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What Is an IRA Trustee?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 20 July 2014
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    2003-2014
    Conjecture Corporation
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An IRA trustee is an entity that oversees the administration of an Individual Retirement Account, a form of retirement plan that is available in the United States. Trustees are charged with the responsibility of keeping the plan in compliance with regulations issued by the Internal Revenue Service, or IRS. In order to function as a trustee, the entity must be licensed by the IRS and maintain the standards put forth by that agency.

Several different types of business entities may function as an IRA trustee. Banks often offer retirement plans of this type and handle the administration of the plans entrusted to their care. Credit unions and savings & loan associations can also function as trustees, following the same rules and regulations that are required of banks. It is also possible for a brokerage firm to be licensed by the Internal Revenue Service and offer IRAs to their customers.

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As part of the administration of the accounts, the IRA trustee must be capable of processing any purchase requests submitted by account holders. Federal regulations also require that the trustee provide periodic reports to the account holders that contain an type of activity that affects the balance of the IRA. This would include any contributions made to the account in the period covered by the report, as well as any disbursement that may have occurred. If any deductions are made for tax purposes, they are also noted. All reports include data such as the date each transaction occurred, the type of transaction, the amount of the transaction, and the adjusted balance after the transaction is applied.

There is some confusion regarding the difference between an IRA trustee and an IRA custodian. While many people use the two terms interchangeably, the trustee is in a position to offer additional financial options to anyone who wishes to open an IRA. For example, a trustee has the ability to assume the full management of investing the funds within the IRAs managed, and offer a wider range of financial advise to account holders. An IRA custodian is restricted from offering these additional services and support.

When opening a new Individual Retirement Account, investigating the IRA trustee that will be involved with the account is a good idea. This means reading consumer reviews regarding the trustee, contacting agencies like the Better Business Bureau to see what type of complaints have been logged against the trustee, and how those complaints are resolved. Since it is possible to set up this type of account online, consumers do not always have the option of visiting the trustee at a brick and mortar location and thus obtaining a personal feel for the way the trustee does business. For this reason, many people prefer to work with trustees that do have physical locations, and later use online methods to monitor the account activity.

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