Do I Still Need a Custodian After My Check Book IRA Setup?
By Alisha Bennett
Clients are often confused about the role of the Custodian after their Check Book IRA is completed. Frequently, they will ask if a Custodian is still required after the LLC is active and ready to go. The short answer is YES: having an IRA Custodian who allows self-directed IRAs and ownership of LLCs/private equity is vital to your Check Book IRA creation and maintenance.
Essentially, the LLC is an asset of the IRA. Therefore, to garner the tax-exempt protection status of the IRA, the IRA must be in existence and held with a Custodian. The IRS rules state that you cannot be your own IRA Custodian unless you own an institution that qualifies (such as a bank or other financial institution which leaves most of us common folk out).
After the setup of your Check Book IRA, you will probably have a mostly hands-off, once a year relationship with your Custodian. Their role will mainly be to facilitate additional IRA/401(k) and/or contribution funds that you choose to move into your IRA-LLC, annual reporting of Form 5498 and helping you with any annual distributions if you’re of age.
Of course if the idea of working with a Custodian at all is frustrating to you, you can check out our Solo 401(k) plan which allows you to skip the Custodian altogether.