Not All IRA Custodians Are Built Alike

By Elsie Dudukovich0 Comments

Your relationship with your IRA custodian is an important one.  While the IRS permits real estate and other nontraditional investments to be held as assets in an IRA, not all custodians will carry IRAs holding alternative investments.  Just because an IRA can do it, does not mean you can force the custodian to do it.   

The Forbes article “Real Estate in your IRA – How Not to Do It” can be seen as a cautionary tale for what can happen when your custodian and your investment are not in harmony regarding the use of IRA funds. Sadly, this investor’s difficulties could have been avoided by finding a custodian who could hold the assets he wanted from the beginning.  You face the concern of the investment not being held in the IRA and the use of those funds seen as a personal distribution or a possible prohibited transaction.  This event can put you in the position of dealing with taxes and penalties associated premature distributions and prohibited transactions.

Ultimately, you need a custodian who can hold the assets you want in your IRA.  When it comes to planning your investment strategies, consider if you will be able to do everything with one custodian or if you need multiple custodians.  If you want to diversify your holdings and are considering using more than one financial institution, it is vital to contact each custodian to understand what your options are and if your needs will be met. 

Equity Trust is one of the custodians that specializes in holding alternative assets and also has an in-house brokerage to hold traditional assets as well.