On the form 302 from AFCU, there is a box to check trustee or custodian under part 7..."make payable to Andrews as trustee or custodian." Andrews said to check custodian. This is my first time doing a trustee to trustee transfer and I'm nervous and don't want to make a mistake. Is custodian considered the same as trustee as far as the IRS is concerned? Thanks for your help.
Answers
That being said, the advice from Andrews is correct - they are acting as a custodian. An IRA custodian is usually a financial institution, such as a bank or a brokerage, entrusted with the responsibility of safeguarding the assets of a client's IRA. According to the rules set by the IRS, an IRA custodian must be an approved financial institution.The IRA custodian executes transactions on behalf of the client, keeps all necessary and appropriate records of all actions undertaken in the custodial capacity, and files any reports, such as statements and tax notices, required either by the custodial agreement or the law.
There is some confusion regarding the difference between an IRA custodian and an IRA trustee. While many people use the two terms interchangeably, the trustee is in a position to offer additional financial options to anyone who wishes to open an IRA. For example, a trustee has the ability to assume the full management of investing the funds within the IRAs managed, and offer a wider range of financial advise to account holders. An IRA custodian is restricted from offering these additional services and support.
