We routinely get asked about storing metals for your IRA offshore. Our position is no, we store them here in the U.S. under our direct control.
We have a number of clients that report that other IRA administrators and metals vendors peddle a service whereby you can store your metals in Canada or Switzerland. This seems to run counter to our collective understanding of the IRA rules for self directed IRAs and fails to really serve a useful purpose.
Let’s break this theory down into its components.
1. Argument – Gold and Silver Eagles are currency, and you can hold currency anywhere:
The promoters hold that Gold and Silver Eagles are US currency. We buy into that argument in that this was the original purpose of minting the coins. However, if this were the case, then your IRA would just hold good old greenbacks in the account versus the actual coins. You would save all those fees, and storage costs and general hassle. But, people prefer to hold the metals for its intrinsic, numismatic value – not its ability to go buy $20 worth of hamburgers and fries in the drive through. In fact no reasonable person does this. The coins are clearly held for their underlying market value and as a hedge against inflation. They are not being held for their face value so that they can purchase junk food during retirement.
Because of this fundamental difference, we believe that gold and Silver Eagles are viewed and would be deemed as nothing more than a precious metal and not currency if an IRS audit were performed on any of these promoters of offshore storage. This means that the metals cannot be stored offshore.
2. Argument – Storing these metals offshore will protect you from government confiscation:
Offshore storage promoters contend that if and when the government decides to crack down on metals and confiscate them, any metals held in the IRA offshore will be protected. Well, let me be the pessimist and realist.
In order for metals to be held in an IRA, they must be held by and under the control of the Trustee/custodian. If these promoters subscribe to this, which they have to in order to be compliant, then the metals are held and owned by the custodian. If that is the case, then some reasonable smart person at the Treasury will merely send a one paragraph letter to the custodian telling them to redeem all metals held in their possession for US currency.
Since most people don’t want to wear orange jumpsuits, the custodian is likely to willingly comply. That custodian will draw back all metals, on shore and off shore, and turn them over and credit the client accounts with cash. Its just that simple.
Look, if I can think of this, I guarantee the brain trust at the Treasury will figure this out in about five minutes. So, its not like I am giving them a road map. Say what we will about the government and the Treasury, they can and will easily figure this problem out very quickly.
In case you want to argue that they are not the custodian’s metals, then you run the risk of violating IRC 408 and forcing a disqualification of your account at the point you purchased the metals. This will trigger taxes and penalties, plus you will personally be required to comply with any confiscation orders. This is an even worse scenario.
What does all this mean?
Its our opinion that there are some specific IRA administrators and metals vendors who are misleading people to invest their IRAs into metals and store them offshore. Such advise seems risky and dangerous given that there are no bright lines or legal support for being able to store these metals offshore. Additionally, we believe its misleading to tell clients that their metals will be safe from government confiscation if the metals are held offshore.
Accuplan and American Estate & Trust recommend that you check your IRA provider or metals provider in advance. Question their legal basis for recommending that you can move your account offshore. Seek the advice of legal counsel if necessary. From a corporate policy perspective, this is an area that has not been tested with the IRS, there is no legal authority supporting it, and there is some legal authority showing that you cannot store metals offshore. So, we do not advocate or recommend this practice.
Does this mean that we are anti-metals? Hell No! We strongly encourage and support the business of precious metals and holding metals in your IRA account. What we don’t support is some half baked, ham handed, amateur legal analysis that is not fully supported by fact or legal opinion. We think people are being less than honest in their representations and promotions of metals storage options. If the competition counter claims that we are just protecting our turf because we don’t have offshore storage, then they really make my case. So, they think that it requires a Phd in splitting the atom to figure out how to call a offshore storage facility. The short answer is its pretty straight forward on setting up offshore storage and people do it every day. We choose not to do this for legal and safety reasons.
What you should do
- Ask you offshore promoter what their legal support and authority is for moving your IRA offshore
- Contact a legal advisor for a second, confirming opinion as to the claims and representations.
- Look at the real value add and safety aspect. Will your tax law based retirement plan really be removed from any government confiscation actions.
- Weigh the facts and costs and risk.
- Just ask yourself how much risk are you willing to take without any legal support or backing when storing your metals 1000s of miles away.