IRA Trustees and Custodians
1st Link Financial Services is not affiliated with any of the custodial companies below. But we are offering this partial list as a service to assist you in selecting a reputable, experienced IRA custodian that can help build IRA wealth.
Guidelines for Selecting Self-Directed Custodians
The law allows all custodians (the firms picked to oversee IRA products) to accept the same products for the IRA. After that, each administrator makes its own choice on which of those products it will actually work with.
Understanding Custodians
Flexibility
The law allows all custodians (the firms picked to oversee IRA products) to accept the same products for the IRA. After that, each administrator makes its own choice on which of those products it will actually work with.
Each administrator has its own set of rules. Some allow no real estate. Some allow only land. Some allow land, improved properties, etc. Almost all will allow the traditional investments of annuities, CDs/TDs and mutual funds.
The custodian may or may not be able to hold title to real estate in the state in which you want your IRA to hold title to property. Typically, each has a list of the states in which it will do business. You need to know beforehand.
If the IRA is going to have multiple assets (real estate, trust deeds, etc.), will the administrator allow all of those assets? Alternatively, you may use multiple custodians.
When you have a unique transaction, is the administrator flexible enough to consider it? While not a sure thing, this can be discussed ahead of time.
Durability
Will the administrator be in business as long as the IRA is? Not all custodians are able to stay in business over the long run. Several companies have gone out of business over the years.
- Some for poor business practice.
- Some because of fraud.
- Some because of takeovers or buy-outs.
Ability
How able is the staff that backs up the administrator? This is critical because the nature of investing in real estate requires people with knowledge of the industry.
Does the administrator have an in-house attorney? Is the administrator able to answer legal questions quickly? Does it have the expertise it takes to understand the law on IRAs?
What is the firm’s turn-around time? Real estate opportunities are time sensitive. The good deals in real estate go fast.
How often does the administrator do your type of transaction and does it have back-up staff? What happens when the account representative you use goes on vacation?
Cost
What type of charges does the administrator have? Charges vary tremendously depending on the type of fee.
Asset-based fees: A percentage based on the amount of the IRA asset. Usually around 00.5% to 01.00% of the first $500,000
Transaction-based fees: A fee for each transaction. In some instances, this can mean a fee every time the administrator collects a note payment.
Hybrid fees: A combination of asset-based and transaction-based fees.
$100,000 IRA accounts may cost as little $500 or as much as $1,500 yearly. We have the ability to determine which are the most cost effective.
Summary
Flexibility, durability, ability and cost are important factors to consider when choosing an administrator. Too often, because of the frustration of trying to find an administrator, accountholders settle for the first company they find. That administrator, , for one of the above stated reasons, may not be the right one. Accountholders can later change their custodians to obtain the benefits needed, but at a price. Companies typically charge a fee starting at 1% of the transferred amount to move accountholders to another administrator. Choose right the first time and save time and money.
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