A custodian is required for all IRAs. The document must demonstrate that the account meets all of the following requirements. An IRA trustee, also called a custodian, is the institution that manages your IRA. By law, every qualified retirement plan must have a custodian or trustee.
A trustee can be a bank, credit union, financial institution, or trust company, such as IRA Financial Trust. IRS regulations require a qualified trustee or custodian to own IRA assets on behalf of the IRA owner. A self-directed IRA depositary, also called a passive custodian, allows IRA holders to make non-traditional investments (i.e., real estate), but generally does not offer investment advice or act as a fiduciary. In short, in accordance with section 408 of the Internal Revenue Code, a bank, financial institution, or authorized trust company can establish and administer an IRA.
By law, every IRA must have a custodian or trustee. When it comes to a retirement plan, fiduciary and custodian are sometimes interchangeable terms. The trustee or custodian of your 401 (k) or IRA account is usually the plan administrator, ensuring that transactions are conducted in accordance with IRS regulations. If you want to include alternative assets in your retirement plan, you'll need to find a custodian who allows you to make those investments and open a self-directed IRA with him.
The first step in establishing a self-directed IRA is to open an account with a depositary of a self-directed IRA, such as IRA Financial. On the other hand, a depositary of a self-directed IRA, also called a passive custodian, allows holders of an IRA to make non-traditional investments (i.e., a depositary of a self-directed IRA earns fees for providing IRA management and custody services for alternative assets approved by the IRS). The IRA depositary has the right to decide what types of investments approved by the IRS will allow their IRA clients to invest in. The IRA trustee is the depositary of the bank or IRA who is responsible for the administration of the IRA and, in most cases, the custodian of IRA assets.
A depositary of a self-directed IRA, also called a passive custodian, allows holders of an IRA to make non-traditional investments (i.e., the depositary of a self-directed IRA has no fiduciary responsibility to the owner of the IRA and is simply the party responsible for facilitating investment in a self-directed IRA).