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Gold Within a Self-Directed IRA

Posted by James M. Carlson
Oct 17 2012

An IRA custodian/trustee will have clients and potential clients who will ask about using his or her IRA funds to buy gold. An IRA custodian/trustee should at least consider rendering this service. The answer need not be an automatic, “no.” It may be that individuals are willing to pay fees to make the rendering of this service worth while. Such fees are negotiable.

In January of 2004 gold was selling for around $400 per ounce. On September 12, 2012, the price was around $1,725 per ounce.

Code section 408(m)(3) authorizes that certain gold may purchased as an IRA investment and that such aninvestment will not be a prohibited transaction.

An IRA custodian/trustee should consult with its attorney before establishing procedures to buy and sell gold on behalf of IRA accountholders. Here is are some suggestions to be considered when establishing the policies and procedures applying to gold as an IRA investment.

  1. Ownership must be by the financial institution as the IRA custodian/trustee. For example, SecondThird Trust Department as IRA trustee for John Doe’s traditional In. The seller of the gold needs to acknowledge this is in writing and that the seller is not authorized to discuss this investment with the individual. The trust department could choose to not even tell the seller about the individual
  2. The seller of the gold should certify that the gold being sold/purchased does meet the requirements of Code section 408(m)(3) so that the purchase of this gold will not be a prohibited transaction
  3. Physical possession of the gold. Most conservative is that the trust department hold possession, but this is not required. The trust department could retain a third party to hold the gold. The individual cannot have access to the gold
  4. The purchase of the gold must be by the trust department as the IRA truste
  5. There should be a basic discussion of the prohibited transaction rules with the individual regarding the gold investment and possibly other investments. Furnishing a written discussion would be a good idea.

Gold may be a permissible investment for IRAs. Each institution will need to decide if it can charge sufficient fees to make it a worthwhile business endeavor. There are individuals who want to invest in gold.n IRA custodian/trustee will have clients and potential clients who will ask about using his or her IRA funds to buy gold. An IRA custodian/trustee should at least consider rendering this service. The answer need not be an automatic, “no.” It may be that individuals are willing to pay fees to make the rendering of this service worth while. Such fees are negotiable.

In January of 2004 gold was selling for around $400 per ounce. On September 12, 2012, the price was around $1,725 per ounce.

Code section 408(m)(3) authorizes that certain gold may purchased as an IRA investment and that such aninvestment will not be a prohibited transaction.

An IRA custodian/trustee should consult with its attorney before establishing procedures to buy and sell gold on behalf of IRA accountholders. Here is are some suggestions to be considered when establishing the policies and procedures applying to gold as an IRA investment.

Ownership must be by the financial institution as the IRA custodian/trustee. For example, SecondThird Trust Department as IRA trustee for John Doe’s traditional In. The seller of the gold needs to acknowledge this is in writing and that the seller is not authorized to discuss this investment with the individual. The trust department could choose to not even tell the seller about the individual

The seller of the gold should certify that the gold being sold/purchased does meet the requirements of Code section 408(m)(3) so that the purchase of this gold will not be a prohibited transaction

Physical possession of the gold. Most conservative is that the trust department hold possession, but this is not required. The trust department could retain a third party to hold the gold. The individual cannot have access to the gold

The purchase of the gold must be by the trust department as the IRA trustee

The should be a basic discussion of the prohibited transaction rules with the individual regarding the gold investment and possibly other investments. Furnishing a written discussion would be a good idea.

Gold may be a permissible investment for IRAs. Each institution will need to decide if it can charge sufficient fees to make it a worthwhile business endeavor. There are individuals who want to invest in gold.

Categories: Pension Alerts, Self-Directed IRAs