Difference Between IRA Trustee or Custodian

An IRA trustee can offer more financial options than an IRA custodian.

The two different entities that help manage an IRA are referred to as a "Custodian" or "Trustee." According to IRS Publication 590, both the trustee and custodian "must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian." Also, both entities in most cases cannot accept contributions over the annual IRA deductible.


Full Management

While for most people there is very little difference between an IRA custodian and trustee, Tom Anderson, CEO and Founder of PENSCO Trust Company, states that one major difference is that a trustee can take over full investment management of the IRA and offer financial advice. A custodian does not.


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IRA Guidance

There are several types of IRAs such as a Gold IRA, Roth and SEP. As Anderson explains, a trustee can take into account your particular financial situation and provide you guidance in what is best for you.


Other Financial Resources

A trustee should be knowledgeable in CDs, stocks, bonds and money market accounts to be able to provide a variety of paths for investment. A custodian is not necessarily knowledgeable in these financial areas and generally is unable to give financial advice. Financial resources such as the Canandaigua National Bank and Trust clearly differentiate between the two positions.


Banks or Investment Firms

Anderson states that custodians are primarily tasked with administrative and operational support of your IRA. Most banks function as custodians. Investment firms and other financial institutions function as trustees, though most large financial entities will offer both services.



As stated by uslegal.com, a reputable legal resources site, IRAs, whether they are SIMPLE, SEP, Roth or traditional, require a custodian. A trustee is optional.