by Industry Council of Tangible Assets…
As we are approaching the time of year when investors should start considering any actions they may wish to take as part of their overall financial planning, this seems a good time to informally recap how you can take advantage of the Precious Metals IRA option.
A little background: In 1981, Congress arbitrarily changed the rules and decided “collectibles” were unacceptable for inclusion in IRAs and other self-directed retirement plans. The definition of collectibles coins and precious metals, fine art, gems, stamps, antiques, rugs, wine, and other items. ICTA did not exist at the time (the organization was formed in 1983), and the coin and precious metals industry had no real voice in Washington to either prevent this action or even educate the U.S. Congress.
In 1986 the American Eagle gold and silver coin programs began, and the legislation that created the Eagles included language stating that, for the purposes of Section 408(m) of the Internal Revenue Code (the section that deals with self-directed IRA plans), the term “collectible” did not include gold, silver, or (later) platinum Eagle coins. Therefore, American Eagles are allowed in self-directed IRAs, with no differentiation between proof and uncirculated.
ICTA was successful in having Congress approve legislation that expanded IRA-acceptable precious metals to include many more bullion gold, silver, platinum, and palladium products as part of the Taxpayer Relief Act of 1997. These other eligible precious-metals items are defined only by fineness; many “mainstream” (most popular and frequently traded) precious- metals bullion coin and bar products are acceptable if they meet the fineness requirement and any criteria specified by the company handling your IRA (these criteria can vary by company). The IRA trustees who handle such precious metals retirement accounts can provide you with a list of those items they will or will not accept for IRA purposes.
How to Include Precious Metals in Your Ira
Both investors and dealers who don’t have experience with these accounts have many questions. The following includes some of the basic elements of these accounts. You’ll find some of the information highly dependent on the policies and procedures of the company handling your IRA; now is the time to compare companies for the one that best fits your needs. (Please note that ICTA provides this information with the intent to assist you, but ICTA’s staff cannot provide legal advice on the subject. For more specific information, we strongly recommend that you consult with your own legal counsel or professional tax advisor.)
1. The first step to including precious metals in your IRA is to set up your account with an “IRA trustee”—a company that handles IRA accounts for precious metals. If you don’t do that properly, you can lose the tax benefits associated with an IRA. You must have the account set up and funded (with rollover and/or “new” IRA money) BEFORE you purchase any metals. It is important to note that you may not personally take physical delivery of precious metals products held in your IRA! The IRA trustee should arrange for the safekeeping of the metals to your satisfaction. We recommend you contact your favorite coin dealer for assistance in choosing a trustee for your precious metals IRA account. You should know in advance what specific procedures you will need to follow and what fees may apply for establishing the account.
2. While there are the usual benefits to including any acceptable asset in a qualified IRA (or other self-directed retirement program), there are certain costs associated with such IRAs. There may be a flat annual fee (sometimes called an administration fee) as well as the annual storage charges. Fee structures vary by company and might include a per-transaction fee. You should evaluate all applicable charges to determine which company may best serve your needs.
3. Ask whether the IRA company or your dealer has any minimum dollar amount for an IRA trade. You will want to research in advance to see if your favorite dealer is willing to conduct bullion IRA transactions and whether there is any service charge for this type of trade. You have to follow the IRS’s rules on acquiring precious metals coins or bars as well as when you liquidate all or part of your holdings.
Unlike a normal cash bullion purchase, in which you pay for and receive your merchandise immediately, IRA transactions must be handled according to IRS regulations and the IRA trustee’s procedures. Sometimes there is a delay in payment for the dealer, since the trustee will want to ensure the merchandise has been received by the custodial facility before releasing the investor’s funds for payment. Since the dealer’s money may be tied up for some period of time until the funds are released, the dealer may levy a nominal IRA transaction fee to help offset this extra cost. Be sure to ask.
Sometimes IRA companies may release payment for the metals BEFORE the dealer ships to the designated safekeeping facility. It is likely they reserve this pre-funding accommodation to dealers with which the IRA company has an existing relationship. But normally payment is authorized only when receipt of the metals has been logged at the storage facility.
4. In addition to setting up an IRA account with “new” IRA money, investors may roll existing monies over from other IRA accounts. Usually the procedure is to issue an order to liquidate certain other assets held in an existing IRA. If you are using rollover money, you need to make sure you understand exactly what you need to do. It should be very simple— you will authorize the sale of the original IRA asset and direct that the proceeds of that sale to be sent to the company handling your precious metals IRA account. Be sure you understand the procedures for setting up the new account in order to have a smooth transition.
Once your IRA account is funded, you will be able to purchase the precious metals you want to include in your precious metal IRA account.
Dealers interested in conducting precious metals IRA transactions should contact at least one or two IRA companies for more information on policies and procedures. There is a lot of interest in these IRAs right now, and you want to be sure you can accommodate your customers’ business quickly and easily. Likely your customers will have many questions, and it’s just smart business to be ready to assist your clients.
For investors who want to own precious metals but do not have adequate funds outside of an IRA or other self-directed retirement plan, IRAs provide an excellent way to fulfill your personal investing strategy. Whether you’re a dealer or an investor, doing your homework on the details of IRAs now helps ensure your transactions are easy and hassle-free.
© 2014 Industry Council for Tangible Assets. All Rights Reserved.
Any information in this article is provided to assist you and is not intended to be used as a substitute for actual advice from a professional tax or legal adviser. Additionally, while we believe the information provided to be correct, ICTA cannot be held responsible for any errors, whether typographical or in fact. No part of this article may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the Industry Council for Tangible Assets.
ICTA is supported solely by membership dues and donations. To join and/or learn more about the Industry Council for Tangible Assets, please visit our website — ictaonline.org.