Do you need a custodian for a self-directed ira?

A custodian is needed for any IRA. The custodian of a self-directed IRA will be different from the regular depositary. You can't go to one of the big box stores, like Edward Jones or Charles Schwab, and have a truly self-directed IRA. They have accounts that they call self-directed, but in reality you can buy from a fixed menu of investments that they have created for you.

An Individual Retirement Account (IRA) offers investors certain tax benefits for retirement savings. Some common examples of IRAs are the traditional IRA, the Roth IRA, the simplified employee IRA (SEP) and the employee savings incentive compensation plan IRA (SIMPLE). Custodians maintain all IRAs for investors. Custodians may include banks, trust companies, or any other entity approved by the Internal Revenue Service (IRS) to act as custodians of an IRA.

Most IRA custodians limit IRA account holders to stocks, bonds, mutual funds, and certificates of deposit approved by the company. The depositary must hold the assets in an IRA, whether it's a traditional IRA, a Roth IRA, or a self-directed IRA. The IRA depositary is responsible for complying with all IRA-related IRS reporting requirements. You should open a self-directed IRA with a special custodian called a passive custodian or custodian of a self-directed IRA that allows you to make investments in alternative assets, such as real estate.

A self-directed IRA is an IRA held by a custodian that allows you to invest in a larger set of assets than is allowed by most IRA custodians. If you're looking for an all-in-one custodian and administrator, there's nothing better than IRA Financial Trust. Not surprisingly, people who save for retirement with a self-directed IRA tend to be sophisticated investors. Like traditional IRAs, self-directed IRAs are governed by rules, but not everyone defines a self-directed IRA in the same way.

The primary responsibility of the depositary of the self-directed IRA is to facilitate transactions according to the instructions of the IRA holder, as well as to assume custody of the investment in alternative assets owned by the IRA. Self-directed IRAs allow investing in a larger and potentially riskier asset portfolio than other types of IRAs. The custodians of a self-directed IRA are not responsible for verifying the legitimacy of investments or the accuracy of claims.