Investing in Bitcoin is a certainly a possibility.
Chances are you have heard about it.
But what is Bitcoin?
It is a "cryptocurrency" also known as a virtual currency.
There is no administrator such as the U.S. Treasury or the Federal Reserve.
It is a peer-to-peer transaction system.
Users execute transactions directly in exchange for products, services, and other currencies.
According to a recent Kiplinger article titled “The Bitcoin IRA: 5 Essential Facts You Need to Know,” people can invest in Bitcoin.
As always there is a big difference between “can” and “should,” as we have noted before regarding other matters.
First, what is a SDIRA?
It is an IRA where you as the investor can buy any lawful assets for the IRA.
You can include traditional assets like stocks and bonds or alternative assets like gold ... or even Bitcoin.
What are appealing aspects of Bitcoin investment?
A single Bitcoin recently skyrocketed in value.
This currency went from eight cents in 2010 to $13,774.22 (0830 hours, CST, today).
Heady stuff, yes?
Still, there is a risk the value could drop.
No IRS Restriction
The IRS does have a few investment restrictions.
For example, an individual cannot make IRA investments in life insurance or collectible items such as coins, metal, stamps, or artwork.
But there are no specific rules against Bitcoin.
Technically, you could invest in this.
What are potential dangers of investing in Bitcoin?
Uncertain Investment Viability
Yes, the value of Bitcoin value has increased dramatically.
But it may not last.
If you are considering an investment in Bitcoin, you would be wise to make it a small part of your portfolio.
Banned in Some Countries
Not all nations are friendly to Bitcoin.
Although Canada and Australia explicitly allow for Bitcoin and Bitcoin transactions, others do not.
China and Iceland are two nations specifically prohibiting such transactions and trading.
What about the United States?
Bitcoin is permitted.
Regulating it has and continues to be debated.
For example, when asked for an opinion regarding campaign contributions could be made in Bitcoin, the Kansas Governmental Ethics Commission determined that it could not be used for state and local elections in Kansas.
Although the IRS has no explicit rules against investing in Bitcoin, it issued a statement of disapproval in 2014.
As with all investment decisions, any investment in Bitcoin should be done carefully.
Although appealing, Bitcoin investments may not be right for you.
Work with an experienced financial planner and estate planning attorney to determine what is best for you and your goals.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (November 27, 2017) “The Bitcoin IRA: 5 Essential Facts You Need to Know”