Tech investor Peter Thiel made headlines in 2021 for his $5 billion tax-free Roth IRA piggy bank, thanks to alternative investments made through a self-directed IRA. But with this success comes risks associated with self-directed and checkbook IRAs, especially when it comes to investing in assets like bitcoin.
The different IRA structures, including brokerage and bank IRAs, self-directed IRAs, checkbook IRAs, and non-checkbook self-directed IRAs, each come with their own set of risks. These risks include liquidity issues, legal structure concerns, misreporting transactions, deemed distribution treatment, and prohibited transactions.
For those looking to invest in bitcoin through an IRA, the Unchained IRA offers a unique approach that mitigates these risks. Unlike a checkbook IRA, the Unchained IRA does not require self-reporting of transactions and uses collaborative custody to actively monitor inflows and outflows of IRA vaults. This structure helps users remain compliant with current IRA rules and regulations, reducing the potential for pitfalls.
As the IRS and Congress pay special attention to how self-directed IRA structures are used and regulated, the landscape for bitcoin IRAs may face increased scrutiny. Choosing the right IRA structure, like the Unchained IRA, can help investors navigate the complexities of investing in alternative assets like bitcoin within a tax-advantaged account.
