Precious metals such as gold and silver bullions that you plan to pass on to your beneficiaries are included in the total value of your estate. Depending on the size of your estate, it may be subject to taxes, leaving your children and grandchildren with much less than you anticipated.
Gold and silver coins and bars are considered collectibles. Long-term capital gains on the direct sale of collectibles are taxed at a maximum rate 28%. Hence, if you leave your heir bullions worth $10,000, the tax on that exchange could amount to $2800. But did you know that there are ways to bypass these taxes? If you give the collectibles to them as a gift, it can be exempted from taxes.
This year 2015, the Internal Revenue Service has raised the lifetime gift-tax exemption, also called basic exclusion, from $5.34 million in 2014 to $5.43 million, due to inflation adjustments. In addition to that rule, a person may make tax-free gifts of up to $14,000 (other than gifts of future interests in property) per person per year to as many individuals as they want. Additionally, if a person gives up to $145,000 (other than gifts of future interests in property) to his or her spouse who is not a United States citizen, the gift is not considered taxable.
If you are married, “gift-splitting” provides a greater power to transfer wealth. You and your spouse can separately give a gift amounting to $14,000 per year to the same recipient, which means the person can enjoy a tax-free gift totaling to $28,000. And you can give separate gifts of $14000 to as many individuals as you want. Make sure that you keep track of these gifts. You can end up owing gift tax of up to 40% if you go over the basic exclusion limit.
Since gold and silver are far more inflation-resistant compared to paper money, it is a good idea to purchase these precious metals and give them to your children as gifts instead of simply writing them a check.