Who Holds the Gold in a Gold IRA? What You Should Know.

Most people already know that a self-directed Gold IRA allows you to own physical gold. Holding this asset is different from a traditional IRA, which prohibits the practice, limiting investors to indirect holdings such as gold exchange-traded funds (ETFs).

Since 2008, there has been a growing trend to invest in physical gold. However, there are specific rules to be aware of when it comes to who holds the gold in a Gold IRA and how it’s held. This article outlines the various options for owning gold in a Gold IRA, including a list of the most well-known IRS-approved gold repositories.

Who Holds the Gold in a Gold IRA?

For the purposes of investing in gold by way of a Gold IRA (also referred to as a precious metal IRA), you will first need to go through a broker to purchase the gold. Further, before the transaction can occur, you must also designate a gold custodian to get started.

A Gold IRA custodian will be the party that creates and manages your account and bears the responsibility of storing this physical asset class. Custodianship of Gold in IRA accounts can vary, and you must abide by IRS guidelines to be tax compliant.

The list below includes options you may consider when it comes to establishing custodianship, and it’s important to note that not all of these parties can qualify as a Gold IRA custodian.

Individual Account Holder

Your first instinct might be to conclude that Gold IRA account ownership allows you to physically hold your own gold. This, however, is not the case, despite the fact that individual account holders own the gold. The IRS requires that any physical gold held in a precious metal IRA be stored in an IRS-approved depository.

As a result, you cannot keep gold designated in a Gold IRA account in your home, safe deposit box, or anywhere else that allows you physical, unfettered access to the asset.

Gold IRA Custodian

A Gold IRA custodian is a company that manages your account and submits reports to the IRS to ensure compliance with current tax regulations. The information reported to the IRS may include contributions (including transfers and rollovers from other retirement accounts) and distributions.

The custodian will also report the fair market value of your precious metal assets annually to help determine what, if any, taxes are owed.

Gold IRA custodians also fulfill other important functions other than IRS reporting. Overall, a custodian is responsible for providing the following services:

Depending on the services offered, a gold custodian may also be the party responsible for storing your gold, though custodians are typically associated with handling the administrative aspects of maintaining precious metals.

IRS Approved Depositories

man stamping approval of gold depository company

A depository is a secure, third-party facility where your physical gold is actually stored. So, in essence, to answer the question posed in the title of this article, it is the depository that holds the gold in a Gold IRA. Depositories may also make investment decisions on your behalf, giving them more control of your assets than a custodian.

Though there is no publicized list of the requirements necessary to be classified as an IRS-approved depository, these facilities typically have the following qualifications:

  • Maintain segregated storage
  • Provide adequate insurance coverage
  • Implement robust security measures
  • Comply with regulatory standards
  • Be subject to routine audits
  • Offer transparency and accessibility to account holders

Authorized Dealer

When it is time to fund your Gold IRA, you will want to go through a dealer or broker who is authorized to facilitate the purchase of precious metals meant to be held in a Gold IRA. However, it is important to note that the dealer will not hold your gold for you.

After you purchase gold from an authorized dealer, it will then be stored in an IRS-approved depository under the custodianship of a Gold IRA custodian.

Importance of Gold IRA Custodians

The most obvious reason to utilize a Gold IRA custodian is to comply with the IRS tax guidelines. The custodian’s role is to ensure that any activities undertaken that are associated with Gold IRA account ownership comply with the law. Maintaining good standing with this federal agency is critical, and the custodian handles this on behalf of the account holder.

There are also several administrative tasks associated with the management and administrative duties of a Gold IRA that go beyond opening the account. These duties can require a significant time commitment that a custodian is well-equipped to handle.

In addition to handling day-to-day administrative tasks, a custodian is also instrumental in facilitating the purchase and sale of gold through authorized dealers. You may rely on your custodian for advice regarding investment options, retirement planning, IRS regulations, and overall wealth-building strategies.

Further, and perhaps the most important role of a Gold IRA custodian is in asset custody and security. A custodian, by definition, is responsible for the safekeeping of your physical assets. Even without the IRS regulations, maintaining a secure facility for precious metals is a significant undertaking.

Because the legal rules and responsibilities of Gold IRA holders can be complex, having a qualified and reputable Gold IRA custodian is essential.

Factors To Consider When Selecting a Reputable Gold IRA Custodian

When it comes to selecting a Gold IRA custodian, you have several choices. To aid you in the selection process, it’s a good idea to do some due diligence and research potential candidates before making a commitment.

It’s recommended to evaluate the following factors:

  • IRS Approval
  • Reputation and Experience
  • Fees and Costs
  • Storage Options and Security
  • Customer Service and Accessibility

Collaboration Between the Custodian and Depository

gold ira custodian and account holder shaking hands

The relationship between a Gold IRA custodian and a depository is collaborative, with both parties working together to effectively manage and secure the physical gold assets of account holders.

Specifically, the parties work together in the following ways:

  • The custodian arranges for the transferring of assets to the depository after purchase from an authorized dealer.
  • The custodian works with the depository to ensure that the assets are stored safely and securely, avoiding any commingling of assets with other account holders’ gold.
  • The custodian coordinates with the depository to prepare statements and other documents.
  • The custodian also serves as the primary point of contact between the account holder and the depository, as needed.

The collaborative nature of this relationship is essential, not only to furnish a safe way for account holders to maintain a portfolio in a third-party location but also to provide peace of mind.

Coordination Between the Custodian, Account Holder, and Depository

Despite the close collaboration between the custodian and depository, the Gold IRA account holder also serves a necessary function. It is you, the account holder, after all, who must make the ultimate decision regarding asset purchases, transfers, storage, sale, and distribution.

As mentioned above, the custodian is typically the primary point of contact between the account holder and the depository. It is vital that there is effective and streamlined communication between all parties involved to meet IRS regulations and safeguard the account holder’s investment.

What Criteria Must a Depository Meet To Be Approved by the IRS?

To date, the IRS doesn’t have an explicit approval process for depositories; however, the agency does have requirements related to the storage of physical gold. Failure to comply with IRS requirements can have a catastrophic financial effect on an account holder as well as a reputational impact on the depository.

To meet the requirements for storing assets in a Gold IRA, a depository should, at a minimum, adhere to the following:

  • Provide segregated storage: Each client’s assets should be held separately from other clients.
  • Maintain strong security: A depository should have protocols in place to prevent theft, tampering, and unauthorized access. This may include state-of-the-art surveillance, advanced access controls, and physical security personnel on staff 24/7.
  • Maintain insurance coverage: In the event that there is a loss, theft, or damage, the depository should have adequate insurance to make account holders whole.
  • Follow all IRS regulations: The IRS has guidelines in place related to storing, handling, and reporting. A depository should strictly abide by these rules.
  • Undergo independent audits: To maintain the integrity of the depository, it should voluntarily submit to or schedule audits by third-party firms. These audits will verify, among other things, that the assets being reported exist and are authentic.

Some of the Most Well Known IRS Approved Depositories

gold five stars on dark background

Due to the importance of depositories, many of these organizations have practically become household names. The following list includes some of the most well-known.

Delaware Depository Service Company

The Delaware Depository Service Company is a relative newcomer to the industry but has quickly established a reputation for excellence over the past couple of decades.

The facility serves a wide range of clients, including government agencies, and boasts a geographic location that is well-distanced from geopolitical threats. Investors also flock to this depository for the state’s favorable tax advantages.

Brink’s Global Services

An industry veteran, Brink’s Global Services is internationally recognized as a provider of secure storage and logistics solutions. Further, the company has highly secure facilities across the globe to choose from.

GoldStar Trust Company

This depository focuses on providing services related to self-directed IRA custodianship as well as storage solutions. Currently, the company serves more than 60,000 investors with more than $3 billion in assets under control.

Perth Mint Depository

Based in Australia, Perth Mint Depository has a reputation for being among the safest and most secure locations for precious metal storage in the world. The company also provides clients with an online trading platform.

Strata Trust Company

Formerly known as Self Directed IRA Services, Inc., Strata Trust Company recently got a brand makeover. The company is known for serving smaller, independent investors with a range of services, including those of a depository.

Why Doesn’t the Account Holder Physically Possess the Gold?

Beginner and intermediate investors alike often inquire about whether they can physically possess the gold in their Gold IRAs, and the answer is typically going to be no. That being said, you can always withdraw your assets, though they will be subject to taxes. Further, past the age of 72, you will likely have minimum distribution requirements that require you to make withdrawals.

In a nutshell, the reason the Gold IRA holder doesn’t physically possess the gold has to do with IRS regulations that prohibit a Gold IRA trustee from holding the gold, and instead require that there be a party with custodial responsibility. Keep in mind that even though the account holder does not physically possess the gold, this person still retains ownership and investment control.

To learn more about investing in precious metals, including options for Gold IRAs, contact Oxford Gold Group.

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