In the event of the passing of a loved one, it is possible you may inherit some of their assets, which are items that can be passed down and are often of monetary value. A few of the many types of assets you may receive are bank accounts, real estate, gold and other precious metals, jewelry, and more.
When you inherit an asset, there may be rules or guidelines you will want to adhere to, such as estate taxes you may have to pay or documents that will need to be signed to pass the asset to the next person. Inheriting assets can be a more complicated process than one may initially realize due to these added rules.
Rules to Follow When Inheriting Gold or Other Precious Metals
When you inherit gold or other precious metals, there are different rules and guidelines depending on what you choose to do with your inheritance. Trust & Will is going to break down the guidelines based on whether or not you plan to keep the gold or other precious metals or sell them.
If You Keep Inherited Gold or Precious Metals
When you inherit gold or other precious metals, it counts toward the amount of money you can inherit and not have to pay any taxes on. Federally, this amount is quite high at $11.7 million. However, your state may have its own individual inheritance taxes that you will want to be sure to read over.
If the amount of your gold or precious metals—along with the rest of your inheritance—is below $11.7 million, you will be able to keep them tax free. If you receive over this amount, you will have to pay taxes on the amount of gold or precious metals that exceed the limit.
If You Sell Inherited Gold or Precious Metals
When you choose to sell inherited gold or precious metals, you may incur a tax liability upon the sale of the item, dependent on the specific circumstances. To make this determination, the gold or precious metals will have to be professionally appraised to determine their fair market value. The IRS defines fair market value as "the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate." (Regulation §20.2031-1).
The appraisal process will occur twice to evaluate their worth, as it is constantly fluctuating. First, they will be appraised based on their worth on the day the person you inherited them from passed away. The second appraisal should take place on the day you choose to sell the assets.
When you choose to sell, you will not be taxed on the amount that the gold or precious metals were worth when they were first appraised. However, at the time that you choose to sell the gold or precious metals, they may end up being worth more than when you originally inherited them. In this case, you will be liable to pay taxes on the additional amount of money you may make from selling them. This is known as capital gains.
According to the IRS, gold and precious metals are considered collectibles and can be taxed at a maximum of 28% when they are sold. Therefore, you will pay capital gains taxes up to 28% on any additional money you make on the sale of gold or precious metals. You will be responsible for reporting this to the IRS when you pay your taxes at the end of the year, as the taxes will not immediately be taken out upon selling them. However, if you do not make any additional money on the sale of your inherited gold or precious metals, you will not be required to pay any additional estate taxes.
Importance of Estate Planning for Gold or Other Precious Metals
Estate planning will be beneficial when you are passing down inherited gold or other precious metals because, unlike houses and cars, there are no deeds required to register ownership of gold or precious metals. At the same time, their worth is not within a bank account, making gold and precious metals their own worth separate from your cash. The only direct evidence you may have that you own gold or precious metals is through tax returns. However, the amount of gold or precious metals you own may change throughout the year after you submit your taxes. Therefore, documenting within your Estate Plan, the exact value of the assets you are passing down - and where it is located, can be very beneficial to the person managing your estate after you pass.
Including this information in your Estate Plan also gives you the opportunity to have full control over who you want to inherit your gold or other precious metals. If you do not create an Estate Plan and designate who you want to inherit your gold or precious metals, it is possible they may end up in the hands of someone you may not have wanted it to go to.
Without an Estate Plan explaining who you want to inherit your assets—including gold and other precious metals—your family and loved ones will be put through unnecessary added stress at a time when they should be making room to grieve your loss. They will instead have to spend time and money determining who is meant to inherit your assets. This means hiring an attorney to navigate the time-consuming and complicated probate process. This can lead to frustration and unnecessary disputes among family members that could have been easily avoided by having an Estate Plan.
Estate planning is a complicated but important process. You cannot know what the future may hold, but you can plan for it. That is why Trust & Will is committed to making estate planning easier with our affordable online estate planning services. With Trust & Will, you can create your state-specific Trust-Based Estate Plan and Will without ever having to leave your home. If you are unsure where to start, Trust & Will has you covered with a free quiz that will point you in the right direction. Visit our website today to learn more about how to create your Trust and Will online!
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