Can an LLC Own Precious Metals?
Gold IRA LLC accounts cannot be used to buy and store precious metals at home; such storage would constitute an early distribution and result in a 10% penalty being applied.
Instead, you should seek the services of an experienced 1031 Exchange Facilitator to manage the sale and purchase processes to fulfill the technical requirements for deferring taxation under Section 1031.
Title to the Metals
Protecting precious metal investments often means placing them into an LLC for asset protection, effectively blocking judgment creditors from accessing them.
Problematic with this strategy is that most investors don’t realize the chain of title for their precious metals is stored by a custodian or third-party storage provider, thus leaving their investment vulnerable if something happens to that third-party company storing their metals.
To protect themselves against this risk, many investors prefer establishing a Wyoming (or Nevada, if desired) LLC as the legal owner of their precious metals. They then either purchase them directly through this entity, or transfer existing properties into its name – in either instance it should be notarized before any transaction. Using an LLC provides tax advantages as it acts as a flow through tax vehicle.
An LLC and placing assets and finances inside it are only the starting point for an effective asset protection plan. To properly shield assets from frivolous lawsuits or creditor claims, an effective strategy must involve both domestic and offshore components.
Attracting assets requires incorporating in a state that offers effective asset protection, creating trusts or other legal entities to hold assets, and properly operating each of these entities to meet your goals. Doing this properly requires knowledge of federal and state exemption laws, bankruptcy statutes, tax laws, comparative law principles as well as laws related to trusts, estates, corporations and business entities.
Utilizing a Wyoming (or Nevada) Precious Metals LLC as the vehicle to hold your Self-Directed Gold or Silver IRA is the optimal means of protection available. Under this structure, a judgment creditor may only get a charging order against the LLC itself rather than seizing actual precious metals stored within. This approach proves far more secure than keeping precious metals held within an IRA Custodian’s name.
People often invest in precious metals as an insurance against inflation. Their intrinsic value tends to remain consistent over time and provide an effective diversifier when added to stocks, bonds and real estate portfolios.
Politico-economic instability or war can make them an attractive investment option, which makes them popular with retirement account investors.
Investment of precious metals through a self-directed IRA does carry risks. A recent US Tax Court case showed that two people who used their own LLC and personal storage to invest in precious metals through an IRA could face paying capital gains taxes on all the value of their investments.
To comply with IRS rules and stay out of tax bracket, any 1031 exchange must take place through an escrow bank account that qualifies. Furthermore, purchase and sale agreements must include language identifying it as such to prevent taxes being levied upon it – this is one reason many investors use an LLC as holding company for precious metal investments.
An LLC Gold IRA allows you to buy precious metals on your own without incurring additional fees from dealing directly with a Custodian, plus it offers you tax advantages that direct-dealing IRAs don’t.
Precious metals have long been seen by retirement account investors as an investment option that helps diversify their portfolio and protect against inflationary worries. Since 1998, the IRS has permitted these accounts to invest in allowable precious metals investments.
Many individuals who buy metals with their IRA believe they can sidestep rules by using a self-directed IRA to purchase and store bullion themselves at home, but this is a falsehood; McNulty v. Commissioner holds that an IRA owner must possess physical possession of their precious metals before it can be considered a taxable distribution from their account. Therefore, using a Wyoming LLC would be far safer.