Note: This article has been updated to reflect recent changes in the software. Please review the new information to stay up to date with the latest features and improvements.
If you have investors using their Retirement Accounts or Self-Directed IRAs (SDIRA), this Article will provide some basic information about how to set up the Account and the Investor's documents.
Definition of SDIRA: https://www.investopedia.com/terms/s/self-directed-ira.asp
IMPORTANT:
Filling out and executing SDIRA documents can vary by SDIRA Custodian. The Investor holds the relationship with the SDIRA and is responsible to contact and engage with the SDIRA Custodian. Sometimes, the Sponsor may need to engage with the Custodian on behalf of the Investor to ensure the documents are filled out correctly and any additional documents for the investment are provided to allow the investor’s fund to be sent to the investment.
Some SDIRA custodians have the Sponsor set up the investment with documents on the Custodians' portal so the entire signature process is controlled by the SDIRA Custodian. This includes documents being sent to the Sponsor for countersignature.
Information and Signatures Required from Three Parties
IRA/SDIRA documents will need information and signature from three parties:
Investor: SDIRA documents must be signed/initialed by the investor to indicate that they are acquiring the number of shares and investing the funds in this investment. They typically fill out these fields:
Class of Investment
Amount of investment
“Titling” for their investment
Their initials/signature by the titling (see below for more information about “titling”)
Custodian: The Custodian is legally investing on behalf of the investor. The Custodian will fill out and sign the documents as if they are legally the entity investing in the investment. IRA/SDIRA’s will use the Tax ID of the Custodian and you will use that Tax ID when setting up the Investor’s Account in InvestNext.
Sponsor: The Sponsor countersigns the documents to fully execute them.
NOTE: Depending on the Custodian, the Sponsor's countersignature may be required BEFORE the documents are sent to the Custodian.
Titling for SDIRA Documents
“Titling” is the format required for the name of the Investor’s Account. Titling can be different for each SDIRA and sometimes even within an SDIRA depending on who you are working with. It is best to encourage the investor to call their SDIRA to confirm titling.
This is the typical titling:
[SDIRA Name] FBO [Investor Name] IRA # [investor account number]
IRA Trust FBO John Smith IRA # 123456
Note: FBO is “For the Benefit Of”
SUGGESTION: When setting up the e-signature template for the IRA/SDIRA documents, add placeholder text in the titling field so the investor has a framework for how to title their documents:
[SDIRA Name] FBO [Investor Name] IRA # [investor account number]
Typical Document Flow with an SDIRA Investor:
The Investor fills out the required information in the documents and signs/initials by the Titling, the Amounts, etc.
The Custodian fills out the documents and then signs on the Custodian’s behalf.
After signing the documents, the Custodian sends the documents to the Sponsor (through the Investor or the Custodian’s system) for countersignature. NOTE: Depending on the Custodian, the Sponsor's countersignature may be required BEFORE the documents are sent to the Custodian.
Remember to send a copy of the final countersigned documents to the SDIRA for their records and add a copy to the Investor’s account, or request a final copy from the SDIRA custodian for your final records.
Documents to Send to IRA/SDIRA on behalf of the Investor for the Investment
When you send the blank or signed documents to the SDIRA, you will need to include the following documents:
NOTE: Please confirm with the Custodian before sending documents to ensure all needed documents are sent.
The Articles of incorporation (also referred to as the Certificate of Good Standing, Formation document of the LLC.)
Offering memorandum
Setting up the Investor Account in InvestNext:
After an Investor has funded their investment, we recommend you review the Investor’s Account to ensure it is set up correctly.
In InvestNext, Retirement Accounts have 2 parts:
Investing Account
Custodians Account
STEP 1: Set Up the Custodians Account:
Use this article to set up a new Custodian Account: https://support.investnext.com/en/articles/4838929-create-a-custodian
NOTE: You can skip this step if the Custodian Account is already set up under the Custodians tab.
STEP 2: Associate the Custodian Account to the Investing Account:
Use this article to associate a Custodian Account to an Investing Account: https://support.investnext.com/en/articles/4680782-associate-a-custodian-to-an-investing-account
STEP 3: Review the Investor Account
When correctly set up in InvestNext, an Investor’s Account will have this information:
