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How to Move a Checkbook IRA to New Custodian

The great thing about a checkbook IRA is that it puts you in direct control of all investment transactions.  This is accomplished with a two-layered structure involving an IRA with a specialty “self-directed” IRA custodian that then invests into a legal entity like a LLC or Trust that you can control and use to make investments.

While a lot of people think that a checkbook control IRA eliminates the IRA custodian, that is not the case.  The role of the IRA is minimized, but the custodian is still necessary for the administration of your tax-sheltered IRA.

There are cases where it may make sense to change the IRA custodian for your IRA LLC or IRA trust entity.  Maybe the quality of service at your current institution has declined, or perhaps the fees have increased to be out of step with the industry.

It is possible to change your IRA custodian without needing to alter your plan investments.

The Role of the Custodian

All IRA plans must be held by a registered custodian.  This may be a bank, trust company, or brokerage firm.

The core services of all IRA custodians are the same.  They hold the account, document plan beneficiaries, perform annual reporting, process IRA layer transactions like contributions, distributions, and rollover, and lastly, process and record investments made with the IRA.

A self-directed custodian is unique when it comes to that last piece, the investments of the IRA.

Unlike mainstream financial institutions that only offer conventional investments like stocks, bonds, funds, and CD’s, self-directed custodians have the capacity to document more unique, non-traditional assets.  A self-directed IRA can be invested in real estate, startups, non-traded funds, and cryptocurrency.

Custodian vs Checkbook Control

In a plan without checkbook control, you are reliant on the custodian to process all transactions for your plan.  This involves submitting a request into the processing queue for the custodian to sign off on and fund the transaction.

For a portfolio with a few static assets that can work fine, but if you have a large portfolio or want to invest in transaction-intensive assets like real estate or tax liens, then relying on the custodian can become cumbersome and expensive.

To obtain checkbook control, you will have the IRA make one investment into a specially formed LLC or trust entity.  The custodian then sits in the background and handles account administration and reporting.  You can then use the LLC or trust to directly manage all plan investments.  You can act immediately when necessary and eliminate a variety of transaction based or asset-based fees that are typically charged by the custodian.  The custodian is only holding the one LLC/trust asset.

Safeguard Advisors specializes in creating and supporting these types of IRA-owned LLC and trust entities.

Keep the Checkbook, Change the Custodian

If the IRA custodian that holds your checkbook IRA is no longer your best option due to service level or cost, you can transfer the IRA-owned LLC or trust to another institution.

The investments within your LLC/trust are not impacted by this move.  It is kind of like moving a safe from one room to another without needing to open the safe.

Steps to Transfer to a New Custodian

Transferring your checkbook entity to a new custodian involves the following steps:

  • Setup an IRA with the new custodian.
  • Ensure your existing IRA is current on fees and entity valuation.
  • Amend your LLC/trust document to show the new custodian FBO your IRA as the LLC member or trust grantor/beneficiary.
  • Submit transfer in-kind paperwork to the new custodian.  They will forward the request to the resigning custodian.
  • Execute re-registration paperwork with the new custodian to complete the transfer process.

Timing and Transition

Depending on your level of engagement and the responsiveness of your resigning custodian the process can take anywhere from 4 to 8 weeks to complete.

You can continue to make and manage investments within your LLC or trust during this time.

When Does it Make Sense to Change?

It takes time and effort to switch, and there will be costs associated with the transfer process.  The costs will vary depending on your situation, but are typically between $300 and $700 for services to facilitate the change and account closure fees with the current custodian.

So, there needs to be a meaningful benefit to justify making a switch.

If your new custodian will save you a few hundred dollars a year in fees the payback can be easy to see.

If the service level of your current custodian is not what it once was, then you need to determine if higher quality service is worth the cost of a transfer.  In some cases it very well may be.

If you intend to continue operating your plan for many years, the cost of transition can be relatively insignificant compared to future cost savings or better customer service.

Sometimes a receiving custodian will offer a promotion to reduce the cost of transfer.

Safeguard Can Help

Safeguard Advisors uses Solera National Bank as our partner custodian.  Having been in this industry since 2005, we have seen a lot of different custodians.  Solera is a real winner.

Solera’s service is friendly and responsive, and their fees are very competitive.  Because Solera is both an IRA custodian and a bank, you have the opportunity to unify your financial services with one team.  That can simplify your operations, reduce transaction costs, and improve the quality of service you can expect.  You can also choose to keep an existing LLC bank account if you want to.

If you are an existing Safeguard Advisors client with a legacy custodian we worked with in the past and want to change, we can streamline many of the processes since we already have your information and plan documents.

If you are not a current client of Safeguard and want to move your checkbook IRA to Solera, we have a program designed for that purpose too.

In the last few years, we have helped hundreds of investors upgrade their checkbook IRA custodian to Solera Bank, save on fees, and improve the customer service for their plan.

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