If you are you looking for opening a Self-Directed Individual Retirement Account (SDIRA), then the term ‘self-directed’ must have caught your attention. It is essential as you will self-direct or decide all matters related to your alternative investments by yourself.
However, you also need to hire an IRA custodian to act upon your instructions and to oversee your account.
The duties of the custodian are not very large. Its main responsibilities include setting up your SDIRA, ensuring that the assets are titled correctly, processing your instructions, issuing periodic statements, and fulfilling the IRS reporting requirements. It will not advise you on your investments or make a profit in any way from the investments you make.
Roles of an IRA Custodian
Although the custodian will play a passive role, it has many other important roles to play that keep your account ticking. So, let us have a look at those roles:
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Maintaining IRA agreements and forms in compliance with the regulations of the IRS and the U.S. Department of Labor
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Accepting, documenting, and recording contributions, transfers, and rollovers from other IRAs or retirement plans
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Acting upon the investment instructions of the account holders by sending funds from the IRA to the selected assets
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Gathering and holding documents such as subscription agreements, operating agreements, offering documents, promissory notes, certificates, and other evidence of ownership of the account holder
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Receiving and recording income from the assets held in the IRA
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Executing the instructions of the account holder to sell, withdraw from or liquidate investments held in the IRA
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Tax reporting of IRS Forms 1099-R and 5498
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Providing IRA statements to the account holder that include transactions and cash and assets held in the account
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Complying with all applicable State and Federal Regulations governing IRA custodians
After you have known almost everything about an IRA custodian, you should extend your knowledge to all the reasons for which you should open an SDIRA. And for that, a walkthrough of the infographic in this post will suffice.
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