A Self-Directed Individual Retirement Account (ADIRA) is advantageous over the traditional IRAs in terms of enabling the account holder to invest in a broader range of assets.
In addition to the assets, like mutual funds, stocks, and bonds, allowed by the traditional IRAs, SDIRAs will enable you to invest in assets such as real estate, precious metals, franchises, and even startups.
Who is a Custodian?
The first step in setting up an SDIRA is to deploy an IRA custodian. It will help if you choose a custodian that is reputed and well-experienced with the rules and regulations of such accounts.
An IRA custodian helps the account holder to invest retirement savings into a broad range of assets, including the areas beyond what the traditional IRAs allow.
Interestingly, the functioning of such custodians is passive. Meaning, they do not provide any investment, tax, or legal advice. Instead, the custodians act upon the instructions of the account holders. Therefore, the account holders need to do the due diligence before forwarding their instructions to the custodians.
Roles and Responsibilities of Custodians
Here is a sum-up of the leading roles and responsibilities of custodians:
- Maintaining the associated agreements as per the existing regulations
- Accepting, documenting, and recording contributions, transfers, and rollovers from other IRAs/retirement plans
- Executing the investment instructions of account holders by sending funds from the account to the investments selected by the account holders
- Gathering, executing, and holding documents such as subscription agreements, operating agreements, offering documents, promissory notes, certificates, and other evidence of ownership of the account holder
- Receiving and recording income from the assets held in the SDIRA
- Executing the instructions of account holders to sell, withdraw from or liquidate investments held in the IRA
- Providing SDIRA statements which include transactions and cash and assets held in the account to the account holder
You need to avail of the services of a trustworthy IRA custodian if you are a holder of an SDIRA. And if investing in alternative assets, such as startups, is on your agenda, you need to know more. Refer to the infographic in this post to understand all about it.
