Custodian Self Directed IRA vs. Checkbook IRA: What’s the Difference?
Do you understand the difference between a custodian self directed IRA and a Checkbook IRA? Understanding the difference is an important part of choosing the best investment vehicle for you. The best investment vehicle will fit your situation, resources, and goals, while helping you avoid any unnecessary issues.
Custodian self directed IRA vs. Checkbook IRA
A custodian self directed IRA is simply an IRA held by a custodian that allows for self directed investments. With this vehicle, you work with the custodian to choose and make the investments of the IRA.
A Checkbook IRA includes a type of self directed IRA that is part of a larger structure. The self directed IRA is held by a passive custodian. The IRA is invested into a special-purpose single-member LLC. You are named as manager of the LLC. As manager, you direct the assets of the LLC. This structure gives you checkbook control over the IRA.
Different features
The first difference is the cost. Custodians will charge fees for maintaining the account. For self-directed IRAs, you are also charged for each investment. Without checkbook control, you will have to pay much more out of pocket for these costs.
A Checkbook IRA saves on many of these costs. You will need to maintain the self directed IRA, but most of the investment costs will be eliminated as the investments occur under the LLC, not the IRA.
Time is another difference. The custodian requires time to make investments- time for paperwork, custodian response, and back and forth communication. With a Checkbook IRA, you don’t have to wait. You have the ability to invest from the LLC quickly and responsively.