Last Updated on October 20, 2020
IRA Financial’s Adam Bergman Esq. answers questions about gifting an IRA asset, transferring Bitcoin to another IRA and a horror story about excessive fees from a third-party cryptocurrency broker.
Question 1 from Mark S in Fort Myers, FL: Can I gift an asset of my Self-Directed IRA to my daughter?
First, you need to know that a retirement account, such as an IRA, as an asset of yourself. You own the Self-Directed IRA and the IRA owns the assets held within. To answer Mark’s question, the answer is no, you cannot gift an asset from your Self-Directed IRA to your child. If you’d like to pass on an IRA-owned asset, you have to first take a distribution.
For example, you wish to gift your daughter with $10,000 worth of Apple stock held in the plan. You would have to withdraw the stock from your IRA. Assuming it’s held in a traditional plan, you would pay taxes on the $10,000. Further, if you are under age 59 1/2, an early withdrawal penalty of 10% would be due. You can then gift the stock to your daughter.
Essentially, you cannot transfer any asset owned by the IRA to someone else. When you distribute it from the plan, it loses all the tax advantages, since you must pay taxes on the amount withdrawn. Obviously, when you pass away, you can leave the IRA to your child, who must follow the rules of the Inherited IRA.
Question 2 from Danielle K in Nashville, TN: Can I transfer Bitcoin I own in an IRA with another custodian to your Gemini IRA platform?
If you are unaware, IRA Financial has a partnership with Gemini Exchange, a leading cryptocurrency exchange. With our partnership, you can set up a retirement account and invest in cryptos, without the need of a third-party broker and unnecessary fees. Further, you don’t even need an LLC to invest in Bitcoin and other cryptos. You can simply open an IRA directly at Gemini.
Danielle wants to transfer Bitcoin she owns in her IRA with a different custodian. The answer is yes, she can. She can simply transfer her IRA and the assets in it to a new custodian. As mentioned, the IRA can be opened with Gemini, your Bitcoin will transfer to the plan. Danielle can start buying and selling cryptos on the Gemini exchange.
To be clear, you can leave an IRA custodian for any reason. Maybe fees became to excessive, or they won’t let you invest in something you wish. Unlike a 401(k) plan, you do not need a triggering event to switch IRA custodians. You simply transfer your funds to a new IRA at your chosen custodian.
Lastly, a sad client story about excessive fees paid to Bitcoin IRA third-party broker & gold company.
Staying on the topic of Bitcoin in an IRA, Adam Bergman wanted to share a horror story about an experience that was shared with him. Mr. Bergman wrote an article for our blog as soon as he received the email. However, he wanted to reiterate to the listening audience just how crazy this story is.
Essentially, a divorcee took all the money she got an invested it in Bitcoin at another IRA custodian and exchange. She used a third-party broker to buy and sell the cryptos. Of course, fees were expected. However, once she spoke to someone on the phone, she learned the cost of the fees – roughly 12%. She ended up paying $45,000 in fees to purchase the coins. Not only that, she will pay that much on fees to sell her investments.
A lot of third-party brokers prey on individuals who may not know the ins and outs of buying and selling cryptos. It’s a story Mr. Bergman really wanted to get out there and show people there’s a better way. Take some time and check out the article he wrote and listen to the last third of the podcast so you don’t fall into the same trap.
AdMail – Keep it Coming
We hope you enjoyed the latest episode of AdMail. Mr. Bergman will continue to respond to questions each week so long there is a demand for them! If you have any questions for him, email him at firstname.lastname@example.org.
As with his other podcasts, you can check out AdMail on SoundCloud. Be sure to subscribe to know when the next one pops up! Thanks for listening and have a great day, Self-Directed Nation!