What is a Self-Directed IRA?

At Entrust, we have designed our fees to adapt to every type of investor. Whether you invest $20,000 or $2,000,000 in a self-directed account, our fees are scaled to match the complexity of administering your account and make sure you have quality service and access to SDIRAs at a reasonable price.

Here are our four main fee types:

• Account Establishment Fee: A one-time fee required to open your self-directed IRA account.
• Annual Recordkeeping Fee: This covers the ongoing work to keep your account in compliance, including IRS reporting, recordkeeping, and administrative services.
• Asset Purchase and Sale Fees: These are one-time fees for the paperwork and processing involved when you buy or sell an asset through your IRA.
• Transaction Fees: These one-time fees apply to specific transactions like issuing paper checks, processing stopped checks, or handling expedited requests.

Many investors are surprised to learn that using retirement funds to invest in alternative assets has been possible since 1974. However, most brokerage firms and banks focus on offering publicly traded securities, like stocks and bonds, because they lack the infrastructure and expertise to manage privately held assets, such as real estate or private equity. As a result, they tend not to promote self-directed IRAs, which offer the flexibility to invest in a broader range of assets.

When managing a self-directed IRA (SDIRA), several key rules must be followed to maintain the tax-advantaged status of the account. Here are some of the primary guidelines:

• Prohibited Transactions: The IRS prohibits certain transactions between your SDIRA and “disqualified persons,” which include yourself, your spouse, parents, children, and other related individuals. These transactions include lending money, selling, or leasing property to these disqualified persons.
• No Personal Benefit: The assets in your SDIRA must be used solely for investment purposes, not for personal gain. For example, you cannot live in a property owned by your SDIRA or use it for vacation purposes.
• Investment Restrictions: While SDIRAs allow investment in a wide range of assets, certain assets are not permitted. Prohibited investments include life insurance contracts, collectibles like artwork, and certain metals that don’t meet IRS purity standards.
• Unrelated Business Income Tax (UBIT): If your SDIRA earns income from a business activity or through debt-financed investments, it may be subject to UBIT, even though the account is otherwise tax-advantaged.

Yes, there are several potential disadvantages to a self-directed IRA (SDIRA). Here are some key considerations:

• Complexity and Responsibility: With an SDIRA, you have more control over your investments, but you also bear more responsibility. This includes understanding IRS regulations, managing investments, and avoiding prohibited transactions that could disqualify your IRA. A lack of knowledge could result in costly mistakes.
• Limited Liquidity: Many of the alternative assets that can be held in an SDIRA, such as real estate, private equity, or precious metals, may not be easily liquidated. This can be an issue if you need to access funds quickly.
• Higher Fees: SDIRAs often come with higher administrative costs compared to other IRAs, as certain aspects of the administrative process cannot be automated.
• Due Diligence: It's called "self-directed" for a reason. With an SDIRA, you are entirely responsible for thoroughly researching and vetting investments.

Before opening an SDIRA, it’s important to weigh the potential advantages and disadvantages based on your specific financial goals and risk tolerance.