Checkbook Control Custodian: What to Ask Before You Choose One
Start with the question that eliminates most of the field: will you permit your IRA account holders to establish a checkbook IRA, sometimes called an IRA LLC, where the self directed IRA owns an LLC and the account holder operates the LLC bank account to make investments? Not every self directed custodian will. Ask it in the first minute, because a no makes every other question irrelevant.
After that, the differences that matter are narrower than most people expect. Three things separate one custodian from another, and price is only one of them.
There is also a timing point worth understanding before you start calling. In a checkbook structure, the custodian is in your path at two moments and then largely steps back. They hold the IRA and move the money into your LLC at the beginning. They collect a valuation once a year. In between, when you are writing an offer or paying a contractor, you are signing and wiring from the LLC account yourself.
That makes the choice front loaded. You will feel a slow custodian intensely for about three weeks and then rarely, which is exactly why people underweight the decision and then regret it.
The three things that actually differ
Custodians in this space perform roughly the same function: they hold the account, keep the records, and report to the IRS. The service is more standardized than the marketing suggests. What varies is execution.
How fast you can get a competent person on the phone. This sounds soft. It is not. You will have questions with yes or no answers, and the difference between a two minute call and twenty minutes on hold, repeated across a setup, is the difference between a smooth process and a frustrating one. It also predicts what happens when something goes wrong later.
Price, for identical work. Annual fees for the same recordkeeping and reporting run roughly $200 to $300 at some custodians and $500 to $600 at others. That is a real spread for a service with very little variation in it, and it is only the starting point. How the fee is structured matters more than where it starts.
Whether the stated processing window is real. Most custodians publish a turnaround window, meaning how long it takes them to process a new request such as a transfer in of your funds or the initiation of an investment. Two to three business days is common. The question is whether day four arrives with the work done. This is the hardest thing to verify in advance and the one that causes the most damage when it fails.
The fee question, and why the usual version misses
Most people ask what the annual fee is, get a number, and stop. That is the wrong question, because the number you are quoted may not be the number you pay in year five.
There are three ways custodians price this, and they behave very differently over time.
Flat. A fixed annual fee. It does not move because your property appreciated or because you bought another one.
By the value of the assets. The fee rises as the account grows. Nothing changes except the appraisal, and the bill goes up. At some custodians this reaches $2,000 a year.
By the number of assets. A charge per holding. One rental is inexpensive. Ten rentals inside one self directed IRA can run $1,500 a year.
Neither of the last two is automatically more expensive than a flat schedule on day one. That is what makes them easy to miss. The issue is that both climb, sometimes a long way from where they started, and neither climb reflects any additional work being done. The recordkeeping on a property worth $600,000 is the same recordkeeping it was at $300,000.
So ask it this way:
"Is the annual fee for the IRA based on the value of the assets in the account, on the number of assets in the account, or is it a flat fee plus transaction fees?"
Then ask for the fee schedule in writing.
For reference, the three custodians we most commonly recommend are UDirect, Digital Trust, and Advanta, and all three use flat schedules. A typical account runs around $50 to open and about $300 a year.
To be clear about what that recommendation is and is not: we have no financial stake in which custodian you choose, and you are free to use anyone you like. You simply need someone serving as custodian. Those three are the ones that consistently pass the same tests this article is asking you to run. The fees are reasonable and predictable, a knowledgeable person answers the phone, and they do what they said they would do in the window they said they would do it.
The timeline questions
Two questions, and you want the answers in writing rather than as a verbal reassurance.
"What are your standard processing times for a transfer-in request?"
"What are your standard processing times for executing an investment?"
The first one matters most, because moving your money out of your existing retirement account is nearly always the slowest part of setting this up. The custodian receiving your funds has to send the transfer request to the institution currently holding them, sometimes called the resigning custodian. Your new custodian controls only their own step, but that step gates everything after it.
Here is what going wrong looks like.
We submitted a transfer request to a custodian on a client's behalf, with a stated turnaround of about 48 hours to get it out the door to the resigning institution, meaning faxed over to the client's current IRA provider. Five business days later, a full Monday to Monday, we called to check on it. The form had never been sent. It had fallen through the cracks. In another instance it ran longer than that.
Nothing about that was complicated or unusual. It was simply not done, and the client absorbed the delay. When you are trying to have funds ready before you write an offer, a week disappearing for no reason is expensive.
You cannot fully vet this in advance. What you can do is get the stated window in writing, which gives you a baseline to hold them to, and then actually follow up on the day it comes due rather than assuming it happened. Ask your provider, too. Anyone who places clients with custodians regularly knows which ones hit their published windows and which ones do not.
Get the titling right before you write anything
This is the one that costs people real money, and the correct answer depends on which structure you have.
If you have a checkbook IRA LLC, the name on the purchase contract is simply the name of the LLC. ABC Investments LLC. That is the buyer. It is also the name on escrow instructions, service agreements, the property manager agreement, and the utility accounts. The LLC is the entity doing business, so the LLC name goes everywhere.
If you do not have an LLC and your IRA is holding the property directly through the custodian, the buyer is the IRA itself, and its legal title looks like this:
Custodian Name FBO Client Name, Account #00000
The mistake to avoid is writing the contract in your personal name and planning to assign it to the LLC later. Do not do this. You are not the buyer, your IRA is, and starting the paper trail in your own name creates a compliance problem that is far easier to prevent than to unwind.
Ask your custodian for a sample titling line in writing before you make an offer. It takes one email and it removes the question entirely.
What you still need them for after closing
Once the LLC owns the property, your day to day contact drops sharply. Two obligations remain.
Annual valuation. The custodian has to report the value of what the IRA holds. Ask what they require and in what format. Some accept a broker price opinion, some want more. Knowing in advance means not scrambling for it later.
Clean records. Everything runs through the LLC bank account. Rent in, taxes and insurance and repairs out. Your property manager needs to understand that the LLC is the owner, not you. Keep leases, invoices and improvement records where you can produce them, because the valuation request will eventually come and you will want the file to already exist.
Worth restating, because it is the thing people forget: MyDirect IRA is not a custodian. A licensed self directed custodian holds your actual IRA account, and that separation is deliberate.
Make the call before you need it
The interview is also the test. When you call to ask these questions, notice how long you wait, whether the person who answers can actually answer, and whether they will put the fee schedule and the processing windows in writing. That experience is a preview of what you get when a closing date is at risk.
Run through it in this order: will you hold an IRA owned LLC, is your fee flat or tied to the value or number of assets, what are your published processing times, and what do you require for annual valuation. Four questions. Ten minutes.
If you would rather not start from a blank list, that is a reasonable place to use us. We have set up 400+ of these over 13+ years, and part of the job is knowing which custodians deliver what they advertise. A twenty minute call covers which accounts are funding the purchase and where you are buying, and those two answers narrow the custodian choice considerably.
If you are still working out whether the structure itself is right for you, start with how a checkbook IRA LLC works before choosing who will hold it.
Ted Erickson is the founder of MyDirect IRA. He has spent 13+ years in the self-directed retirement account industry and has established 400+ checkbook IRA structures for clients in all 50 states. He is a licensed California real estate salesperson and mortgage loan originator.
This information is for educational purposes only and should not be considered tax, legal, or investment advice. Consult your own tax or legal advisor before making any investment or plan-structure decisions.
