Does a Self-Directed IRA Need a Custodian?

Does a selfdirected IRA need a custodian

Those familiar with real estate or private placement securities might benefit from opening a self-directed IRA, as this specialized account allows for alternative – often riskier – types of investments not readily available through traditional custodians.

To identify an appropriate self-directed IRA custodian, be sure to review the IRS list of approved nonbank trustees and custodians as well as fees structures of potential custodians.


Self-Directed IRA custodians should be open about fees they charge and when and how they do so. You should be provided invoices or transaction records quickly to avoid unnecessary fees that might eat into your retirement savings.

Many IRA custodians limit investment options to stocks, bonds and mutual funds; some allow alternative investments such as private placement securities and real estate as well. Such investments typically involve more complex transactions with reduced legal protection compared to publicly traded assets.

Self-directed IRA investments with alternative assets may involve greater risks of fraud due to having less financial information and transparency compared with traditional stocks and bonds found within traditional IRAs.


One drawback of self-directed IRAs is their high fees, making the SDIRAs more expensive for investors and potentially leading to costly mistakes if investors do not adhere to IRS regulations. For instance, investing in life insurance or precious metals that do not meet purity standards could incur taxes and penalties that must be paid upon withdrawal from an SDIRA account.

Self-directed IRA custodians charge their own fees to manage transactions and maintain accounts, with these costs differing between providers. Before choosing a custodian for their self-directed IRA, investors should carefully consider this cost when making their selection.

Custodians sometimes charge an additional fee to verify information in accounts, due to illiquid investments which may be difficult to value and pose an obstacle when trying to sell in the future.


An IRA custodian is an ideal way to purchase and hold assets, saving time and money while providing account holders with convenient purchases at their discretion. They also help account holders stay within government rules and regulations.

Self-Directed IRA custodians that excel are those that offer you functionality specific to the investments that you wish to purchase, such as real estate, private placement securities, startups, promissory notes or cryptocurrency investments. When selecting such an IRA custodian it is crucial that they have experience handling such types of investments as these.

Transparency when it comes to fees should also be prioritized, and you should verify all account statements for accurate prices and asset values.

Checkbook control

Picking an appropriate custodian is key for IRA holders looking to invest in nontraditional investments like real estate, promissory notes, tax liens and precious metals. A reliable custodian should allow purchases of alternative assets quickly while charging reasonable processing fees.

A trustworthy custodian should also be open about their fees, providing full disclosure of administration and transaction costs associated with purchasing and selling an IRA.

Custodian fees for an IRA may be asset or transaction-based; therefore it’s crucial that you understand how they are charged prior to choosing one. Unfortunately, many self-directed IRA custodians charge both, which can quickly add up. Broad Financial works with Madison Trust to set up your self-directed IRA and then upgrade it into an LLC for checkbook control.


When making alternative investments in your self-directed IRA, it is crucial that the fees of its custodians and trustees are clearly disclosed. A great place to start looking is on the IRS list of approved nonbank custodians and trustees – these firms tend to be large firms with well-known names.

As well as checking the information in your account statements, it’s crucial that you verify it for accuracy. Some alternative investments can be difficult to value accurately and fraudsters may misrepresent themselves as legitimate custodians in order to sell fraudulent investments. It is recommended to work with a custodian with extensive experience with multiple types of assets – the size of its business can tell you much about its knowledge and expertise – for example Madison Trust has over $4 billion worth of custodial assets with 15,000 clients; their expertise speaks for itself! For instance Madison Trust boasts over $4 billion in custodial assets under custody, as evidence of their expertise when managing investments of different kinds – making them the perfect custodian!

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