Choose a trustworthy and competent self-directed IRA custodian who is a banking institution, has IRS Form 5305, and offers FDIC and liability insurance. Research potential custodians, ask for regulator contact information, and check the Better Business Bureau for complaints.
Self-directed IRA custodians have access to the account holder’s funds, so it’s important to choose someone who is trustworthy, trustworthy, and competent. The custodian is responsible for keeping records, submitting information to the IRS, preparing returns, and explaining IRA rules to the client. Make a list of self-directed IRA custodians and research each one carefully before registering as a client.
A self-directed IRA custodian must be some type of banking institution, including a bank, credit union, savings and loan, trust company, or a licensed non-bank custodian. The first step in choosing the best custodian is to ask to see the custodian’s custody document. This document, IRS Form 5305, is documentation that the company can act as an IRA custodian.
When making initial contact with an IRA custodian, ask for the regulator’s contact information. Many of the questions you ask the custodian are also good for the regulator. It is important that the answers you get from the custodian align with the information you have been given by the regulator.
Some questions to ask both potential custodians and regulators of self-directed IRAs are the value of the clients’ assets and how long the company has been in business. Ask the custodian if they outsource their administrative work. While many businesses do this routinely, it’s important to realize that these subcontractors don’t receive the same regulation as self-directed IRA custodians. The strictest supervision is on companies that perform all in-house duties or contract with a wholly owned subsidiary of the custodial company.
Ask potential custodians what kind of insurance they have. It is important that undirected funds are protected by FDIC insurance. The company must also carry liability insurance to protect against errors and omissions. Ask prospective custodians if they offer educational seminars for their clients. Many do, but it is important that they are legitimate educational resources and not used as a way to sell investments.
Contact the Better Business Bureau in the area where the potential custodian is located. A quick phone call or visit to their website can determine if the company has any complaints filed, how many, and how they were resolved. Take the time to read the biographies of the board of directors, as well as the principles of the company. Look for a diverse group of members, rather than a board that contains multiple family members.
Smart Asset.
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