Can I hold precious metals that are owned by my Solo 401k Trust in a safe at home?
No, as this would raise a number of problems. As trustee, the individual may not use plan assets for his or her own benefit. If the coins are held in the individual’s safe – that would look like a distribution from the plan. Plan assets must be held in a trust and not in the individual’s personal possession. You should use a third party depository.
IRC Section 408(m) clearly states that gold, silver, or palladium bullion must be held in the physical possession of a U.S. trustee, otherwise known as a U.S. bank or financial institution. This poses the question: if a plan holder holds precious metals in a safety deposit box at a U.S. bank in the name of the 401k Trust, are the metals in the “physical possession” of a U.S. trustee or bank?
The argument is that the metals are being stored in the bank; they are not in the physical possession of the plan holder. Although the plan trustee controls the safety deposit box in which the metals are stored, the metals are not in the possession of the plan trustee. The metals are arguably in the possession of the bank since they are being held in the bank, although they are not in the control of the bank.
From a legal standpoint, possession is not defined by control, meaning one can be in possession of an item but not control or ownership. Hence, many tax practitioners take the position that holding metals in a safety deposit box in the name of the 401k Trust satisfies IRC Section 408(m) required of “physical possession”.
Although there is little IRS guidance on holding IRS approved coins personally, it’s fairly safe to assume that they should be in physical possession of a trustee (U.S. bank or financial institution). In fact, most tax practitioners believe they should be held by a trustee, as coins may also be bullion.