Choosing a Custodian for Your Self-Directed IRA

Estimated reading time: 4 minutes

A self-directed IRA puts you in the driver’s seat. It allows you to invest in what you know best and opens up many more investment opportunities to diversify your retirement portfolio. However, you don’t do it alone. When you set up a self- directed IRA, you establish it with a custodian or a financial institution, and choosing the right custodian is an important task.

What is a Custodian?

A custodian is the person or entity who facilitates the transactions. They are an essential element of your IRA. Custodians can hold title to client assets, investments and property, and issue funds, and are subject to regulatory oversight and audits. According to IRS regulations, “all IRAs must be held by a custodial entity such as a bank, credit union, trust company or an entity that is licensed and regulated by the IRS as a ‘non-bank custodian’.”

Self-directed IRA custodians are unique in that they allow alternative investments, which is different than a custodian that only offer traditional investments, like mutual funds, stocks, and bonds. With a self-directed IRA, you can invest in a wide range of alternative assets, including real estate, promissory notes, oil and gas, and private placements in your retirement account.

Sometime people are confused between IRA custodians and promoters. An IRA promoter is a third-party provider that focuses on promoting investments, but does not have the regulatory oversight or authority to hold investments or move IRA funds like a custodian. They may also be limited by what they can offer and must have ties to a custodian who can make these transactions for you. It’s another middleman that adds time, paperwork, and fees to each transaction you want to make. When you’re searching for a custodian, make sure it’s an actual custodian or administrator and not merely a promoter.

How Do You Know If a Custodian Is Right for You?

There are a few things you want to compare when seeking your Self-Directed IRA custodian:

  • Experience – How long have they been in business? Are they experienced in Self-Directed IRAs? Look for third party endorsements, achievements, and performance awards. Check the reviews of the potential custodian and see if there have been any complaints filed against them.
  • Access – How easy is it for you to get in touch with your custodian? How fast can you process a transaction and make an investment? How are accounts managed? Is there an online account management system? How are investments processed?
  • Investment Choices/Options – Do they offer the type of investment knowledge and resources that you need or are interested in? Also, some Self-Directed IRA custodians may not allow certain investment options. Make sure you choose one with a wide range of types of investments.
  • Knowledge – Do they provide ongoing education? Can you contact them with specific questions? Who answers your questions and what are their qualifications?
  • Technology – Is the technology platform the custodian uses efficient and easy to use. Look for a custodian that offers advanced technology solutions such as the ability to submit investments online, as well as manage your account.
  • Fees – Finally, compare providers by their fees. It’s important to find a custodian who is transparent about their fees and provides full disclosure. Custodians may charge administrative fees, transaction fees, or fees for special services. Ask if there are any hidden fees, maintenance fees, or costs for uninvested cash. Ask if you’ll be charged for each transaction, a flat fee, or on the value of your account. Ask about billing cycles and request a list of all potential fees.

Wrapping Up

Choosing your Self-Directed IRA custodian is perhaps the most important decision you will make with respect to your account. Take the time to research your options and contact each potential custodian and ask them your questions. Do they feel accessible, knowledgeable, and have a transparent fee structure? While you can always rollover your account to a new custodian, it’s better to do your research upfront to avoid the hassle, lost time, and fees associated with the move.

Quest Trust Company is one of the top ranked self-directed IRA custodians in the country. We would be happy to show you our process, demonstrate our experience, and compare our fees to any other custodian. Schedule a consultation with a Quest Trust Company IRA Specialist today.

Does Your Custodian No Longer Hold Private Investments?

Estimated reading time: 3 minutes

New custodian requirements are causing headaches for some retirement investors and are causing them to look elsewhere. Investors that have their retirement accounts at some of the common publicly traded custodians are being told that they can no longer hold private investments under certain thresholds. 

The biggest challenge is that these custodians are no longer holding private investment opportunities for under $1M. For investors with smaller accounts that choose to remain with these certain custodians, they will no longer have the option to put their money into private investments. Assets such as real estate, notes, and private entities could all be eliminated from the list of possible investment options. 

How Can a Self-Directed IRA Help?

Self-directed IRAs could be the answer to the problem. With a self-directed IRA, you have the ability to diversify your investment portfolio by choosing from the broadest possible spectrum of investments, including those not traded on a stock exchange, and you’ll never have to worry about investment minimums or maximums. Self-direction means you get to make all the decisions about your financial future, and your custodian will provide account administration. Remember! Not all custodians are created equal!

You can build wealth faster with the freedom to purchase almost any type of investment. Common investment choices include all types of real estate, newly created and existing promissory notes, LLCs, limited partnerships, private stock, trusts, oil and gas, tax liens, and much more. All types of IRAs, including Traditional, Roth, SEP, and SIMPLE IRAs, as well as Coverdell Education Savings Accounts (CESAs) and Health Savings Accounts (HSAs), can be self-directed. 

Why Self-Directed at Quest?

Quest Trust Company is the nation’s premier self-directed IRA custodian, administering clients all across the U.S. Not only do we provide world famous account administration and customer service, we put a big focus on education and making sure our clients are equipped with all the knowledge and resources they may need. In our Education Center, you can experience live webinars, blogs, recorded videos, and more. In addition, we’re always adding the the latest online features, allowing you to fund investments online within 24-48 hours – one of the fastest funding times in the industry!

Benefits of Self-Directing Your IRA at Quest: 

  • Ability to view and manage accounts & investments online in the Client Portal
  • Submit investments and yearly Fair Market Valuations 100% online
  • Pay expenses with our team or online with the Expense Pay Feature
  • 24-48 hour processing times for almost all request involving accounts
  • Access to 35 Certified IRA Services Professionals and endless continued education

Here’s How We Can Help

For those that have a larger IRA and still want to participate in private assets, Quest can help. If you are looking for a qualified and knowledge custodian to place your private assets or start new private entity investments, call an IRA Specialists to see how we can make your move to Quest.

Schedule your free 1-on-1 call: Schedule A Consultation

URGENT SDIRA News that Could Affect YOU!

Estimated reading time: 3 minutes

A New Proposed Tax Bill Could Mean Big Changes for YOUR SDIRA and Private Investments

Recently, a new proposed tax bill that could have significant effects on Self-Directed IRA accounts has been circulating in the news. If you haven’t heard, this new tax legislation proposes several big restrictions on Self-Directed IRAs (SDIRAs) and private investing freedoms. With the announcement of the House Ways and Means Committee proposal (specifically Sections 138312 and 138314) and the many changes it includes, it has countless Self-Directed account holders wondering how it will affect them. 

What’s The Risk?

Certain provisions that are in this bill could create dramatic issues and obstacles for investors, and could dramatically change the way you’re used to investing forever.  Changes like limiting your IRA investment choices, eliminating certain Roth Conversions abilities, capping the maximum values of IRAs, limiting IRA ownership in LLCs and other private entities, and in some cases, forcing distributions for some.

Limitations on Investment Options

The biggest change in this bill that affects Self-Directed IRA holders is the proposed limitation on investment choices. “The bill prohibits an IRA from holding any security if the issuer of the security requires the IRA owner to have a certain minimum level of assets or income, or have completed a minimum level of education or obtained a specific license or credential”. This will cause a major problem for those looking to invest in LLCs and other private entities, as this will not be allowed.  This directly affects accredited investors.

The IRS posted the following definition of an accredited investor includes anyone who:

  • earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonably expects the same for the current year, OR
  • has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence).

Forced Distributions

Directly following the previous change, if these certain private investments are held in the account, those assets will have to be distributed by December 31, 2023. Although the President says taxes will not be rising for individuals making under $400,000, yet this bill could force liquidation of assets no matter who you are or how old you are. 

No More Backdoor Roth Conversions

With this proposed new bill, there will also be an elimination of backdoor Roth conversions. Currently, you can convert a Traditional IRA contribution to a Roth IRA in order to have the ability to create tax-free profits. There will no longer be this option for those over a certain income limit if the bill passes. 

Capping IRA Values

Another main proposal in this bill will directly punish those who have successfully grown their IRAs. For those that have managed to build their IRAs up to $10M will receive a cap. What we have seen in our years of self-direction, many of the IRA accounts are under this cap and this cap is aimed at only a handful of investors. Yet, hundreds of thousands of other investors will suffer from these new changes, too. 

What Can You Do To Help?

No matter which side of the political spectrum you may be on, this proposed bill could affect all retirement account holders. We encourage you to start the discussion by contacting your representatives in Congress and the Senate, regardless of party, to share your opinions and express how this could affect everyone. 

IT TAKES LESS THAN 5 MINUTES. By clicking HERE, you can submit an email to your representatives in Congress and the US Senate that has already been drafted for you. All you have to do is put your name and email, and then hit send! Your voice can help make a difference, but it’s critical that you take action to contact your legislators.  

If you have any questions about the new proposed tax bill and how it could affect your account, give us a call. Our IRA Specialists are here to help answer any questions you have. 

Watch an interview style video with Quest Trust President and Founder, Quincy Long, about the new proposed bill:

Your Top 10 Most Common Self-Directed IRA Questions Answered!

Estimated reading time: 6 minutes

Understanding how self-directed IRAs work can be some of the most lucrative and useful knowledge to have. When you know even just the SDIRA basics, you’ll find that there are many ways this information can help not only yourself and others around you as you continue to invest. So, what are some of the most common questions people ask about self directed IRAs? Below are the top 10 most common questions surrounding SDIRAs:

  1. What is the difference between a Self-directed IRA and a regular IRA? This is a great question and probably the most common question asked. The answer is actually simpler than it may seem. There is no legal distinction between a self-directed IRA and any other IRA. The difference is that with a truly self-directed IRA, the account agreement allows the broadest spectrum of investments. Legally, there is no difference between the two; self-directed is simply a term used to help describe that the account allows for the investor to have full control over their investment choices and the type of alternative assets than can be held. 
  2. What is the benefit of having a self-directed IRA? There are many benefits of using self-directed IRAs. Not only can you diversify your portfolio, moving beyond stocks, CDs, and mutual funds, but you can also have more control on the investments you choose. Unlike having a financial advisor that will trade and sell your stocks for you, when you have a self-directed IRA, you are truly getting to find the investment of your choosing. Everything is on your terms when you self-direct your account at a non-traditional custodian, because you choose the investment. This allows you to invest in the things you know and understand, as opposed to things you may not be as familiar with. Not everyone understands the stock market – or is comfortable with its current state, anyway – so, having the opportunity to invest in private assets like real estate, is a much better option.
  3. What type of accounts can be self-directed? There are many different accounts that can be self-directed. At Quest, we offer seven different types of accounts, all which can be self-directed. Because each account works a little bit different, it is beneficial to speak with someone like an IRA Specialist who can provide education about specific accounts.
  4. Can I have multiple IRA accounts? One of the great features of self-directed IRAs is that they don’t have to be used only on their own. Self-directed IRAs can work together by using a beneficial strategy called “partnering”. This term is used when one entity (or more) and an IRA come together to put up the funds for an investment. In this strategy, all parties have a vested percentage of ownership in the deal. When doing this, the percentage of ownership is decided at the beginning of the investment and must remain the same throughout the life of the investment. This means that any profit the investment receives is returned based on this percentage of ownership. Additionally, the IRA would be responsible for its percentage of any expense associated with the investment, too.
  5. Can I move a 401(k) to a self-directed IRA if I am currently still employed with my company? Typically, you cannot move your IRA until you have left your company or have some separation from the company that could allow you to move a portion of those 401(k) funds. This is not to say that you cannot have both an IRA and a company 401(k) at the same time. Many people have an IRA and make personal contributions to the account, you just may not be able to receive a deduction for your IRA contributions. In some cases, companies will allow for an “in service” rollover, meaning that some of the funds may be eligible to move to an IRA while still employed. 
  6. Is it possible to have a Roth IRA if I make too much money? One of the most common questions surrounds a certain type of IRA account – the Roth IRA. Many people believe that if you make too much money that you cannot have a Roth IRA, but this would be incorrect. Although it is true that if your modified adjusted gross income is over a certain limit you still cannot directly contribute, it would be false to assume this means you cannot have one at all. Check out our other articles about Roth conversions to learn more. 
  7. Is it possible to own real estate in an IRA? This is a very common question, and it is true that one can purchase and own real estate in an IRA. Due to the potential predictability and security of the asset, many people are making the decision to diversify their retirement accounts into tangible assets like real estate. With self-directed IRAs, you are able to invest in all types of real estate such as land, single family, multifamily properties, commercial properties, mobile homes and much more. When using an IRA to purchase real estate, your IRA is the purchaser and you make all the decisions about your investment and the profits grow in your IRA!
  8. What happens if I don’t have enough money in my IRA to purchase my investment? If you don’t have enough money in your IRA, don’t worry! There are other options available to you that can allow you to still use your self-directed IRA for the investment. You can:
  • Make your annual contribution if you haven’t made one for the year already.
  • Partner your IRA with another IRA or personal funds to make up the total cost of the investment
  • Utilize getting a loan from a private lender to help make up the remainder of the funds
  • Get a non-recourse loan from a qualified lender
  1. Can I live in or work on a house that my IRA owns? This is one of the most important common questions that involves IRAs. When you are using a self-directed IRA to invest, there are certain people that your IRA cannot participate in deal with. Certain disqualified people (you, your spouse, your lineal ascendants and descendants and any companies owned or controlled by those people) cannot do business with your IRA or else it will be seen as a prohibited transaction. If you are using your IRA to do business with a 3rd party, this can be done all day long! But this mean, you would not be able to work on or live in a house that your IRA owns. More about that here!
  2. Do I need an LLC to purchase investments in a self-directed IRA? No! You actually do not need to create any LLC when using an IRA to invest. When using your IRA to purchase alternative investments, you simply let your custodian know what you would like to invest in, and then your custodian will purchase the investment in the name of the IRA. 

Self-directed IRAs aren’t the easiest thing to understand, but once you’ve taken the time to ask yourself some of the most common questions, you’ll be able to understand them a little better. It’s important to have a knowledgeable investment professional or a certified IRA custodian/specialist that can help answer questions when needed! To learn more about how to get started investing with a self-directed IRA, schedule a 1-on-1 consultation with an IRA Specialist by clicking HERE.

Quest Against the Rest: A Self-Directed IRA Custodian Comparison

Estimated reading time: 3 minutes

When choosing to open your self-directed IRA, there will be many things to consider before selecting the best custodian. Alongside service and experience, one of the main considerations will most likely be the fees. Some custodians boast minimal fees, and although that may seem enticing at first, this usually comes with a less positive overall experience. 

Our mission at Quest Trust Company has always been to provide the best experience for our clients and the highest quality of customer service, or as we like to call it “world famous customer service.” At Quest, we make sure our clients’ needs are always at the forefront of every choice we make, from day to day decisions to companywide implementations like systems and procedures. 

So, how do those fees compare to other Self-Directed IRA custodians?

Quest Fees Compared to Others

Our rates remain competitive compared to other self-directed IRA providers. While their administrative fees may appear lower, transaction and miscellaneous fees may be substantially higher. Additionally, services like closing an account, 24-48 hour turn-around time, or doing Roth conversions remain free at Quest when other companies charge hidden fees for similar accounts tasks. 

Quest Trust Company: 3 Administrative Fee Options, NO Account Termination Fee, 24-48 hour funding time with NO Expedited Fees, NO Minimum Cash Balance Required, NO charge on incoming wires/checks and more!

Quest was determined to rank in the top half compared to other custodians, taking the spot of 3rd place overall when compared to 12 others. The level of customer service received when you have an account at Quest surpasses that of custodians with cheaper fees, allowing us to still be one of the custodians to provide the best value!

Education to Set Us Apart

While other custodians may be able to provide the ability to self-direct your IRA, not every custodian will provide quality education to help the client make the best investment decisions. Quincy Long, our CEO, has always said, “the best clients are the most educated clients,” and this is why we have always provided the free, quality educational material to our clients and to the public. 

We also believe the same holds true with our staff. At Quest, we believe that an educated and qualified staff is necessary in order to provide the level of service our clients deserve and set us apart from other custodians, regardless of fees.  

Features with your Quest Accounts

Quest is always working to enhance the education programs we have in place, but also develop new training programs centered on providing better and faster service. Continuous advances to our systems allow Quest to be one of the self-directed IRA custodians on the forefront of investing technology. Whether we are giving clients more access to take control of their investment all throughout the process in the improved Client Portal or implementing new features, we’re focused on being able to put the control in the hands of the client.

Fees will always be a consideration when choosing to open a self-directed IRA, but remember- cheaper isn’t always better. We hope that our clients continue to find our services valuable as we strive to be the best Self-Directed IRA custodian in helping new and old investors to create their wealth for tomorrow!

We would love to share the many benefits of being with Quest Trust Company. To get more free education or information about starting your self-directed IRA, give a friendly Quest Certified IRA Specialist a call at 855-FUN-IRAS (855.386.4727). To learn more about how to get started investing with a self-directed IRA, schedule a 1-on-1 consultation with an IRA Specialist by clicking HERE.