I have an SDIRA. My Custodian is telling me that I can pay their fees with funds from outside my IRA. Is that right? I know there are other fees and expenses that I have to pay with funds from inside my IRA. So now I'm confused as to when do I need to use funds from inside my IRA and when can I use funds from outside of it? Can someone explain this to me?
With fees for the administration of an IRA, you are allowed to pay personally or from the IRA.
You may never use personal funds for any of the investment activities of the plan. That would constitute self-dealing and risk of a prohibited transaction.
Hi Dennis! Brian is correct, but I wanted to jump in to explain this a little further....
Most often, SDIRA custodians will allow you to pay administrative fees via credit card (you'll usually have to fill out a credit card authorization form), or they may give you the option to pay your fees using the uninvested cash balance in your account. In some cases, they may also offer an invoice option, if you don't want to keep a credit card on file.
The big difference here is administrative cost vs. investment cost in that the cost of your custodial services is separate from the cost of your investment. If you have ANY expense that relates to one of the investments held by your SDIRA, you'll only want to cover those expenses using your IRA funds and you'll have to direct your custodian to facilitate the payment from your IRA. Directing your custodian to facilitate the payment of those expenses from your IRA is known as a "transaction" and is part of the service your custodian should provide. Those "transactions" typically come with transaction fees, which are typically outlined in the fee scheduled you signed off on when opening the account.
Depending on the custodian, those fees can be paid via one of the methods listed above.
Thank you Brian Eastman & Jaime Raskulinecz. That does help clarify it for me.