent investments while legitimate ones may fall foul of such scams
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