IRA Custodian Requirements

Retirement savings takes up a significant portion of your life if you wish to have a successful retirement, and when you invest in an Individual Retirement Account as a way to save for the future, the custodian of the IRA has defined responsibilities ethically, and according to the law. It must represent the investor well and act in his best interests, in addition to performing the correct record keeping and reporting, both to the account owner and the IRS. The custodian does not have to ensure the profitability of the investments.

Fiduciary Responsibility

The IRA custodian maintains a fiduciary responsibility to the investor or owner of the IRA account. It must hold and secure the assets in your account, whatever they are, and operate the account in your best interest. It must also not buy or sell investments without your permission, and must hold your account assets separately from its own assets.

Record Keeping and Reporting

The IRA custodian must maintain records of the correct balances and all deposits and withdrawals, as well as all of the dividends and gains on the account. All losses to the IRA account must be carefully documented as well. In addition, it must report this information regularly to the owner of the IRA account.

Accept Allowed Contributions

The custodian must only accept the allowed amount of yearly contributions for the IRA account. At the time of publication, the maximum that you can contribute to an IRA account is $5,000 per year, or $6,000 per year if you are over age 50. Receiving more than what is allowed as a contribution could cause the IRS to disqualify the IRA, and it could lose its tax-advantaged status.

Investment Gain

The custodian of an IRA account is not responsible for investment gains. Investing money into any investment vehicle other than a government-insured account places that money at risk for loss of value. The custodian needs to be certain that it acted reasonably and prudently, but it cannot guarantee that the investments will increase in value. The custodian is not responsible for evaluating the quality or legitimacy of any investment, or that of the people promoting a particular investment, although some custodians provide financial counseling and other services.

Self-Directed IRA

The custodian in a self-directed IRA has a responsibility to invest in non-traditional investments that the account owner may choose. Examples of these investments include real estate or precious metals, as well as investments in small, private start-up firms. It also has a responsibility not to conduct prohibited transactions, such as investing in collectibles.