Key Takeaways
- 1A 'checkbook IRA' uses an LLC to give you direct control over IRA investments.
- 2While legal for some investments, it's extremely risky for precious metals.
- 3The IRS has successfully challenged checkbook IRAs used for home gold storage.
- 4Prohibited transactions can disqualify your entire IRA—triggering massive taxes.
- 5Most reputable Gold IRA companies don't offer checkbook arrangements.
- 6Traditional custodian setups are safer, simpler, and IRS-approved.
Every few months someone asks me about "checkbook IRAs" for their gold investments. Usually they've seen an ad promising "direct control" over their retirement money. No custodian telling them what to do. No waiting for approvals. Just them and their checkbook.
It sounds great. Here's the problem: for precious metals, checkbook IRAs are a trap. Let me explain why.
What Is a Checkbook IRA?
A "checkbook IRA" (also called an LLC IRA or self-directed IRA LLC) is a structure where your self-directed IRA owns a limited liability company (LLC). You're the manager of that LLC, which means you can write checks and make investment decisions directly—without going through a custodian for every transaction.
For some investments—like buying rental property or making private loans—this can make sense. It streamlines things.
For precious metals? It's usually a recipe for disaster.
How the Structure Works
Here's the typical setup:
- You open a self-directed IRA with a custodian that allows alternative investments
- Your IRA invests in a newly-formed LLC (usually in a state like Delaware or Wyoming)
- You become the manager of that LLC
- The LLC opens a bank account—the "checkbook"
- You can now write checks from the LLC to make investments
The appeal is obvious: instead of submitting paperwork to your custodian every time you want to make an investment, you just write a check. Faster, more flexible.
Why It Doesn't Work for Gold
Here's where people get into trouble. They set up a checkbook IRA, buy gold through the LLC, and then... store it at home. After all, the LLC owns the gold, not them personally. So it should be fine, right?
Wrong.
The IRS requires IRA precious metals to be stored at an approved depository. It doesn't matter if an LLC is in the middle of the ownership chain. The metal still needs proper storage. Taking possession—even through an LLC—is treated as a distribution.
The McNulty Case
Prohibited Transactions
With a checkbook IRA, it's incredibly easy to accidentally commit a prohibited transaction. These include:
- Using IRA assets for personal benefit (even temporarily)
- Storing IRA property at your home
- Buying assets from or selling assets to "disqualified persons" (family members, etc.)
- Using IRA funds to pay personal expenses
With a traditional custodian setup, the custodian acts as a guardrail. They won't approve transactions that violate the rules. With a checkbook IRA, you're on your own. One wrong move and your entire IRA is toast.
The Real Risks
Full IRA Disqualification
One prohibited transaction can disqualify your entire IRA. Not just the problematic investment—the whole account. You'll owe taxes on everything.
Early Withdrawal Penalties
If you're under 59½ when your IRA is disqualified, add a 10% early withdrawal penalty on top of the income taxes.
Audit Risk
The IRS knows about checkbook IRA schemes. These structures face higher scrutiny. An audit years later could uncover issues you didn't even know you had.
No One to Blame But Yourself
The company that set up your checkbook IRA isn't responsible for your compliance. If you mess up, you pay the price—not them.
Skip the Complexity
Find a Gold IRA company that handles everything the right way—no LLC gymnastics required.
Find a CompanyA Better Approach
For precious metals, the traditional custodian arrangement just works better:
- IRS-approved: The structure is explicitly allowed under the tax code
- Proper storage: Your metal goes to an approved depository automatically
- Compliance guardrails: The custodian prevents prohibited transactions
- Insurance: Depositories carry massive insurance policies
- Simpler: No LLC to maintain, no state filings, no complexity
Yes, you give up some "control." But that control mostly means the ability to make mistakes the IRS will punish you for. The trade-off isn't worth it.
For gold investments, stick with a reputable Gold IRA company that uses standard custodian arrangements. See our company reviews for recommendations.
Checkbook IRA FAQs
Is a checkbook IRA legal?
The basic structure—an IRA owning an LLC—is legal. However, the way it's used matters enormously. Using a checkbook IRA to store gold at home, for example, has been ruled a prohibited transaction by the Tax Court. The legality depends entirely on following IRS rules.
Can I use a checkbook IRA for gold?
Technically yes, but it's extremely risky. The gold must still be stored at an approved depository—not at your home or in a personal safe. Most people who want a checkbook IRA for gold want it specifically for home storage, which violates IRS rules.
What happens if I violate checkbook IRA rules?
If the IRS determines you engaged in a prohibited transaction, your entire IRA can be disqualified. This means the full value is treated as a distribution—you owe income tax on everything, plus a 10% penalty if under 59½. On a $100,000 IRA, you could lose $40,000+ instantly.
Why do companies promote checkbook IRAs?
They charge fees to set up the LLC structure. Some also sell gold at high markups. The 'checkbook control' pitch appeals to people who distrust custodians. But the companies setting these up aren't liable when the IRS audits you.
Written By
Thomas Richardson
Thomas is a former wealth manager with 20+ years of experience. He founded Rich Dad Retirement to expose the flaws of traditional "paper asset" retirement planning and educate Americans on the stability of physical precious metals.