IRA Custodians — Their Role in the IRA LLC or IRA Trust Process

Let’s get the mystery out of the way right away. All IRAs are required to be held through a custodian. As part of this responsibility, the IRA custodian will report the annual value of the IRA to the IRS each year.

Can I Choose any IRA Custodian I Wish?

Yes and no. As you may know, custodians such as Schwab will not custodian IRA accounts that hold non-traditional assets (e.g., self-directed). As a result, we work with IRS-approved, FDIC-insured IRA custodians that are passive in nature. For your benefit, PGI can work with any IRS-approved custodian. The bigger question is which custodian may be best for you!

What is a Passive Custodian? A passive custodian is an IRS-approved custodian who only fulfills the IRS’ requirements for being an IRA custodian. Accordingly, passive custodians do not sell investments. As a result, these custodians charge fees to serve as the custodian versus earning commissions on investments.

What is a Custodian Responsible for?

Here is a listing of what the IRA custodian is responsible for:

Form 5498 — This IRS form is utilized by the custodian to report annual contributions you make to your IRA. As a result, the custodian files the 5498 with the IRS for all IRAsby May 31st.

Fair Market Value (FMV) — Since your funds/assets are in the name of the IRA LLC or IRA Trust, it is incumbent upon you as the manager of the LLC (or Trustee of the Trust) to accurately assess the FMV of the assets held by your IRA. You do want to take this responsibility seriously. Review a sample FMV form for a single-member LLC.

Contributions — The IRA custodian, through the Form 5498, will report all contributions into the IRA.