SDIRA Tip: Consider the Impact of Capita ...

SDIRA Tip: Consider the Impact of Capital Calls on Fees

Jun 24, 2021

When selecting a custodian, many SDIRA investors overlook the potential impact that capital calls may have on custodial fees.  Although capital calls do not increase the number of assets held in the IRA account, there are often transaction fees associated with fulfilling each call.

In the majority of cases (depending on each custodian’s policies), it should not be necessary for the IRA account holder to complete subscription documents repeatedly for each capital call to be funded.  However, if the capital call requires the subscriber to sign an acknowledgment or side-agreement, the signature should be provided by the custodian and not the IRA account holder.

Given that document review is arguably simpler for the custodian, one might expect that the transaction fee for executing a capital call would be less than for a new investment.  This is indeed the case for some custodians, but the majority charge the same to process a capital call as they do for a new investment.

Thus, meeting a capital call can result in a transaction fee anywhere between $0 and $100 or more per call.

If you are contemplating an investment with your SDIRA that is subject to capital calls, you might want to ask your custodian about the fees and document requirements before committing to the investment.

Of course, none of this applies to those who have established a single-member LLC (i.e., "checkbook IRA") to make IRA investments.  However, these structures have other factors that should be considered before setting them up.

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