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© Kingdom Trust 2016KingdomTrust.com
Other current or forthcoming books in our Consider the Alternatives series:
Investing with a Private Equity IRA
Investing with a Private Lending IRA
Investing with a Real Estate IRA
“I never attempt to make money on the stock market. I buy on the assumption that they could close the
market the next day and not reopen it for five years.”
- Warren Buffett
© Kingdom Trust 2016KingdomTrust.com
Table of Contents 2
10853
479
Introduction
Metals Options
Prohibited Transactions
Common Questions
A Precious Alternative
The Advantages
The Kingdom Process
© Kingdom Trust 2016KingdomTrust.com
Introduction 3Poor performance and a volatile stock market leave many investors wanting to take more control over their investment portfolios.
Your retirement savings may need to provide 25 to 30 or more years’ worth of income. You can’t rely solely on the Social Security system, nor do you have a guaranteed pension plan like retirees of generations past.
While stocks, bonds and mutual funds have been the core investments inside the Individual Retirement Accounts (IRAs) of Americans since the 1970s, continued volatility in the stock market and meager returns (coupled with the above changes to the retirement landscape) lead many investors to look elsewhere to build a retirement fund.
When it comes to securing their financial futures, more and more savvy investors are turning away from Wall Street and looking to Main Street. Whether it’s gold bullion, private company stock or real estate, the alternative asset investment is moving to the forefront of wealth-building tools. And the vehicle carrying the alternative asset investment is the Self-Directed IRA.
A Self-Directed IRA is like any other IRA except that you, the account holder, play a much bigger role in choosing investments. You have more control over your financial future by choosing the investments purchased by the IRA.
You have more choices, more opportunities for diversification and the ability to invest in assets that harness your areas of expertise. “Self-Directed” means that it’s your decision, your direction, your investment and your opportunity.
Which IRA type is right for me or my business?
TRADITIONAL IRA
• Tax-deferred earnings• Contributions are tax
deductible• Withdrawals are not tax-free• No restrictions on income
eligibility• Contributions can lower
taxpayer AGI• Can contribute up to age 70 ½• Distributions required
SIMPLE OR SEP IRA
• Higher contribution limits• Owner can contribute for him
or herself as well as employees• Designed for small business
owners, including the self-employed (limit of 100 of fewer employees for SIMPLE plans)
• Low administrative costs• Contribution flexibility• Distributions required
ROTH IRA
• Tax-free growth• Contributions not tax
deductible• Tax-free qualified withdrawals• No minimum or maximum
age requirements• Penalty-free withdrawals• Must meet income eligibility
requirements• Distributions not required
© Kingdom Trust 2016KingdomTrust.com
A Precious Alternative 4Gold, silver and other precious metals are viewed as true alternatives to traditional Wall Street investments.
Hedge and bufferWhile no investment is guaranteed to pay large dividends, precious metals are said to provide a measure of security to investors and, like other alternative assets, may act as a hedge against Wall Street volatility. In fact, many precious metals investors look to centuries’ worth of wealth preservation using physical gold and silver as evidence of their security.
Also, precious metals are particularly attractive to investors because the price movements of precious metals tend to run counter to the stock market and may act as a buffer against inflation.
Portfolio diversityDiversification is widely considered a smart plan of attack when it comes to retirement investing. In conjunction with the possible hedge and buffer benefits mentioned above, precious metals may also provide a level of diversification not found in retirement accounts that only hold stocks, bonds and mutual funds.
You can take this a step further with a Self-Directed IRA, as this type of account allows you to hold a variety of bullion coins, rounds and bars. You have a wide variety of precious metals products from which to choose, as long as those chosen are allowed to be held in an IRA.
Why haven’t I heard of this before?The Self-Directed IRA is the most undereducated investment option in the market today. Most investors hear about IRAs from their tax, investment or financial advisor.
However, even though investors have been able to invest in alternative assets since the IRA’s inception in 1974, most advisors only promote traditional investments since those are the investments with which they are most comfortable. This is a major reason why Kingdom Trust is committed to educating and developing an understanding of Self-Directed IRAs and alternative assets.
© Kingdom Trust 2016KingdomTrust.com
Metals Options 5Investors have multiple options when purchasing and holding precious metals with a Self-Directed IRA.
Precious fourThere are four metals that may be purchased in a Precious Metals IRA (a Self-Directed IRA holding a precious metals investment): gold, silver, platinum and palladium.
Qualified coinsPrecious metals investments may include coins, but some coins fall into the “collectibles” category, making any dealing with them a prohibited transaction within an IRA. Generally, to be considered a qualified coin rather than a collectible, a coin must be a country’s legal tender and must be at least 99.5% pure.
According to Section 408(m)(3) of the Internal Revenue Code, the term “collectible” does not apply to the following:
l U.S. Treasury minted $5, $10, $25 and $50 gold coins
l U.S. Treasury minted silver coins
l U.S. Treasury minted platinum coins
l Coins minted under the laws of any state
BullionAlso, the “collectible” designation does not apply to any gold, silver, platinum or palladium bullion that meets the fineness required by the Commodity Exchange Act. Bullion bars or rounds must meet the following fineness minimums:
l Gold .995+
l Silver .999+
l Platinum .9995+
l Palladium .9995+
© Kingdom Trust 2016KingdomTrust.com
Metals Options Continued 6Taking possessionWhen investing in precious metals with your IRA or other retirement investment vehicle, a custodian such as Kingdom Trust must be in possession of the metals. There is only one exception to this rule, which is described in the final section of this report.
Permissible precious metalsBelow is a list of some qualified precious metals segmented by metal type. Please know that this is not a complete list. Unless otherwise noted, the items listed must meet the aforementioned fineness standards.
l American Eagle coinsl PAMP Suisse and Credit Suisse bars (.999+ fineness standard)
l Canadian Maple Leaf coinsl Austrian Philharmonic coins
l U.S. Buffalo coins (uncirculated, no proofs)
l Australian Kangaroo/Nugget coins
l Various bars and rounds (.995+ fineness standard)
GOLD
l American Eagle coinsl Canadian Maple Leaf coinsl Austrian Philharmonic coinsl Australian Kookaburra coins
l Johnson Matthey or Engelhard bars (100 oz.)
l Various bars and rounds (.999+ fineness standard)
SILVER
l American Eagle coinsl Canadian Maple Leaf coinsl Australian Koala coins
l Isle of Man Noble coinsl Various bars and rounds (.9995+ fineness standard)
PLATINUM
l Canadian Maple Leaf coinsl Various bars (.9995+ fineness standard)
PALLADIUM
© Kingdom Trust 2016KingdomTrust.com
The Advantages 7There are three key reasons why holding metals in a Self-Directed IRA may be a wise investment for the future.
Tax-advantaged investingSeasoned investors understand the advantages of investing in an IRA whether it’s a Traditional or a Roth. Traditional IRAs benefit from tax-deferred growth, whereas Roth IRAs benefit from tax-free growth.
A Kingdom Trust representative can help you understand more of the differences between the types of IRAs and retirement plans we can hold on our platform.
Higher earning potentialPrecious metals are finite resources and have multiple uses beyond currency such as electronics and industrial supply. Therefore, precious metals investments have unique growth potential, unlike most traditional asset investments. The value of gold and silver, in fact, has endured centuries’ worth of crises to remain a top alternative investment.
Also, investors using their IRAs for alternative assets like precious metals have greater control because they have a broader range of investment options from which to choose and aren’t as affected by dramatic fluctuations on Wall Street.* The performance of precious metals usually has very low correlation with traditional, dollar-denominated assets like stocks and bonds.
Passion and expertiseA Self-Directed IRA allows you to invest in assets you’re passionate about or have experience with. Because of a higher level of interest and knowledge in the asset, you may become a better informed investor.
* Kingdom Trust is registered and regulated as a non-depository trust company by the state of South Dakota. As a custodian, it holds documentation and is responsible for the safekeeping of assets being administered. Kingdom Trust does not guarantee a financial gain on any investment under its administration.
© Kingdom Trust 2016KingdomTrust.com
Prohibited Transactions 8Failure to follow prohibited transaction and disqualified person rules may result in the IRA becoming disqualified.
There are some restrictions to be aware of regarding holding precious metals in an IRA, including, but not limited to, the allowed types and purity standards covered in the “Metals Options” section of this document and the examples below.
Disqualified persons
l Your IRA may not purchase or sell assets or entities from or to a disqualified person, including you (the account holder), a fiduciary or anyone providing services to the plan, your spouse, ancestor (parents, grandparents, and so on), lineal descendant (child, grandchild and so on), spouse of a lineal descendant, or any entity owned or controlled by a disqualified person. For example, your IRA may not sell gold bullion to your spouse.l Your IRA may not purchase an asset previously owned by a disqualified person.
Income and expenses
l IRA asset expenses (shipping fees, depository holding fees, etc.) must be paid for with funds from the IRA. Your personal funds may not be used, unless via allowable contributions or rollovers.
Other prohibited activities
l Assets in an IRA may not be for personal use, so you may not take personal possession of precious metals held in your IRA. This also applies to any disqualified person mentioned above.l You may not lend or borrow from your IRA. This also applies to any disqualified person mentioned above.
© Kingdom Trust 2016KingdomTrust.com
For much more on this important topic, download the Prohibited Transactions report from our website or
request a copy from our staff.
© Kingdom Trust 2016KingdomTrust.com
The Kingdom Process 9Opening a Precious Metals IRA with Kingdom Trust is a simple, stress-free process.
If you’ve identified precious metals you would like to invest in with a Self-Directed IRA, Kingdom Trust is here to help you get started. We provide industry-leading service, simplified procedures and a wide array of custody solutions to help you achieve financial freedom.
1 2 3 4 5 6OPEN FUND INSTRUCT INVEST
You may fund via contribution, transfer or rollover from another account.
CONFIRM ACCESS
Our online account opening process accepts a digital signature and takes just a few minutes.
You will submit documents directing Kingdom Trust to purchase an asset on your behalf.
Kingdom Trust will countersign the documents and send funds for investment.
Kingdom Trust will work with the investment to receive confirmation and value updates.
You, and designated representatives, may access your account at any time through our online portal.
© Kingdom Trust 2016KingdomTrust.com
Common Questions 101. How can I fund my Individual Retirement Account?You can fund via annual contributions, with current limits of up to $5,500 ($6,500 if age 50 or older) for Traditional and Roth IRAs through tax year 2016. You may also roll over funds from another IRA or qualified plan such as a 401(k). Visit IRS.gov for current contribution levels for all IRA types.
2. How do I get money out of my account?Money comes out of your account as distributions, which can be taken penalty-free at age 59½ or older. If distributions are taken earlier, a 10% penalty would be assessed. Traditional IRA account holders must begin taking Required Minimum Distributions (RMDs) upon reaching age 70½. For Roth IRAs, distributions may not be taken penalty-free until the account has aged five years from January 1 of the year in which the first contribution is made and the account holder has reached age 59½. Distributions may also be made from an IRA upon the death of the account holder. They can also be made for certain disabilities, for first-time home purchases and a few other situations.
3. Should I be aware of any special rules or tax considerations?Yes, which is why Kingdom Trust strongly encourages you to consult tax, legal and accounting professionals when considering any investment. Every investor should know as much as possible about disqualified persons, prohibited transactions and any tax situations related to an investment.
4. In what assets may I invest?The Internal Revenue Service only prohibits investments in life insurance, collectibles, metals and coins (with some exceptions) and S corporations. All other investments are acceptable as long as they are structured properly and do not include a disqualified person.
5. Is my IRA insured?IRAs are not insured like bank accounts. However, at Kingdom Trust, uninvested cash is held for your benefit at financial institutions covered by the FDIC. FDIC insurance covers up to $250,000 per account and applies to cash deposits only. FDIC insurance does not insure a client’s investment(s).
6. How do I buy metals in my IRA?First, you must find a broker-dealer from whom you will buy the metals. Before purchasing the metals, you should make sure the metals you want to buy are allowed to be held in an IRA.
For Kingdom Trust accounts, once we receive investment paperwork from you or the broker-dealer, we contact your chosen depository to set up a sub-account. Then, Kingdom Trust sends investment funds from your account to the broker-dealer to make the purchase. We then key the metals into our system as pending.
Once the broker-dealer receives the funds, the metals are shipped from the broker to the depository. And once the depository receives the metals, it sends Kingdom Trust a report to update your account. At this time, the metals move out of pending status and are comfirmed into the account.
© Kingdom Trust 2016KingdomTrust.com
Common Questions Continued 117. How do I find a precious metals dealer?Kingdom Trust does not recommend or endorse any precious metals dealer, so you must perform the necessary due diligence. When searching for broker-dealers, you will want to review their payment terms, shipment and delivery costs, broker fees, return policies, industry association memberships and which mint the dealer uses.
8. How are precious metals held?Precious metals are held at authorized storage facilities. A custodian will lease space at such a facility, or depository, in order to hold metals in a segregated or non-segregated capacity, if applicable.
Kingdom Trust uses well-established, nationally and internationally known storage facilities with excellent reputations in our industry. The facilities we use are regularly requested from our Self-Directed IRA clients.These depositories offer insured, secure storage environments and provide easy access for the physical delivery of the metals. Other physical assets are represented by purchase agreements that are held in Kingdom Trust’s vault while the actual physical assets are held at a facility arranged by the account holder.
9. What depositories does Kingdom Trust currently work with?We currently have relationships with Brinks Global Services, Delaware Depository, First State Depository, IDS Delaware and IDS Canada.
10. How do I pay for expenses like broke-dealer fees for metals owned by my IRA?Any expenses related to an IRA-owned asset must be received and paid by the IRA itself. You cannot use personal funds to pay for expenses, as this is expressly prohibited in 26 U.S. Code § 4975.
12. Can I add gold or silver coins I already own to my Self-Directed IRA?No, your IRA cannot purchase precious metals you personally own, as this is prohibited in 26 U.S. Code § 4975. You can make in-kind transfers of precious metals from one IRA custodian to another. You can also sell your coin collection and deposit the cash with your custodian and thereby make a contribution to your IRA (subject to IRA contribution limits, of course). All contributions to an IRA must be made in cash, except in the case of transfers and rollovers.
12. Should I hold metals directly in my IRA or have them held in an IRA-owned LLC?Kingdom Trust does not promote, endorse or advise on any particular method of investing. With that said, there are some differences in these two methods worth pointing out.
In the case of precious metals, if the IRA purchases the metals directly, then the IRA holds all paperwork related to the metals ownership. The custodian, on behalf of the IRA, would sign any documents for a metals purchase.
If a limited liability company purchases the metals, then the LLC holds the documents. Because an IRA-owned LLC would have check-writing privileges, the authorized signer(s) for the LLC would sign the documents.
© Kingdom Trust 2016KingdomTrust.com
13. Can I take possession of my precious metals after making my investment?No, at least not while your metals are held in an IRA. All IRA assets must remain within the custody of an IRA custodian or trustee. You may choose to take distribution of your precious metals assets at any time, but keep in mind that such an action will likely be considered a taxable event and may be subject to withdrawal penalties. Consult investment and tax professionals before taking such action.
The only exception is with a Single Member LLC structure. By pairing a Self-Directed IRA with an LLC, you can hold approved precious metals as an investment and also be able to hold the metals at an allowable storage facility of your choosing. As with the above, please consult investment and tax professionals before taking such action.
14. Does Kingdom Trust perform any due diligence?Because these are self-directed investments, you (the account holder) are responsible for performing your own due diligence. Members of your financial team may help with your due diligence efforts on any investment you are interested in.
For a metals investment, those due diligence efforts should include finding a broker-dealer well-versed in Self-Directed IRA investing, researching what coins, bars and rounds are allowed to be held in an IRA and choosing a depository in which to store your metals. This initial research and due diligence should help the process move more smoothly.
Common Questions Continued 12
This publication is intended to provide basic information regarding Self-Directed Individual Retirement Accounts. It is published with the understanding that this is not a legal or bindingcontract, but rather an informational tool. Please refer to our website at KingdomTrust.com for more detailed information. Kingdom Trust is a non-fiduciary trust company, registered and regulated in the state of South Dakota as a non-depository trust company. Kingdom Trust is a passive, non-discretionary custodian that does not provide, promote, endorse or sell investment products and does not endorse or promote any individual investment advisor or investment sponsor.
© Kingdom Trust 2016KingdomTrust.com
KINGDOM TRUST
1105 State Route 121 N., Suite B
P.O. Box 870
Murray, Kentucky 42071
Office: 270.226.1000
Toll-Free: 888.753.6972
Follow Us
Visit our website for more educational opportunities and resources: KingdomTrust.com
For more educational resources on the topics discussed in this eBook, visit any of the following:
26 U.S. Code § 4975https://www.law.cornell.edu/uscode/text/26/4975
IRS Publication 590-Ahttps://www.irs.gov/pub/irs-pdf/p590a.pdf
IRS Publication 590-Bhttps://www.irs.gov/pub/irs-pdf/p590b.pdf
Precious Metals IRAhttps://www.kingdomtrust.com/what-is-a-self-directed-ira/precious-metals-ira
Retirement Topics - Prohibited Transactionshttps://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Prohibited-Transactions
Self-Directed IRA FAQhttps://www.kingdomtrust.com/what-is-a-self-directed-ira/self-directed-ira-faq
Traditional and Roth IRAshttps://www.irs.gov/Retirement-Plans/Traditional-and-Roth-IRAs
