For you to hold gold or any other precious metal in your individual retirement account, you need a custodian. Now, if you are new to it all, you are probably wondering why you need one. You may also be wondering what role they play.
Well, we are here to give answers to that. But before we do, we want to briefly explain what a gold IRA is.
A gold IRA is a type of self-directed IRA (SDIRA) that allows investors to invest in gold and other precious metals in their retirement account. Because not just gold but other valuable metals can be invested in these accounts, they are also called precious metal IRAs.
All types of IRAs need to be handled by a custodian. But gold IRAs are special since special asset classes are held in them, hence, the custodians that handle these accounts often specialize in them.
With all that being said, we will now discuss the role gold IRA custodians play.
What a Gold IRA Custodian Does
When it comes to individual retirement accounts, custodians are often required and they are usually financial institutions. These custodians have the role of overseeing the accounts of their clients, as well as the assets in them.
Hence, usually, they would handle the transactions and withdrawals made with the account. They would also be in charge of IRS reporting. Custodians are a necessary aspect of IRAs that cannot be avoided.
However, when it comes to precious metals individual retirement accounts, the role of the custodian varies a little bit. This is because these special accounts are made for physical precious metals. Because of how valuable these assets are they can’t be stored just anywhere.
The investor also cannot store the assets by themselves because this is not allowed by the IRS. Due to this storage need, IRS-approved depositories have to step in.
Hence, custodians here are typically in charge of managing the paperwork involved with storing the assets. They are also in charge of transporting the assets to the chosen depository. You can watch this video to learn more facts about precious metal IRA storage.
Therefore, gold IRA custodians have the role of conventional individual retirement account custodians, which involves overseeing the accounts and handling the transactions done with the account. Then they also have the role of handling the paperwork and tax report of the physical precious metal.
Financial institutions like trusts, banks, and so on are usually the entities that serve in this capacity. However, for them to, they would need to be IRS-approved.
Reasons You Need the Custodian
Now, some persons may have all the information that is necessary to handle their accounts, including knowing the specific silver or gold they can hold. Regardless of this knowledge, they would still need to get a custodian as all IRAs according to the IRS rules need to have one.
The reasons for this are:
- Custodians have to handle processing transactions. With every transaction done, there’s paperwork attached. Now, these custodians have experience in this field and they most likely are quite familiar with the whole process involved with doing the paperwork. This familiarity can be leveraged to enable them to work quicker for you.
- The custodian typically would work with the chosen depository where your asset has been stored. Most of the time, investors do not have access to the depositories where their assets are stored. Rather, it is their custodians that would be in charge of organizing the storage. They also make sure the required documentation is completed appropriately.
- The administrative duties involved in having a precious metal individual retirement account can be quite long. These duties involve IRS reporting, withdrawing the assets (upon your request), as well as ensuring proper distribution of them. They can do all of these effectively because they are usually quite familiar with the processes and documentation. Apart from this, they usually have safeguards to ensure the details of your transaction are protected.
The custodian would be in charge of almost everything concerning your account. Due to this, you have to do your homework before you choose one. Reading reviews on gold IRA companies can help you make a good choice.
You can visit https://www.ibtimes.com/looking-serious-gold-ira-consideration-lear-capital-answer-3331293 to see an example of a review on a gold IRA company. Ensuring you take your time before selecting your custodian will prevent you from falling prey to fraud.
The custodian of a gold IRA is a vital aspect of the SDIRA. Trusts, banks, as well as other similar financial institutions, can be custodians for these special retirement accounts. However, for them to serve in this capacity, they have to be IRS-approved.
Typically, the custodian has the duty of handling the account and this involves being in charge of the transaction and withdrawals. They also have administrative roles that include IRS reporting. Because physical valuable metals are held in these accounts, they need to be stored in IRS-approved depositories. Due to this, custodians also have the role of ensuring the assets are properly stored in the chosen depository. They also take care of the paperwork attached to storage.