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 or IRA Accounts or Self-Directed IRAs (SDIRA), this Article will provide best practices for setting up the investor's Account and the Investor's documents.
Definition of SDIRA: https://www.investopedia.com/terms/s/self-directed-ira.asp
IMPORTANT:
Requirements for filling out and executing retirement account documents may vary by Custodian. The Investor holds the relationship with the Custodian and is responsible to contact and engage with their 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 the Custodian to allow the investor’s funds to be sent to the investment.
Some Custodians will have the Sponsor set up the investment with their legal documents on the Custodians' portal so the entire signature process is controlled by the Custodian. This includes documents being sent to the Sponsor for countersignature.
Items Covered:
Information and Signatures Required from Three Parties
Retirement/IRA/SDIRA documents require information and signature from three parties:
Investor: 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. The investors typically fill out these fields:
Class of Investment
Amount of investment
“Titling” for their investment (see below for more information about “titling”)
Their initials/signature by the 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. Retirement/IRA/SDIRA’s will use the Tax ID provided by the Custodian for their investment account. You will add that Tax ID to 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 Retirement/IRA/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 Retirement/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 for a Retirement/IRA/SDIRA Investor:
The Investor fills out the required information in the documents and signs/initials by the Titling, the Amounts, etc.
The Custodian receives the documents from the Investor and fills out and signs the documents.
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 Retirement/IRA/SDIRA for their records and add a copy to the Investor’s account, or request a final copy from the Retirement/IRA/SDIRA custodian for your final records. Most will require the fully executed document in order to release funds to the sponsor.
Setting up the E-signature Document Template for Retirement/IRA/SDIRA Investors:
Use the steps in this document to set up your E-signature Document Template for Retirement/IRA/SDIRA Investors
Documents to send to the Retirement/IRA/SDIRA on behalf of the Investor:
When you send the blank or signed documents to the Custodian, you may need to include the following documents from the Sponsor:
The Articles of incorporation (also referred to as the Certificate of Good Standing, Formation document of the LLC)
Offering memorandum
Wire Transfer Instructions - that way the Custodian knows where to send the funds
NOTE: Please confirm with the Custodian before sending documents to ensure all necessary documents are sent.
Setting up the Investor Account & the Custodian Account in InvestNext
In InvestNext, Retirement Accounts have 2 parts:
Investing Account
After an Investor has funded their investment, we recommend you review the Investor’s Account to ensure it is set up correctly.
Custodians Account
NOTE: This video will show you how an investor will set up their Investor Account while completing their Commitment:
Use the steps below to create a Custodian Account that does not currently exist on the platform. These steps will also show you how to associate an Investor's Investing Account with their Custodian's 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 in the Accounts section of the portal.
STEP 2: Associate the Custodian Account to the Investing Account:
Use the steps in this article to associate a Custodian Account to an Investing Account: Associate an IRA/SDIRA 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:
ADDITIONAL RESOURCES: