In our previous SPOTLIGHT, we explained why you should consider buying gold and precious metals to build a solid financial safety net for your children.
As any other form of investment, gold requires some planning and preparation.
But don’t worry, we’re here to help.
We’ve made a checklist of the key things you should think about before getting some gold coins and bars for your children.
Here it is:
#1: Make sure you choose the right gold product
As you probably already know, there are two different types of investment gold – physical gold (gold coins and gold bars) and gold traded on the stock exchange a.k.a paper gold.
While paper gold may seem like a convenient way to invest in gold, it might carry some risks. For example, gold ETFs (paper gold) are prone to counterparty risks. This means that your gold is held by a financial company you must rely on to manage your investment.
A company or broker in charge of your ETFs could go bankrupt or fail to live up to their obligations, misrepresenting the true state of their portfolio.
Also, the amount of gold reserves held by this company is not always sufficient to support the sale and trade of paper gold certificates.
So if too many investors wanted to cash in their paper gold, the fund that sold it to them might not have enough of the physical metal to repay everyone.
Physical gold, on the other hand, can’t go bankrupt and will belong only to you and your family, which makes it a safer long-term investment to build generational wealth for your children.
Read our SPOTLIGHT to learn more about the key differences between paper gold and physical gold.
#2: Think about buying gold bars vs. gold coins
So if you decide to buy physical gold, you have two options to consider: gold bars and gold coins.
Both have certain benefits to offer:
Some collectible coins are aesthetically pleasing as they are a sound investment, which makes them a family heirloom, much like jewelry that can have an emotional significance for your kids.
Also, legal tender coins, like the 20 Swiss Franc Vreneli gold coins, are easily recognizable and can be sold in smaller amounts at different price points.
Gold bars, on the other hand, give you only one chance to sell all your gold at one particular price.
They are a long-term investment that will potentially let your kids benefit from gold price gains over the long run.
Quick tip
Larger gold cast bars offer a good opportunity to buy more gold at a cheaper price per gram. This is simply because bars carry lower production and design costs than coins.
So if you can’t decide what to buy as a gift to your children — gold bars or gold coins — a healthy mix of both could be a good option if you want them to benefit from potential future gold price gains.
#3: Think about storage
Before you buy physical gold for your children, remember to think about storage.
What would be the most convenient way to store it for them?
You basically have three options:
- keep your gold at home
- store it in a bank safe deposit box
- store it in a secure vault
For example, if you choose home storage, you will have to make sure you keep it somewhere safe.
You can find all sorts of creative places for storing your precious metals, just make sure they’re dry and fireproof.🙂
Today, a home safe probably remains the most obvious and safest home-storage solution, although it all depends on the type of safe you choose.
If it’s a simple fireproof document safe, experts warn it might be completely worthless for preventing thieves from breaking into it.
That’s why choosing third-party storage might be a better option, as it often gives you the benefit of high protection and insurance.
Read more about the different ways to store your gold products.
#4: Learn about taxes on gold and inheritance
Don’t forget that gold and precious metals can be subject to different taxes that vary from country to country.
When buying investment gold (coins, cast bars, or minted bars), you pay no taxes because, in most countries, investment gold is VAT-free.
Now, will your children have to pay taxes when they inherit gold or precious metals?
The short answer to this is it depends on what you choose to do with your inheritance.
In most countries, if you decide to keep your inherited gold, you won’t have to pay any taxes.
In the United States, for example, inherited gold counts toward the amount of money you can inherit without paying taxes. Federally, this amount is quite high, at around $11.7 million.
But, if your children choose to sell their inherited gold and make a profit from it, they may have to pay capital gains taxes.
What is the capital gains tax?
Simply put, it’s a fee on the profit you get from selling your precious metals.
The capital gains tax rates differ from country to country. For example, Italy has a rate of 12.5% for private investors, while the U.K. applies a capital gain tax on precious metals varying from 10% to 28%, depending on your income level.
Notably, some countries like Switzerland, Belgium, and Germany, do not apply the capital gains tax on precious metals.
So before passing your gold savings on to your children, don’t forget to check the current tax rules in your country because they may change.
And one last thing, make sure your children keep the certificate of purchase and ownership as they can help your children pay fewer taxes on the sale of their gold in the future.
To learn more about this, read our SPOTLIGHT about taxes on gold and precious metals.
P.S. Whatever you choose, don’t forget to discuss with your children early enough about their gold inheritance. Whether it’s about storage or tax, make sure they’re well-informed and will know how to handle their gold inheritance in the best of ways.
