Inheritance and Taxes: Saving in Gold for Your Children's Future
Why do we put our money into long-term investments, including physical gold? To protect our savings, have a cushion if things get tough ... and secure the future of our loved ones!
During the Covid crisis, Eurozone consumers saved a record amount of money, accumulating almost 600 billion euros in cash! As public spaces and big shopping centers reopened, a new consumer buzz began.
And yet, while some people enjoyed themselves after long weeks of quarantine, others preferred to play it safe, putting more money into savings and investments.
Apparently, there has been a growing interest in gold as a savings and investment solution. As a long-term investment, gold has many advantages: security, an increase in value over the long run … and its role as a legacy for your children and family.
Let us explain!
Gold is an inheritance that can be passed down easily
Many families invest in property, whether it is their primary or secondary residence. The aim is twofold: to have an extra income (or at least avoid paying rent after retirement) and to leave a legacy for their children.
Usually, "investing in property" has a strong cultural meaning: when confidence in banks is waning, parents want their children to be left with something tangible... despite the administrative hassle that often comes with real estate ownership.
Before settling an estate, your children will most likely have a few bills to pay. Furthermore, if you have more than one child, there is a risk of conflict between those who want to sell and those who want to keep the property.
That’s why some parents might prefer to go for an alternative. For example, physical gold. Whether in the form of bars or coins, your children can share their gold inheritance equally (no jealousy 😉).
The golden rule of legacy planning: being clear on your paperwork
Make sure you keep all your invoices and certificates
When buying gold, you will get various documents that should be kept as safe as your gold bars and coins.
These documents include:
- A certificate of ownership mentioning, in particular, the number of products, their title, weight, and value.
- An invoice detailing each purchase and the date it was made. This document is very important in countries such as France, where certain taxes are gradually lowered over the years.
Resist the temptation to unbox your minted gold bars!
For example, minted gold bars, such as Lady Fortuna, come in secure packaging, but try not to open it, even if you're dying to see and touch your gold bar!
Otherwise, you are facing two risks:
- You may somehow damage your gold bar by handling it incorrectly since investment gold of the highest purity is extremely malleable.
- Opening the packaging may reduce the value of your minted bars! Cast bars, however, can be touched, although we advise you to always wear protective gloves to avoid scratches or marks.
Start preparing your will
There are frequent headlines about gold savings that are lost and then found decades later. Consider putting your beneficiaries as well as your wishes down on paper, so you don't accidentally end up on the front page of your local newspaper🙂
Obviously, writing your own will is far from the most fun thing you can do. And although there's no rush, it's still a good idea to draw it up so that your loved ones get their inheritance right.
The form of a will differs from one country to another
Of course, drafting a will isn't something you should take lightly! Your will can be revoked if it has inconsistencies, violates the law, or fails to follow certain rules.
Regardless of the legislation in force, there is one thing all countries agree on: it's better to get a notary's or lawyer’s advice when writing your will.
What are the rules in different countries?
For example, in the U.K., you need to get your will formally witnessed and signed to make it legally valid.
In Switzerland, you are required to make a handwritten, public, or oral will.
In France, unless you use a notary, only handwritten forms are accepted.
Taxes and inheritance: the bill, please!
So, the first step is to make sure your heirs get their share! Now, let’s see how much their inheritance will cost them before they can benefit from it.
In France, physical investment gold is subject to standard inheritance tax, which is calculated based on two factors:
- The amount of inheritance.
- The degree of the relationship between you and your heirs.
Despite some subtle differences among Swiss cantons, gold is subject to the inheritance tax… from which spouses, registered partners, and descendants are exempt.
Like in France, taxes in Italy are calculated based on the degree of relationship and the total value of assets.
The United Kingdom
In the U.K., inheritance tax is 40% if the total amount of the inheritance (including gold) exceeds £325,000.
If you know the U.K. tax system really well, you can play around with gifts during your lifetime to lower the (slightly steep) bill.
Is it taxable or not?
Let's go back to the basics to get a clearer picture! It is important to distinguish between investment gold and other gold assets that you may own (e.g. jewelry, collector's items, etc.).
Investment gold comes in the form of gold bars and coins and should be made of pure gold: its purity must be equal to or greater than 995 thousandths.
Investment gold is also subject to specific tax rules, which is why it’s important to define the nature of your assets, so you can plan ahead and avoid calculation errors.
Giving your kids an early inheritance
Many people opt for an early inheritance to avoid high inheritance tax or help a close relative (e.g. a nephew or niece) or a lineal descendent to build their wealth.
Clearing the blur of taxes
Family gifts, whether it’s a sum of money or something tangible like investment gold, are generally tax-free, as long as they don’t exceed certain thresholds set by each country.
However, small gifts given as part of a special event (birthday, Christmas, graduation, wedding) are different. As long as they are of a "reasonable" price (depending on whom you ask), these gifts are neither taxed nor subject to any declaration.
Can you pass on gold as an early inheritance without declaring it?
Bad news for those who hate bureaucracy: gold given as an early inheritance should be declared. This is mainly due to two reasons:
- to ensure the ownership of gold bars or coins you want to pass on,
- to allow the recipient to benefit from gold's advantageous taxation, particularly degressive taxes.
In any case, consider contacting your notary to declare your early gold inheritance.
Tax advisors, to the rescue!
Taxes, early inheritance... With so much information available, it can be challenging to make the right choices when it comes to optimizing costs and building wealth.
So, instead of putting your investment plans on hold, consider seeking advice from a lawyer or tax expert.
What’s the bottom line?
👉 Unlike real estate inheritance, investment gold, which comes in coins and bars, can easily be divided among your family members.
👉 In most cases, investment gold is not subject to complex inheritance taxes.
👉 In general, it can be more tax-efficient to pass it on as an early inheritance.