A special article from the CEO of Entrust, Hubert Bromma - the leader in self-directed retirement plans.

After the events of the last several weeks, a number of people have asked us about the safety of their self-directed IRAs. Is the Custodial Bank safe? Is the Depository Bank safe?

The answer is yes, of course. Bu this may be a simple answer to a complex question, so it is necessary to look at what “yes” really means.

First, all self-directed IRAs are just that—self-directed. This means you, our valued client, controls all investment decisions made with your Entrust self-directed IRA. You are the IRA owner and fiduciary to your own IRA. Your investment choices are clearly those you have directed us to make.

Second, the Custodial Bank is the custodian of your IRA. The assets of your IRA are held in segregated accounts for your benefit. That is why you see the vesting of your assets showing as FBO, or “For Benefit Of”. The bank holds these assets for you and you only. In the case of International Bank and Trust, it is a non-depository, non-lending bank. This means all of your un-invested funds are placed in federally insured depositories. Not just one depository, but many depositories. For example, FDIC insurance covers $250,000 per account in un-invested funds that each bank has. If you have $1,000,000 in un-invested cash, there would be at least four banks that your IRAs un-invested funds would be deposited in, and in the case of FDIC insurance, your un-invested funds would be fully insured. All other investments you make with your Entrust self-directed IRA are not insured by anyone.

The Custodial Bank may also be a depository of your un-invested cash. Because Entrust has special arrangements with such custodial banks, we also place un-invested funds into several federally insured certificates of deposit. This spreads the risk you may have for un-invested funds to many financial institutions, as noted in the previous paragraph.

As you can see, you have made the right choice to self-direct your IRA in your choice of investments. Those investments you have made are as safe as your investment decisions are. In all cases, your un-invested cash is safe. Only the collapse of entire governments could potentially change this fact.

For those who ask, what happens to our Entrust self-directed IRA if a Custodial Bank is in trouble? First, all Entrust related offices are required by law to be examined and audited in the exact same manner as our custodial banks, so you can be certain that your accounts are retained under regulatory scrutiny and subject to all the laws associated therewith. Each third party record keeper and administrator is audited and examined at least once each year. Second, what we have done for your benefit is something unique in the self-directed IRA industry: should a custodial bank be in trouble, that bank would transfer the custodial relationship to one of our other custodial banks. Your accounts would continue to be serviced and protected as always. This adds safety to your self-directed IRA in a way no other custodian does.

We, the Entrust Group and all of the Entrust companies are in the self-directed IRA business. You have entrusted us with the record keeping and administration of your self directed IRA. We are here to protect and service you IRAs and ensure that your IRAs will be there for the present and future.

To contact the author, visit www.theentrustgroup.com.

This entry was posted on Monday, March 24th, 2008 at 6:00 am and is filed under Self-Directed IRA. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.