If you have a self-directed IRA account, you’re more than likely already aware of your ability to invest in gold, silver, and other precious metals with your IRA funds. However, as more companies promote the idea of storing gold and silver at home with an IRA LLC (or in a local safe deposit box), we’d like to highlight the differences between storing precious metals at a depository via an IRA provider, and storing precious metals at home with an IRA LLC.
Companies that endorse the idea of home storage don’t always paint the whole picture regarding benefits, risks, and rules of at-home storage vs. utilizing a depository that specializes in precious metals storage through the IRA administrator. These companies usually refer you to your own legal counsel for advice on the process. LegalZoom vs Incfile
The following comparison seeks to communicate the relatively unknown details about at-home metals storage that you need to make a fully informed decision about your precious metals IRA.
• The IRS is notified annually that your IRA owns the LLC.
• Metals investment choices are severely limited. No metals other than US minted Eagles
• The IRA owner must supply the IRA provider with third party confirmation of the value of the LLC including any metals and any cash it owns.
• Insurance for home stored metals is unattainable at any reasonable price.
• Safe Deposit box storage is not insured by the bank and although insurance is available from select vendors, it is expensive. (ex: $100K = $200/yr $50K = $110, $20K = $75)
• The metals still belong to the IRA, not to you, so you must avoid any prohibited transactions with them otherwise your IRA is at risk. An example of this would be pledging the metals for a personal loan or taking personal ownership of the metals directly.
• Distributions of metals or other assets owned by the LLC must go first to the IRA provider to be reported to the IRS.
• Providing storage space for the LLC assets at your personal residence, in your personal safe, in your personal back yard, may be a prohibited transaction.
• The LLC must have a business bank account which may have monthly fees.
• Bank safe deposit boxes cost between $15 to $65 per year or more. Keep in mind that silver eagles take much more space per $.
• IRA provider annual fees for LLCs are often higher than for direct metals ownership.
• Bookkeeping for the LLC must be maintained by the IRA owner.
• Annual reporting and state filing fees may be required for the LLC.
• LLC set up and legal fees are required.
• If the IRS asserts that a prohibited transaction occurred, the burden of proof is on the taxpayer to ensure that the IRA holder did not receive a personal benefit. In tax court you are presumed guilty until you prove otherwise.
• Personally-held metals are likely subject to a higher level of due diligence from buyers as there is no documentation of “chain of possession” ensuring that the metals have not been tampered with and may reduce the resale value of some metals.
IRA Direct Ownership:
• The IRA provider does not alert the IRS that your IRA owns metals.
• You may invest in any allowed metals.
• You pick from a selection of depository companies specializing in holding metals.
• You may take distribution of or sell the metals at any time.
• You do not need to supply the IRA provider annual confirmation of the value as this is done automatically by the IRA provider.
• Insurance is included in the depository fee for any metals stored.
• There is practically no possibility of you having a prohibited transaction.
• Banking accounts and bookkeeping is included in IRA provider fees.
• IRA providers often have lower annual IRA fees for metals than any other asset.
• Depositories offer either specific item storage or commingled storage at your option.
• There is no state reporting required by you.
• No LLC creation fees or legal fee is needed.
• IRA can be established and ready to make a purchase significantly faster.
Although the idea of having your IRA’s precious metal sitting on your kitchen table may sound appealing, most of our clients realize that holding their IRA’s metals with a professional administrator is the option with lower stress, lower hassle, and lower risks.