February 2, 2023

A Self-Directed IRA Custodian is on Your Side

An Individual Retirement Arrangement (IRA) is the framework established by the Internal Revenue Service (IRS) to allow multiple retirement investment options for individual plans and corporate plans alike. The rules that govern self-directed IRAs are published and made available in IRS Publication 590, titled “Individual Retirement Arrangement.” It is published on the public domain site: http://www.irs.gov/pub/irs-pdf/p590.pdf.

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1. Self-Directed IRAs Offer More Control

With a self-directed IRA, you take control of where your money is invested. This means that you select the types of investments to make with your own money, instead of fully relying on a “park it and forget it” strategy.

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2. A Self-Directed IRA Custodian is Available to Keep You out of Trouble

This type of IRA requires the owner to establish a self directed IRA custodian account. Using a Facilitator in combination with a passive custodian can save money; however, the individual investor must exercise discipline. Pick a knowledgeable Facilitator to guide you through the process. The Facilitator should have a relationship with an experienced self directed IRA custodian. Ensure the custodian has a compliance department. The advantage for you is that the custodian will take care of the accounting for the trust account and file the necessary IRS forms on behalf of the IRA so that you don’t have to.

3. Proper Investment Decisions Build your Account and Protect You

IRS rules are very complex, and it is important to ensure that these rules are followed properly. Your custodian needs to have the staff that understands the rules and can prevent you from making decisions that may cost you significant amounts of money. With a passive IRA custodian, initiate the communication from time to time to ensure that your investment is allowed and not one of the prohibited transactions disallowed by the IRS. With great freedom comes personal responsibility, so seek a knowledgeable Facilitator and experienced custodian.

4. Interaction between the Interested Parties

The custodian is the party that will take care of interactions between the plan, the owner, the account holder and the government. Your self directed IRA custodian will need to file the necessary documents required each year for the reporting of the IRA value.

5. Protection from Yourself

Understanding which investments are permitted by the IRS for a self-directed IRA can be somewhat of a gray area. Your self directed IRA custodian is a resource to prevent you from trying to make investments that are prohibited by the tax code. With a passive custodian, you as the LLC manager, will need to initiate communication with the custodian if there’s any doubt as to the investment being considered. For the savvy investor, the prohibited transactions are considered a short list. For others, a tax attorney or accountant is recommended for consultation. After a couple of investments, the self-directed investor will gain confidence and will immediately recognize the tremendous potential afforded the IRA.

Take charge of your investment decisions by establishing an IRA checkbook plan. Find a trustworthy and knowledgeable Facilitator associated with an experienced self-directed IRA custodian. Take the first step to truly being your own “Wealth Advocate.” Your retirement is your future, take control today!