The role of an IRA Custodian

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An IRA custodian plays a crucial role in any account, although his or her duties with regard to self-directed options are markedly different. Generally speaking, the IRA custodian is tasked with the maintenance of assets and the managing of transactions, as well as keeping records of those transactions.

While many custodians typically charge individual fees for every transaction, such as the purchase or the sale of assets, others will charge only a single maintenance fee yearly. It may be more affordable for you to pay a yearly fee, depending of course on the number of trades that you plan to make during the course of a year.

Basically however, IRA custodians simply act under the direction of the account holder. Self directed accounts generally give the account holder more investment options. The owner typically makes a few decisions throughout the year with regard to the retirement accounts, which are in effect throughout the year. In addition, trades can be conducted at any time with a self-directed account. So in effect, self-directed IRA custodians will usually have to do more work, which is why they typically charge higher fees.

According to current laws, IRA custodians are not allowed to receive "unreasonable compensation" for his or her role in the management of an account. This restriction can be quite confusing however, as the law does not define this in specific terms. Some IRA custodians actually charge fees for services such as annual record keeping and even quarterly "asset administration" fees. These fees have a way of adding up quickly, so you would do well to shop around before settling on any one IRA custodian.

In addition, you should keep in mind that there are rules and regulations that you have to follow with regard to certain investment types and prohibited transactions. For example, IRA custodian typically cannot ensure your compliance or even offer legal or tax advice. He or she may offer unbiased educational material however, and may also refer you to certain tax codes when appropriate, but the responsibility of dealing with any legal issues that may arise is ultimately on your shoulders.

It would also be helpful to know that the tax status of the account will remain secure if you are careful to avoid certain investment types, such as collectibles and antiques. Investment in many other areas and assets are typically allowed however, with stocks and bonds being some of the more common ones, along with real estate, mortgages, franchises, partnerships and tax liens. Real estate is in fact quite a popular option nowadays.

While an IRA custodian is not legally allowed to suggest good deals to a client, he or she is allowed to put you in touch with advisors who can do so. You will typically need a mortgage company, attorney, accountant, or any other professional advisor in order to do so however. With regard to real estate, some investors can even help you find good deals and provide additional education that is so crucial to new investors.

Ephren W. Taylor II first revealed his extraordinary knack for making money at age 12 and he hasn't slowed down since. He was a self-made millionaire while still in his teens. In his twenties he became the youngest African-American CEO of any publicly traded company ever, City Capital Corporation (CTCC). Today Taylor and City Capital oversee tens of millions in assets for clients ranging from entertainment icons and pro athletes to church members and private companies. He is a dynamic speaker and author of the best seller "Creating Success from the Inside Out." Learn more at CashFreeInvesting.com, IRACashFlow.com or Ephren.com.

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