Differences Between Self-Directed IRA Custodians

Estimated reading time: 3 minutes(Last Updated On: November 30, 2018)

Just as with your taxable investment accounts, you’ll need a self-directed IRA custodian to help you with your self-directed IRA. And just as you have many different choices for your investment brokerage, you’ll also find that there are a number of different self-directed IRA custodians available to help you with your account administration. Here are some factors to keep in mind when considering the differences between self-directed IRA custodians.

Fee Structures

It’s probably not surprising that one big area in which self-directed IRA custodians differ is with respect to fees. If you’re relatively new to the self-directed IRA savings vehicle, you might be a bit surprised to learn that the fee structures for these account custodians are generally higher than those for more “traditional” accounts.

But when you think about it, this makes perfect sense. After all, a traditional IRA custodian severely limits your investment options – namely to those investments in which there is very little administrative or custodial work to be done. Holding stock, bond and mutual fund investments isn’t particularly complicated or burdensome, so the fees for that work will be lower.

On the other hand, investing through a self-directed IRA allows you to greatly expand your options. With this retirement savings vehicle you can invest in real estate, precious metals, and virtually any other type of investment that isn’t specifically prohibited by the IRS regulations.

Different self-directed IRA custodians will charge different fees for the various custodial services necessary for you to make these different types of investments. Some custodians might specialize in a particular type of investment (such as precious metals or realistic), while custodians such as Quest Trust Company seek to provide account holders with competitive fees on a variety of investment types. Some custodians (including Quest Trust Company) may also offer you the option of a “flat fee,” which can save you thousands of dollars if you have a large account balance or a number of family accounts that you want to administer together.

Look For Support

Because the process of investing through a self-directed IRA is relatively novel for some retirement savers, it’s important to look beyond the fees you will be charged and fined a custodian who can also provide you with additional support. Check the various custodian websites to see what types of educational and supporting materials are available. Knowing that your custodian can help you understand things better can be a great comfort.

Beware the “Checkbook IRA LLC”

Finally, you should be skeptical of custodians who take an overly aggressive interpretation of prevailing tax law. For example, some self-directed IRA custodians advocate a so-called “checkbook IRA LLC” structure. The idea is that by forming a “shell” limited liability company and investing all of your IRA funds in it, you can essentially gain “checkbook control” over your IRA and be able to make portfolio investments much more quickly and easily. Unfortunately, this structure has not been explicitly approved by the IRS, and there are indications that if they ever directly addressed it, the structure would be found invalid. Given the importance of your IRA, you probably don’t want to take the risks that go along with operating your account this way.

Quest Trust Company helps change people’s lives and financial future through self-directed IRA investment education. Quest Trust Company helps people invest in what they know best and build their financial future on their own terms.

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