> Not 100% sure but I believe this is one of the reasons most > brokers require funding from custodian accounts. If you have a self-directed ERISA plan you must open a trust account for the plan assets. Personal and plan assets are totally segregated by this mechanism. The ERISA plan even has its own tax ID in many cases. I have never known a broker who requires a third-party custodian or trustee to get involved in opening such a trust account, it's a completely standard thing to do. Tom
I trade futures in an IRA at MF Global. I opened the account at "Millenium Trust Company" who serves as the Administrator. As I recall there were two or perhaps three companies that offered this service, I called each of them on the phone and asked questions. For some reason (can't remember), I picked Millennium and not the others. The way it worked then (about 5 yrs ago), I had to open an account at Millennium and then perform one of those arms-length-transfers from my prior IRA into this new IRA, according to Uncle Sam's rules about transferring IRA money. Then I had to open a futures account at MF Global (which was called "Man Futures" at the time). Finally I had to send Millennium written instructions to transfer the money to MF Global. After these setup annoyances, it's been just a plain old futures trading account thereafter. I place the trades, I get the statements (and access to their eMidas and MTrade websites), I manage the cash and T-Bills and FX balances for non-USD monies like profit/loss/margin on EUR denominated futures positions. Millennium Trust doesn't do squatt and they don't get in the way and I never hear from them except once a year, when they inform me they have deducted their annual fee (something like $100 or $200) to be the Administrator. Whether it still works this way for new accounts, I don't know. Visit Millennium Trust's website ( http://www.mtrustcompany.com/ ), read their blurb to figure out what are the key words, then Google search on those key words to find their competitors. Call several of them and ask lots of questions. It isn't brain surgery.
I don't trade futures in my IRA. Frankly, I think it's a lousy idea. First, it's speculative, and in fact, most people lose at futures trading. If you do lose, your loses are not deductible obviously in an IRA. Next though, if you turn out to be a profitable futures trader, the tax treatment outside an IRA is a preferential treatment, in that 60% of your gain is treated as a long term capital gain. On the other hand, if you had the profit inside an IRA, you defer the tax until you distribute, at which time it is taxed at ordinary income rates. This looks to me like shooting yourself in the foot. Further, to me there would be a question about Unrelated Business Income Tax if you were trading futures actively in an IRA. I'm not a CPA or an attorney, but if you were for instance daytrading index futures, I think that activity "could" be construed at a business by the IRS, meaning that any income would be taxed, and taxed at very unfavorable rates at that. At a minimum, I certainly would want to run my plans by someone who is an expert in this area to get an opinion. Finally, you seem to have answered at least one question. If IB does not require the personal guarantee, open the account there. But again, due to the preferential treatment on futures to begin with, I question the wisdom of it. OldTrader
It may have to do with account size (mine is not small), credit rating, trading experience, having other accounts at MFG (which I had), having accounts at other brokers in the name of the Trust as references (which I had) etc. I doubt it has to do with who you deal with at MFG. All brokers send all applications to the compliance department for evaluation and they decide what is needed. It simply never came up in my case and I would not want to draw any attention to the issue so I would rather not pass on any contacts etc.
comintel: thanks, I understand. MGJ: I have spoken to Millenium Trust many times about this. The way they dealt with the problem before I called them was they allowed their clients to sign the personal guaranty, then they had MFG sign a second document that said the first document was not binding. Pretty ridiculous, and according to the ERISA experts I consulted it also does not undo the prohibited transaction created by the first document in the eyes of the IRS. After I pointed this out to them they sat on their hands for a week, then got back to me and told me not to sign the guaranty, and that they were looking into a revision of how they open futures accounts. I never heard back from them after that. In any case, this doesn't help with my ERISA plan, for which I am the trustee/custodian. I can't rely on a third party to negotiate this away for me, I have to do it myself. OldTrader: I am hiring CTAs to trade my account. These accounts must be opened at MFG so IB is not an option unfortunately. The CTAs do not day trade, so UBTI is not an issue. Thanks everyone for your input. Tom
I concur as long as you need the account for retirement. However some with IRA's don't actually need those accounts for retirement. In that instance trading futures in a Roth IRA would be ideal if the trading was profitable (assuming it's legal) since profits would be tax free. Losses however would not be deductible!
They are by far the biggest. Also, as of a few years ago, the other I talked to held back almost half of your money. Millennium only held $500.