Individual Retirement Accounts (IRAs) provide tax-advantaged savings mechanisms, enabling individuals in the U.S. to save for retirement with tax advantages. Given these accounts’ significant tax implications and significant tax advantages, it’s crucial that we understand who controls them and makes decisions – in particular who serves as fiduciaries if applicable? When discussing an IRA it brings forth important questions; specifically: Can a fiduciary control an IRA?
What Is A Fiduciary?
A fiduciary is defined as any individual or institution who holds the responsibility to act in the best interest of another party when dealing with financial matters, usually such as trusts. They should prioritize serving their client over themselves while exercising discretion when taking actions; examples include trustees, financial advisors and estate executors.
Fiduciaries and IRAs
By definition every IRA must have an administrative agent who acts on the account’s activity while fulfilling any financial institution’s fiduciary obligations to their owners and any transactions, which they perform accordingly. This role also ensures IRS rules compliance as they report activity reports and handle transactions as directed by their owners or oversee transactions as required by them.
Financial Advisors
When working with an advisor to manage an IRA investment account, their fiduciary role becomes paramount. The Department of Labor’s fiduciary rule, revised several times throughout 2010, sought to ensure financial professionals gave advice in line with clients’ best interest; specifically when managing retirement accounts. If an advisor meets this criterion and becomes fiduciaries they are obliged to act solely in line with client financial objectives and risk tolerance levels and act in their best interest in every instance they advise their client regarding.
Power of Attorney (POA)
IRA owners may grant another individual power of attorney (POA), giving that person authority over their IRA account and decisions related to it. A person granted POA acts effectively as fiduciary and is expected to act in their best interests when made decisions for your account.
Limitations of Fiduciary Control
Even if a fiduciary assists with administratively overseeing an IRA, ultimate control lies with its account owner and not with them; any fiduciaries involved cannot make decisions without prior direction from or consent of account holder; an exception exists where this authority has been explicitly given, such as when someone executes Power of Attorney documents (POAs).
Conclusion
Fiduciaries play an integral part in managing individual retirement accounts (IRAs). Although fiduciaries provide guidance, advice, or administrative oversight of these accounts, they do not exercise ultimate control. Decision-making power lies with each account owner unless specific legal provisions such as power of attorney are put in place; as always it’s wise to consult professionals when making these important decisions about retirement planning or fiduciary relationships.
Source: RareMetalBlog.com
