Cold storage wallets, also known as offline or hardware wallets are a way to hold your own keys to your Bitcoin and cryptocurrency holdings.

Some clients prefer to hold their own keys (and keep their crypto in a cold storage wallet) to avoid potential hacking threat on exchanges. The most popular hardware wallet companies are Trezor and Ledger.

Keep in mind storing your crypto on a hardware wallet requires additional technical skills. If you are not technologically savvy, we'd recommend you keep your crypto holdings on an exchange or with an insured professional custody solution.

The IRS has not yet issued guidance on holding crypto owned by a Solo 401k trust or Checkbook IRA LLC in a hardware wallet. While we believe it's allowable, there are a few important best practices to follow:

  • Only store retirement-owned crypto assets in the account/sub-account on your hardware wallet. Never put personal funds in the same account/sub-account

  • Always keep excellent records. As the 401k plan administrator and/or LLC manager, it is your responsibility to keep track of how you originally purchased the crypto (with retirement funds).

  • Only store crypto in the sub-account for your retirement funds on the hardware wallet that was purchased with retirement funds. You should be able to trace back the provenance (history) proving the original exchange account was opened in the name of your retirement account (Solo 401k Trust or IRA LLC) and that only retirement funds were deposited into that account, used to buy the crypto and then move that retirement-owned crypto onto your hardware wallet.

  • Consider having one hardware wallet for just your retirement-owned crypto and a second hardware wallet just for personal (non-retirement crypto).

Note: Using a hardware wallet requires a level of technical expertise and operational security measures. If you lose the keys, password, PIN, or recovery seed phrase to your hardware wallet those assets may be gone forever. If you lose access to your hardware wallet holdings, there is no way to get them back. If you are not 100% comfortable with highly technical endeavors, we'd recommend you leave your crypto on an exchange or store it with a professional insured custodian.

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