Self Directed IRA Custodians

IRA assets are required by law to be held by a licensed custodial firm. If you are looking to set up a self-directed IRA, you will have to choose a custodial firm to hold your account assets. The following is an excerpt from IRS Publication 590 which lays the ground rules for IRAs:

An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. The account is created by a written document. The document must show that the account meets all of the following requirements.

  • The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian…

Investors should ensure that the custodial firm they choose is properly licensed. To make things easier for you, we have prepared an extensive list of self-directed IRA custodians that are properly licensed to act as a custodian for your self-directed IRA.

In order to become a custodian, a firm must meet extensive requirements set forth by the U.S. Government. To see the complete list of requirements, click here.

Selecting A Self-Directed IRA Custodian

Choosing a self-directed IRA custodian is becoming harder as more and more companies are coming into the industry. While one custodial firm is unlikely to work best for everyone, there are some general things to look for when deciding which self-directed IRA custodian is going to be the best fit for you. Here are some questions you will want to ask potential custodians: (some of these questions can be answered by simply visiting our custodian pages)

  1. Are you properly licensed to act as a custodian for my IRA?
  2. Will my uninvested cash be FDIC insured?
  3. Are there any alternative investment types you don’t allow (outside those specifically prohibited by the IRS)?
  4. What are your fees?
  5. How long have you been in business?
  6. What is your typical turn around time for investment authorization requests, check requests, etc.?
  7. What type of ongoing support do you provide for your clients?
  8. How many clients do you currently have?
  9. May I speak with some of your clients to get their take on your service?

Making Investments With A Self-Directed IRA Custodian

The process of working with a self-directed IRA custodian will vary depending on the custodial firm you choose, but here is a generic description of how the process works.

  1. Investor goes out and finds the investment they wish to make.
  2. Investor has contract drawn up in the name of the custodian for benefit of the IRA account. The purchaser name will look something like this:
    “ABC Trust Company Custodian FBO ‘John Doe’ IRA”
  3. Investor fills out and submits an investment authorization form to the custodian (typically this can be done via fax or email to help expedite the transaction). An investment authorization form basically details out what the money is needed for, where it needs to be sent, etc.
  4. The custodian then authorizes or denies the investment. Assuming it was approved, the custodian will sign the contract on behalf of the IRA, and then send the money in the manner they were instructed.

All custodial firms are not created equal when it comes to timely processing of investment requests. When choosing your custodial firm, make sure you ask about turn around times on investment authorizations.