Gold and Silver with an IRA Custodian vs. IRA LLC Home Storage

What’s the Real Difference?

Patricia McCrystal
Louisville, CO, August 10th 2015 – Here at New Direction IRA, we make it a priority to empower our clients with unbiased information about their investment choices so they can make knowledgeable investment decisions. If you have a self-directed IRA account with New Direction IRA, 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.

You can rely on New Direction 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.

IRA/LLC program:
•  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.
For many investment strategies, there are multiple factors in play when making the best choice. Education about IRS rules and regulations is critical to making knowledgeable IRA investment decisions.

For New Direction account holders, our numerous educational programs and materials provide the best information in the industry. Use this chart as a quick reference guide to compare the risks, costs, and responsibilities of direct IRA ownership verses IRA LLC home storage of your precious metals assets. For more information on New Direction's Precious Metals IRA and IRA/LLC options, please visit our gold IRA website, and as always, happy investing!

How Do I Find Self-Directed IRA Investments?

Self-directed IRAs, or SDIRAs, are becoming increasingly popular because they allow account holders to choose from a world of investments. At New Direction IRA we’ve seen IRAs invest in everything from trailer parks to oil fields to Middle Eastern currency and more.

The sheer number of investments could seem daunting, but many investors view this as an opportunity to invest in what they know and trust. Here, we’ll go through the main alternative asset types and share how you might begin looking for investments.

Note that all due diligence is your responsibility and not the responsibility of the IRA provider, like New Direction IRA. (At NDIRA, we do not offer financial advice; we only service the investment that you choose.)

Real Estate

Real Estate investments come in all shapes and sizes. You can invest your IRA in commercial or residential real estate, fix and flips, rental properties, raw land and everything in between.

There are many options for real estate IRA investing

You may find it beneficial to search for investment property by contacting a realtor, driving around the area you in which you want to invest or attending real estate investment groups. What’s important to remember is that you can invest in nearly any real estate as long as it follows disqualified persons rules.

Disqualified persons to an IRA include the IRA holder, his spouse, his parents and grandparents, his children and grandchildren, their spouses, certain fiduciaries and any entity owned or operated by a disqualified person. So, for instance, you couldn’t buy a rental property or vacation property and let your kids live in it.

You can, however, partner with both disqualified and non-disqualified persons. You’ll have to be diligent about paperwork and incoming/outgoing funds but the flexibility afforded by the IRS to maximize your funds opens your investment options even further. You can even take out a non-recourse loan to mortgage investment property. For more information on funding, visit http://www.newdirectionira.com/real_estate_ira.html

Precious Metals

Your IRA can invest in gold, silver, platinum and palladium products. There are certain fineness requirements for each and you cannot invest in many collectible coins, but there are simply many options for a precious metals investment. For a full list of acceptable coins and metals, visit http://www.newdirectionira.com/gold_iras.html.

In an SDIRA, you find the dealer from which you want to buy metals and determine the terms of the deal with him. You send the terms over to your IRA provider and they will send money where needed. At New Direction IRA, you can then choose your depository (where your metals will be stored) and the dealer will ship the metals directly to the depository.

Performing due diligence is necessary for all investments, especially precious metals. Make sure you are comfortable with the dealer and depository and the terms of the sale.

Private Equity

Finding private equity investments often requires more leg work than real estate or precious metals investments.

Where you can often find listings of property or scores of dealers offering metals, private equity offerings require greater diligence. There are several website cropping off that seek to match investors to companies and individuals seeking investments.

You can also invest your IRA in entities that may be launching a new product or certain groups that are preparing to make large investments. As above, disqualified persons apply and full details can be found at http://www.newdirectionira.com/private-equity.html.

The best way to find private equity investments is to get involved. Visit investment groups, research companies, search for startups and find an investment opportunity that fits your IRA investment goals.