Do I Need a Custodian For a Self-Directed IRA?

Do I need a custodian for a selfdirected IRA

If you want to use your retirement funds for more unusual investments such as real estate or precious metals, a self-directed IRA (SDIRA) may be the solution.

Keep in mind, however, that it remains your responsibility to oversee and approve of investments before engaging any custodian; they simply facilitate administrative work – meaning it’s up to you to find an excellent one.


Though most SDIRA custodian fees may seem minor, they can quickly add up. Therefore, it’s essential that you fully comprehend all associated charges when choosing an SDIRA custodian who best fits with your account.

When searching for an IRA custodian, keep your total fees in mind when selecting one. Consider both standard custodial fees as well as any miscellaneous recurring costs, and fee schedule and structure as some custodians charge fees according to account assets or transaction volume; others offer flat rates instead.

Also ensure the custodian has experience handling your type of investments; for example if you plan to invest in real estate or precious metals look for custodians that specialize in them and ensure they understand federal regulations and industry best practices associated with such assets. Be wary of custodians that do not make clear their insistence upon not providing investment advice as this could indicate they might not be suitable as custodians for your self-directed IRA.


Self-directed IRAs allow investors to explore a wider variety of investments than simply stocks, bonds, certificates of deposit (CDs) and mutual or exchange-traded funds (ETFs); instead offering even more investment options for investors. While most custodians only allow stocks, bonds, CDs and ETFs as securities for their IRA accounts, self-directed custodians provide even more investment opportunities for their account holders.

As part of your selection process for a custodian, take into account their total fees and fee structures. Some will charge by asset class while others offer flat fees; additionally there may be miscellaneous costs that impact overall annual costs.

A good custodian should be able to answer all of your inquiries regarding your account and investments. When researching, be sure to look for an easy-to-navigate website with ample, helpful information. Moreover, ensure they have safeguards in place to safeguard both personal and financial data; never sell this to third parties and only allow employees access as required for their job duties.


Large investment firms and banks tend not to advocate for alternative investments; this form of investing may provide greater returns but requires more research. That is why selecting a custodian who is open and willing to answer questions as well as provide plenty of educational resources is so crucial for successful investing.

An ideal self-directed IRA custodian should also be transparent about fees and how they’re charged – some may charge according to the amount you invest, while others might levy flat annual fees. Find a firm that will explain its charges fully prior to signing on as it will make this part of your research easier.

SDIRAs enable investors to buy assets such as real estate and mortgage notes; however, the IRS requires you to report the fair market value of these investments on an annual basis. Your custodian should assist with understanding these reporting requirements as well as which documentation is acceptable for reporting. They should also remind you of any rules such as not entering into transactions with particular relatives or refraining from engaging in prohibited transactions.


Account owners in a self-directed IRA bear responsibility for selecting investments and avoiding prohibited transactions, so fraudsters who take advantage of this knowledge to sell illicit investments through legitimate custodians may misrepresent their duties to do so.

Not only should a good self-directed custodian vet new investment opportunities, they should also verify account statements to ensure accuracy – especially important for investments that may be difficult or illiquid to value such as alternative investments that require third-party valuations, tax assessment records research or independent appraisal.

A good custodian will also screen for prohibited transactions between an IRA and disqualified people, such as investing with spouses, employers or others disqualified to invest, using funds for unrelated businesses such as paying personal loans to the IRA or transferring assets between accounts. They should be aware of these regulations to help keep account holders compliant; some may even provide training resources and provide resources on self-directed IRA rules and best practices.

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