Why do I Need a Self Directed Custodian and what is Their Role with My IRA?

The reason behind an IRA custodian
The reason why you need an IRA custodian is because the IRS does not allow you to be in charge of your account yourself; you are only able to give orders. Therefore, an IRA custodian acts as an financial intermediary. They play a major role with how your self directed IRA account is managed. Their role is to look after any IRA assets you may have and help to control and keep track of your transactions.
The IRA custodian’s role
Whether the account is self directed or not, an IRA custodian’s role is to abide by your wishes, the account holder in every legal way possible. Having a self directed IRA simply means that you have a number of investment options. They also mean that you can make a transaction whenever you want.
An IRA custodian is unable to give you any advice over legal, tax, or investment matters. However, they can provide you with unbiased expertise and research any relevant tax codes. They can also point you in the direction of professionals who can assist you further, for example attorneys, accountants or investment advisors. It is important that you are aware of what is allowed and what not to prevent you from becoming involved with any prohibited transactions.
An IRA custodian will also be able to assist you with advice concerning nonrecourse financing. With IRA loans, a nonrecourse loan is the only form allowed. With a nonrecourse loan you are not personally liable should you default on mortgage payments. Therefore, the lender can only take your property but no further IRA assets, even if the nonrecourse loan exceeds the value of the property serving as collateral. This benefits you in terms of security and financial leverage. For IRA loans, an experienced custodian will be able to provide you with guidance concerning the best nonrecourse loan options available and what the IRA loan process requires.
Differences in IRA custodian
Different custodians charge in different ways. For example, some ask for an annual fee while others charge for each transaction you make. By law, they are not able to take ‘unreasonable compensation’. However, this is somewhat loose terminology. If a custodian charges no start up fee then they will make sure to make up for this with charges for record keeping or administration.
In addition, different custodians provide different investment options, depending on their preferences and experience. For example, some might limit themselves to traditional investments only, including mutual funds and stocks. The main benefit of a self directed IRA is that you have more investment opportunities than a normal IRA, including real estate. In this respect, self directed IRA custodians are capable of dealing with a wider scope of investments and may prove more beneficial.
An IRA custodian is an important part of your self directed retirement account strategy. This is why it is important to choose one whom you feel is not only trustworthy but knowledgeable. They serve an integral part in ensuring you make the most of your retirement fund and abide by legal and IRS compliance regulations.