When investing in precious metals, you have the option of storing them at home, a bank or in a third party storage firm known as a depositorium. Depositories are required for IRA allocations and can offer many benefits to investors.
Look for a depository that offers daily transaction reports, an internal auditing system and external audits of inventory. Also, inquire about segregated versus non-segregated storage.
Security
A precious metal depository takes many steps to ensure the safety of its clients’ assets. Its vaults are under 24/7 surveillance using video, audio and armed guards. Robbery in these facilities is extremely rare.
For investors concerned about privacy, a private depository is often a better option than storing their metals at home or in a safe-deposit box at a bank, which must disclose contents to FinCEN and Patriot Act regulations. Adding a bullion-storage rider to a homeowner’s policy also is an option, but it can cost more and may not be feasible in all locations.
Investors should select a depository that offers daily transaction reports and monthly internal audits to confirm their assets’ storage status. They should ask whether their assets are stored in segregated or allocated form (which means separate from the assets of other clients) and request an all-risk insurance policy that covers theft, damage and natural disasters. They should also make sure the depository provides 24/7 online access to custody data such as itemized reports, shipment tracking and other logistical activities.
Insurance
Precious metal depositories are able to offer insurance policies and coverages that go far beyond what home-storage options can provide. For example, many precious metals depository facilities have an all-risk policy that protects customers against theft, fire, and other calamities.
These policies also typically cover the value of numismatic coin items and other valuables, rather than just their base metal content value. Many of these insurance policies are backed by Lloyd’s of London, which is the world’s leading provider of specialized asset insurance.
Another benefit of storage at a precious metals depository is that it can help to protect individuals’ privacy by eliminating the need to store valuables in their homes. When people stash valuables at home, they make themselves potential targets for burglary or other criminal activity. However, when a person stores their assets at a precious metals depository, they remove themselves from this risk and can focus more attention on other aspects of their portfolio.
Taxes
Many investors are concerned about whether they should pay taxes when selling their precious metals at a profit. In fact, like stocks and mutual funds, precious metals are classified as capital assets, meaning they are taxed at the same rates as other investments.
In a depositorium, your bullion can be kept in either allocated storage (where the items are separated from others in a compartment reserved for private use) or non-allocated storage where your metal is held alongside other investors’ bullion in communal areas. Generally, both types offer a high level of protection from theft, loss and damage.
When you sell your metals, you can typically convert a taxable sale into a tax-deferred exchange by including specific language required by IRS regulations in the purchase and sales agreement. You also need to establish a qualified escrow bank account and an escrow holder that agrees to be subject to the tax provisions of Section 1031. If these requirements are not met, the exchange will fail.
Convenience
For customers who want to keep their precious metal investments away from home, depositories offer enough storage space for large collections and are designed with high-level security in mind. They have a number of security measures, from locking doors to keeping constant surveillance on all activity. They also provide auditing services and insurance policies.
When customers store their bullion at home, they make themselves potential targets of robbery or natural disasters and must pay for expensive personal property insurance. By turning over their valuables to a third party, they rid themselves of these risks and free up room at home for more important items.
In addition to ensuring that all assets are safe and secure, many metals depository companies will supply daily transaction confirmation reports as well as real-time management and reporting tools. Investors should also ask whether their metal is stored in segregated accounts off of the company balance sheet and how often they conduct internal and external audits to ensure the safety of their investments.
