YOU CAN DRS YOUR IRA!! All you need is an EIN form to become the custodian of your own IRA. Details in comments!
Posted Oct 16, 2021, 6:09 AM UTC
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Also, here's the more direct link for the procedure to become a custodian - it's not just "get an EIN".
https://www.irs.gov/retirement-plans/application-procedures-for-nonbank-trustees-and-custodians
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I will upvote every one of your comments on this thread because they are helpful to the discussion, and I will comment on every one because I hope that will increase visibility and help other Apes to make better decisions for themselves.
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No no no! You can do this, but it does not preserve the tax status. All IRAs must be held by custodians. The IRS does not allow you to be your own custodian. Talk with a CPA before you do this.
https://www.irs.gov/retirement-plans/approved-nonbank-trustees-and-custodians
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No no no! Untrue, that link you sent says nothing about IRA’s not allowing you to be your custodian. On the contrary it says non bank entities may be the custodian of your account.
“i) The trustee must be a bank (as defined in section 408(n) and the regulations thereunder) or another person who demonstrates, in the manner described in paragraph (e) of this section, to the satisfaction of the Commissioner, that the manner in which the trust will be administered will be consistent with the requirements of section 408 and this section.”
https://www.law.cornell.edu/cfr/text/26/1.408-2
You can definitely be your own custodian. Theres just a process to be approved like I’ve already said.
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Getting approved for an EIN totally different from the approval that they're talking about here. An EIN is what you request whenever you start a business or LLC or trust or partnership - it's just like a SSN, but for an entity instead of a person. What this is describing does require an EIN, but also about a hundred other things. Only a few hundred businesses nationwide have even applied and been approved as nonbank custodians (hint, nonbank custodian would be what you're trying to be).
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This is a good point - and I think it’s saying that while getting an EIN is a NECESSARY step in the process of becoming a “nonbank custodian” it is A) the easiest step, and B) far from the only step.
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Ok, did you read paragraph E of section 408? It is exactly what is described in my other comment - you must demonstrate, to the satisfaction of the Commissioner, that you meet these requirements, laid out again here:
https://www.irs.gov/retirement-plans/application-procedures-for-nonbank-trustees-and-custodians
This is not "just form a trust and get an EIN" - it is "submit a formal application to the IRS to meet the standards in paragraph E".
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Apparently I can't post it, because it's about 60,000 charachters long, and I'm not breaking it into 10 parts again. Anyway, that link above shows what you have to go through. Note that the "trustee" must have "diversity of ownership" - implying that it must be a corporation or LLC, becuase one person can't be diverse.
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Section (i) (A) "diverse ownership" is all I needed to see it can't be done this way. You need three parties or more for this to work... 🦍😥
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This gets an upvote because I have felt the pain of trying to help but having gotten thwarted by comment length limits and getting my hand slapped by AutoMods.
Your work is appreciated !
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Here's paragraph e:
(e)
(1) In general. The trustee of a trust described in paragraph (b) of this section may be a person other than a bank if the person demonstrates to the satisfaction of the Commissioner that the manner in which the person will administer trusts will be consistent with the requirements of section 408. The person must demonstrate by written application that the requirements of paragraph (e)(2) to (e)(6) of this section will be met. The written application must be sent to address prescribed by the Commissioner in revenue rulings, notices, and other guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2)(ii)(b) of this chapter). For procedural and administrative rules, see paragraph (e)(7) of this section.
(2) Fiduciary ability. The applicant must demonstrate in detail its ability to act within the accepted rules of fiduciary conduct. Such demonstration must include the following elements of proof:
(i) Continuity.
(A) The applicant must assure the uninterrupted performance of its fiduciary duties nonwithstanding the death or change of its owners. Thus, for example, there must be sufficient diversity in the ownership of the applicant to ensure that the death or change of its owners will not interrupt the conduct of its business. Therefore, the applicant cannot be an individual.
(B) Sufficient diversity in the ownership of an incorporated applicant is demonstrated in the following circumstances:
(1) Individuals each of whom owns more than 20 percent of the voting stock in the applicant own, in the aggregate, no more than 50 percent of such stock;
(2) The applicant has issued securities registered under section 12 (b) of the Securities Exchange Act of 1934 (15 U.S.C. 78l (b)) or required to be registered under section 12(g) (1) of that Act (15 U.S.C. 78l (g)(1)); or
(3) The applicant has a parent corporation within the meaning of section 1563 (a) (1) that has issued securities registered under section 12 (b) of the Securities Exchange Act of 1934 (15 U.S.C. 78l (b)) or required to be registered under Section 12 (g) (1) of that Act (15 U.S.C. 78l (g)(1)).
(C) Sufficient diversity in the ownership of an applicant that is a partnership means that -
(1) Individuals each of whom owns more than 20 percent of the profits interest in the partnership own, in the aggregate, no more than 50 percent of such profits interest, and
(2) Individuals each of whom owns more than 20 percent of the capital interest in the partnership own, in the aggregate, no more than 50 percent of such capital interest.
(D) For purposes of this subdivision, the ownership of stock and of capital and profits interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 1563 (e) and (f) (2). For this purpose, the rules for constructive ownership of stock provided in section 1563(e) and (f) (2) shall apply to a capital or profits interest in a partnership as if it were a stock interest.
(ii) Established location. The applicant must have an established place of business in the United States where it is accessible during every business day.
(iii) Fiduciary experience. The applicant must have fiduciary experience or expertise sufficient to ensure that it will be able to perform its fiduciary duties. Evidence of fiduciary experience must include proof that a significant part of the business of the applicant consists of exercising fiduciary powers similar to those it will exercise if its application is approved. Evidence of fiduciary expertise must include proof that the applicant employs personnel experienced in the administration of fiduciary powers similar to those the applicant will exercise if its application is approved.
(iv) Fiduciary responsibility. The applicant must assure compliance with the rules of fiduciary conduct set out in paragraph (e)(5) of this section.
(v) Financial responsibility. The applicant must exhibit a high degree of solvency commensurate with the obligations imposed by this paragraph. Among the factors to be taken into account are the applicant's net worth, its liquidity, and its ability to pay its debts as they come due.
(3) Capacity to account. The applicant must demonstrate in detail its experience and competence with respect to accounting for the interests of a large number of individuals (including calculating and allocating income earned and paying out distributions to payees). Examples of accounting for the interests of a large number of individuals include accounting for the interests of a large number of shareholders in a regulated investment company and accounting for the interests of a large number of variable annuity contract holders.
(4) Fitness to handle funds -
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(i) In general. The applicant must demonstrate in detail its experience and competence with respect to other activities normally associated with the handling of retirement funds.
(ii) Examples. Examples of activities normally associated with the handling of retirement funds include:
(A) To Receive, issue receipts for, and safely keep securities;
(B) To collect income;
(C) To execute such ownership certificates, to keep such records, make such returns, and render such statements as are required for Federal tax purposes;
(D) To give proper notification regarding all collections;
(E) To collect matured or called principal and properly report all such collections;
(F) To exchange temporary for definitive securities;
(G) To give proper notification of calls, subscription rights, defaults in principal or interest, and the formation of protective committees;
(H) To buy, sell, receive, or deliver securities on specific directions.
(5) Rules of fiduciary conduct. The applicant must demonstrate that under applicable regulatory requirements, corporate or other governing instruments, or its established operating procedures:
(i) Administration of fiduciary powers. (A)(1) The owners or directors of the applicant will be responsible for the proper exercise of fiduciary powers by the applicant. Thus, all matters pertinent thereto, including the determination of policies, the investment and disposition of property held in a fiduciary capacity, and the direction and review of the actions of all employees utilized by the applicant in the exercise of its fiduciary powers, will be the responsibility of the owners or directors. In discharging this responsibility, the owners or directors may assign to designated employees, by action duly recorded, the administration of such of the applicant's fiduciary powers as may be proper to assign.
(2) A written record will be made of the acceptance and of the relinquishment or closing out of all fiduciary accounts, and of the assets held for each account.
(3) If the applicant has the authority or the responsibility to render any investment advice with regard to the assets held in or for each fiduciary account, the advisability of retaining or disposing of the assets will be determined at least once during each period of 12 months.
(B) All employees taking part in the performance of the applicant's fiduciary duties will be adequately bonded. Nothing in this subdivision (i)(B) shall require any person to be bonded in contravention of section 412(d) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1112(d)).
(C) The applicant will employ or retain legal counsel who will be readily available to pass upon fiduciary matters and to advise the applicant.
(D) In order to segregate the performance of its fiduciary duties from other business activities, the applicant will maintain a separate trust division under the immediate supervision of an individual designated for that purpose. The trust division may utilize the personnel and facilities of other divisions of the applicant, and other divisions of the applicant may utilize the personnel and facilities of the trust division, as long as the separate identity of the trust division is preserved.
(ii) Adequacy of net worth -
(A) Initial net worth requirement. In the case of applications received after January 5, 1995, no initial application will be accepted by the Commissioner unless the applicant has a net worth of not less than $250,000 (determined as of the end of the most recent taxable year). Thereafter, the applicant must satisfy the adequacy of net worth requirements of paragraph (e)(5)(ii)(B) and (C) of this section.
(B) No fiduciary account will be accepted by the applicant unless the applicant's net worth (determined as of the end of the most recent taxable year) exceeds the greater of -
(1) $100,000, or
(2) Four percent (or, in the case of a passive trustee described in paragraph (e)(6)(i)(A) of this section, two percent) of the value of all of the assets held by the applicant in fiduciary accounts (determined as of the most recent valuation date).
(C) The applicant will take whatever lawful steps are necessary (including the relinquishment of
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Thank you for the link - one more of those things that if you had asked me on January 1st of 2021 this year what government documents I’d be reading that I never would have guessed this would be one of them…
And though it leads me to a conclusion about which I’m not happy (that becoming a nonbank custodian of my own IRA is not going to happen because even though I might easily get a an EIN as OP has claimed, all of the other IRS requirements are unattainable), I’m glad that I’ve now read the original source documents as part of my own decision process.
Thanks again…
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It’s true that it doesn’t say that the IRS doc doesn’t say that we can’t be our own “nonbank custodians” of our own IRAs, but it does that that we do have to do a whole lot of things harder than getting an EIN
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So why did you originally send a link to that IRS page as if it was proof of you not being able to be your own IRA custodian? Kinda weird man…
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This is a good link, so you get my upvote; however it doesn’t seem to say anything about not preserving the tax status as you have claimed.
Can you explain why you don’t think it preserves the tax status ?
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Updoot for visibility.
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Wouldn't it be easier to find someone who is a tax accountant or similar role or already a custodian and just tell them I have 100 friends that would like to DRS their IRA's, can you offer them a sort of pre-packaged DRS custodian service for $50? I'd rather use such a service than take on all the regulatory compliance burden and risk of being my own custodian
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Wow - this is something I hadn’t thought of !
As others here have said there’s no way we’d meet all of the IRS requirements to become a “nonbank custodian” ourselves and like you’ve said - even if I could I’m pretty sure I wouldn’t want to !
But your question of whether this is a potential business opportunity for an entity that COULD fulfill all these requirements - THAT’S a well-posed question !
Since Apes have learned that there are companies out there that, although we may have never dealt with before (Fidelity) or may even never heard of before (ComputerShare), they could be worth doing a little bit of homework and overcoming phone anxiety for because at the end of the day these other companies help us complete a side quest - I mean solve a problem - along the journey towards MOASS…
I think I said all of that to say this: I think your question is worthy of a post in and of itself - would you consider writing it up ?
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Sure, I'll post it tomorrow, I'm about to get to bed!
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FYI - saw this this post today on the topic !
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Thanks! I'm glad someone found a more official / pre-existing way
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I spent about 15 minutes on IRS.gov signing up for an EIN. As soon as I submitted the application I received the EIN and confirmation letter. This was extremely easy. Don't worry about dealing with the IRS. You will be communicating with their automated system.
WARNING: do not sign up through an internet website that is not IRS.gov this is a free service. Do not pay someone to do this for you. And especially, do not give any personal information to anyone or any website that is charging for a free service.
For those of you who need/want to transfer your IRA shares to Computershare, an EIN is required and easy to obtain.
You will need Adobe Reader to download the confirmation letter. If it is not already on your computer/phone, you will need to download it before you begin the application.
For the quickest application time, click on "sole proprietor" on the first and second pages of the application. The third page is only a confirmation, just click "continue". On the fourth page, click "banking purposes".
Edit: when you get to "form 720 excise tax", click "NO". This is a tax form for coal mining, aircraft fuel, gas guzzler vehicles, leaking underground storage tanks, etc.
Edit: The EIN is issued immediately when submitting the application. It will take two weeks for the beaurocrats to process the order. (This is very quick compared to transferring shares from TDA)
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Thanks for bringing this information to the community. We'll done 👏👏👏👏
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Comment for visibility
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We need more 👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀👀 on this to verify. XXX more can get DRS'd if true.
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I have found u/jaycrft ‘s comments and links in this thread to help me come to my own conclusion on the topic.
SPOILER: Although I think OP is right that getting an EIN could be very easy, the IRS has so many other requirements to become a “nonbank custodian” that this it’s not a real solution to the “I have GS shares in a retirement account and want to DRS them” problem…
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I would recommend editing the title of this post. It's misleading and could be harmful to others if they simply get an EIN, open a CS account with this EIN and transfer their IRAs to Computershare. This will most certainly result in the IRS deeming the transfer as a taxable event, leading to unwanted taxes and penalties.
A Self-Directed IRA through a custodian is the proper route for this, if one is so inclined.
Speak with a tax attorney, CPA, and SDIRA custodian prior to attempting IRA DRS -> Comuptershare.
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EIN DOG
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Maybe this information is going to be interesting for you u/13667
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This is the way
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Upd00t for you! For all to see
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YES! The retirement accounts are FOR SURE the next blow.
I'm seeing a TON of fear/panic being used to sway people away from even THINKING about these moves. That you need an "experienced" tax professional. Should "go slow and double think priorities". "Could be illegal..."
Like WTF?!? We already know this is a RIGGED CASINO.
Who cares about "preferential tax treatment" if a) we can't get our TENDIES b/c of brokerage fuckery, and b) the game stays so rigged our kids and grandkids will never have a chance.
We've figured out all their other bullshit. We can figure out a "tough tax decision" no fucking problem (aka legalese IRS reading, like we've been doing basically the whole time lol).
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Holy shit i didnt know you can do this, thanks ape
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I think this will become very important at some point!
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Big, if true!
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This is the way. Thank you for showing us how
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Before pulling shares out of an IRA or 401k, establish a self-directed IRA through competent financial and legal services.
A do-it-yourself approach may only succeed in creating a taxable event this year. Worst case scenario; it could be interpreted as tax evasion (illegal).
Get competent advice first.
I think you’ve hit the nail on the head of one of the two main concerns of Apes trying to get shares (or even funds) out of retirement accounts and DRSed in CS:
2. Does it create a taxable event ?
A lot of us Apes tend to be laser-focused on what we -think- is the number one priority:
…and this prioritization means that we often don’t fully consider the trade off between #1 and #2.
Your friendly advice to seek competent advice is well-placed.
And it’s a good reminder that having professionals involved in tax issues (and legal issues, etc.) post-MOASS is going to be a new but potentially VERY valuable thing for Apes for three main reasons:
A. They are less likely to make mistakes
B. If they do make mistakes, it is those professionals who are legally on the line for them and not the Ape who hired them
C. Because of A and B, in the long run it will likely cost Apes much less money (and heartache !)
Part of what makes this hard for so many of us Apes is the perception that we don’t yet have the “extra” money to spend on “extra” expenses such a tax advice, legal advice, or financial advice - and in fact in order to get into GME in the first place we’ve already cut back on other fronts (ramen, anyone ?).
This is obviously not competent advice from me in any form, just one Ape’s personal opinion on what looks like it’s a pattern.
Sorry that this ending up being so long, but this potential pattern is starting to make me concerned about some of the assumptions that I’ve made along the way. Maybe I need to chew on all of this some more and consider doing a DD post since if nothing else it may help Apes make some better decisions for themselves.