When setting up a Self-Directed IRA, possessing a clear grasp of the process can make it easier and more efficient. However, before you can learn how to open a Self-Directed IRA, you need to figure out which kind you wish to use. The two most common types are a Self-Directed IRA and a Self-Directed IRA LLC with checkbook control. No matter which you prefer, we can make it easy for you to set up your own Self-Directed IRA account.

Setting up a Self-Directed IRA is a simple three-step process:

Let's look at each of these steps in more detail so you can have a better understanding of how to set up your own Self-Directed IRA. Please keep in mind that Madison Trust will guide you through every step of setting up an account. The details may seem complicated on paper, but it's mostly just filling out forms. The entire process of setting up a Self-Directed IRA is usually completed within two or three weeks.

Step 1: Create an Account With a Self-Directed IRA Custodian
The first step in opening a Self-Directed IRA is to contact a Self-Directed IRA custodian and complete an account application. The application will ask basic questions like "What kind of IRA are you opening?" and "How are you funding your new IRA?"

Step 2: Transfer Funds Into the Self-Directed IRA
There are two ways to fund a new Self-Directed IRA: You can make a new contribution directly, or you can roll over funds from an existing retirement account. If you are transferring funds from an existing IRA, you will complete a transfer authorization form instructing the Self-Directed IRA custodian to initiate the transfer. The form will then be sent to the current IRA custodian for processing. The current custodian will then transfer your IRA funds, and they will be deposited in the self-directed account.

If you are rolling over funds from a former employer's plan, like a 401(k) or 403(b), you will contact your employer or plan administrator to request rollover paperwork. They will then issue a check or wire to the new Self-Directed IRA account. Before opening a Self-Directed IRA, it's important to research the rules that apply to your current 401(k). Many employers lock their employees into a specific 401(k) plan for the duration of their employment. That means that while you are still working for that company, you may not be able to roll over your funds into a Self-Directed IRA. Of course, if you no longer work for the company, you are free to roll over your 401(k) funds at will.

Step 3: Instruct the IRA Custodian to Invest Funds Into the Asset of Your Choice
Complete an investment authorization form instructing your Self-Directed IRA custodian to invest your IRA funds directly into your chosen asset. This form will specify the investment amount and delivery instructions.

Self-Directed IRA custodians serve as passive, non-discretionary custodians and therefore cannot offer any investment or legal advice. It is recommended that investors perform due diligence before placing investments to ensure suitability. Self-Directed IRA custodians like Madison Trust Company are happy to help with any questions or concerns about the investment process but cannot tell you what to invest in with your money.

A Self-Directed IRA LLC starts with opening a Self-Directed IRA and then establishing an LLC which upgrades you to the power of checkbook control to the process. Here's how to set up a Self-Directed IRA LLC:

Open an Account With a Self-Directed IRA Custodian: Research Self-Directed IRA custodians and then open an account with the one that fits your needs.

Fund your Self-Directed IRA: Fund your new Self-Directed IRA by rolling over or transferring funds from an existing retirement account. You can also fund it with an initial contribution.

Set Up an LLC: Your Self-Directed IRA LLC facilitator will establish an LLC for your account. This is a specialized LLC that is specifically designed to conform to all relevant ERISA regulations. Due to the complex structuring necessary for this LLC, you will usually not be able to use a pre-existing LLC that you may already own.

Invest in Your LLC: You will instruct the custodian to invest your retirement funds in the new LLC. This is akin to telling your custodian that you want to invest in a specific stock or company. It's just that in this case, the company you are investing in is your LLC.


Open a Checking Account: Go to the bank of your choice and open a checking account in the name of your LLC. This will give your IRA the ability to invest in any asset without having to go through the custodian. Just write a check from this account and the purchased asset automatically belongs to your IRA.

The entire process of setting up a Self-Directed IRA typically takes two to three weeks from start to finish. For those who need quicker turnaround time, expedited service is available. Visit Madison Trust’s processing timeframes page for more detail.

Madison's initial setup fee is $50. The annual fee uses a flat-rate pricing model. This means that Madison Trust's custodial fee is fixed at one price regardless of the amount in your IRA. Compare our pricing to other custodians and you'll see that Madison Trust is a great value!

Ready to set up your own Self-Directed IRA? Contact us today to get started.

Reach out to our team, and we’ll give answer any questions you may have.