In a recent article, ‘Should You Put Gold into Your IRA?’ 2/24/09, we considered the pros and cons of putting gold bullion into a self-directed IRA and detailed how to do it. But the arrangements we covered were entirely domestic.
What about having your IRA hold gold offshore? It can be done, but before you go to the trouble, ask why. Your IRA would still be subject to U.S. law, and your IRA custodian would still be in the U.S., regardless of where the assets are.
One possible reason is protection from future creditors, especially of the lawsuit variety. If your IRA exceeds a million dollars, or if you live in the wrong state, or if you inherited the IRA, it may be available to anyone who successfully sues you. There are some rather complex arrangements that can move IRA assets (gold or anything else) offshore and make them far more difficult for a creditor to reach. But if that’s your motive, we’d think twice about the loss of control that such programs involve.
An entirely different reason would be to sidestep some future legal interference with gold ownership – if, for example, you think President Obama may become FDR Redux and embrace draconian measures, such as prohibition of ownership, penalty taxes, confiscation, or forced sale at an official price, as in 1933. No preparation for these possibilities can be completely reassuring, since we can’t anticipate exactly what the new rules might be. But something as simple as wrapping the gold in an IRA and storing the metal in a different jurisdiction could allow you to be one of the few remaining Americans who lawfully owns gold.
One easy way to go about this is for your IRA to hold the metal in the form of a Perth Mint certificate. Not all IRA custodians will do this, but some will. Check our prequel article for the names of gold-friendly IRA custodians or contact one of Perth’s Approved U.S. Dealers, either Asset Strategies International (www.assetstrategies.com) or Euro Pacific Capital (www.europac.net). They’ll help.
The more sophisticated approach is to use an offshore limited liability company (LLC). Your IRA would own all of the LLC, while you would be the company’s manager and have direct control over its affairs. The LLC, having but one owner, would be eligible for establishment as a “disregarded entity,” so that its assets are treated, for income tax purposes only, as being owned by the IRA. As manager of the LLC, you would file such an election with the IRS, then open an account for the LLC with a suitable foreign institution, and use the account to buy gold.
Is that worth doing? If you want to have gold in an IRA, perhaps because your IRA dominates your financial picture, or if you’re worried about the possibility of gold confiscation, it may be. The costs are the homework you’ll need to do, and annual expenses of $2,000 or so, depending on how good you are at shopping.
To start, you’ll need an IRA custodian (which will be a U.S. institution -- it’s your company that’s offshore, not the custodianship), one that specializes in such arrangements. We’ve identified some possibilities, and while we don’t know any of them well enough to give our wholehearted endorsement, you can begin by looking into Sovereign International Pension Services in Palm Harbor, Florida (www.sovereignpensionservices.com) or the Entrust Group in Paoli, Pennsylvania (www.theentrustgroup.com).
The custodian will get the offshore LLC formed for your IRA. Then you can convert all or a portion of your IRA assets to cash and transfer the money to the new custodian, who will invest it as a capital contribution to the LLC. From there on, you, as manager of the LLC, will run the show. You can buy Perth Mint certificates for the LLC or you can have the company purchase bullion from Kitco, Asset Strategies, GoldMoney, or any other seller of your choice. They will then help arrange storage with a vaulting company such as Via Mat International in Zurich, one of the oldest and most reputable.
Probably not many investors will want to go this route. But if you’re one of the few for whom it makes sense, these are the steps to follow.
In light of the demise of fiat currencies and the general stock market, more and more investors are flocking to gold as a safe-haven investment. And no one knows more about the hows, wheres, and whys of buying and owning physical gold than the editors of BIG GOLD, Casey Research’s monthly newsletter for the prudent investor.
One caveat: gold is certainly a safe haven and much preferable to some of the unstable investments around, but the fact is, it’s a non-interest-bearing investment. But there’s a strategy that smart investors – like Steven Lehman, the Federated Investors fund manager who beat 99% of his peers last year – are following now… and you can too. If you want to know how to squeeze up to four times more gains out of gold, click here to learn more.