By Garrett Sutton, Esq.
Gold, silver and other precious metals require asset protection. We live in a litigious and uncertain world, which is most likely one of the reasons you invested in precious metals in the first place. It is important to know that if gold, silver, platinum and other metals are held in your individual name, they too can be lost in a lawsuit.
LLC, a Gold Standard for Precious Metal Asset Protection
By using an LLC to hold title to your precious metals you have much greater protection. With precious metal assets in an LLC, if you are sued individually a judgment creditor (the person who won the lawsuit) has to fight through the LLC to get at the assets. This is a difficult process.
The Strength of Wyoming LLCs
By using a Wyoming LLC, all the judgment creditor can get (after hiring a Wyoming attorney to go to court in Wyoming) is a charging order. The charging order is a court order directing the judgment creditor to receive any distributions made from the LLC. This means they can’t force you to sell the metals and give the money to them. All it allows is for monies – when distributed – to go to the judgment creditor. In the case of precious metals what distributions will be made? You typically would not be distributing your gold, silver or platinum. Instead, you are holding them in the LLC for protection. You are free to hold them in the LLC until the judgment creditor goes away or settles for pennies on the dollar. More importantly, by holding valuable precious metals in an LLC the claim may never be brought in the first place. LLCs offer gold asset protection, silver asset protection and precious metals asset protection.
Privacy and LLCs
Another important feature of the LLC is privacy. Wyoming law allows for nominee managers, whereby another person is listed as the manager, thus keeping your name off the public records. (It is both incredible and disturbing what people can find out about you on the internet.)
Our nominee manager is a professional living outside the United States. She won’t know about or have access to your precious metals. That is between you and your gold and silver dealer. But by using a nominee your name stays private, which is an excellent strategy these days.
Title to your gold and silver must be in the name of the LLC for you to have protection in place. There are two ways to do this. First, you can form the LLC and buy the precious metals in the name of the LLC. (We have LLCs already formed for this purpose if you are in a hurry.) By purchasing metals in the name of the LLC the chain of title is clear. Or, if you already own the metals in your name or now buy them in your name, you can later transfer title to your LLC. The preferred way to do this is a transfer agreement signed before a notary.
Wyoming and Nevada have the most protective LLC laws. The difference is price in the form of annual fees. Nevada is $325 per year versus only $50 a year for Wyoming. With our resident agent fee of $125 for either Nevada or Wyoming, total annual cost is $450 for Nevada versus $175 per year for Wyoming. Setting up the LLC (a one time fee) is $1,210 for Nevada and $830 for Wyoming. The difference is, again, state filing fees.
Qualifying to Do Business May Be Optional
But unlike other situations where protection is also required – rental real estate, for example – with precious metals, you don’t need to qualify to do business in the state where the assets are located. With precious metals your LLC’s business is protecting assets not operating a business. And a Wyoming (or Nevada if you want) LLC is all you need, no matter what state you are in. That said, California can present challenges, so be sure and speak with an account representative about your specific situation.
Tax wise you won’t pay any extra taxes by using an LLC to hold gold and silver. Since the LLC is a flow through tax vehicle, taxes on gains will be taxed to you personally, just as if you held it in your individual name. The difference is with an LLC you have asset protection. By holding gold and silver in your individual name (or even in your living trust) you are exposed.
Misconceptions of IRAs
Many people are using IRAs to hold their gold and silver. There is a misinterpretation that IRAs offer complete asset protection. In actuality, it is much more complicated. Federal law protects IRAs up to only $1 million but state laws can reduce that amount. For example, in Nevada only $500,000 in IRA accounts is protected.
The better practice is to have your self directed IRA form an LLC to hold the gold and silver. A graphic example is as follows:
Self Directed IRA
In this structure, if you were to be sued individually, a judgment creditor (or bankruptcy trustee) could seek your IRA assets. If they can get past the IRA they still have to fight to get through the LLC. You have much better protection using an LLC to hold your IRA assets.
All told, gold, silver and other precious metals deserve asset protection. At just $175 per year to maintain a Wyoming LLC, you are buying the best asset protection insurance possible.
For more information please call 1-800-700-1430 or fill out the form on this page.