Dear Liz: My father was eccentric and a follower of conspiracy theories. He didn’t trust banks or the stock market and invested most of his money in coins and gold bars.
We are talking about millions of dollars at the current price of gold.
My parents set up a living trust, so when my mom dies, I’m confident that the gold will be distributed fairly to myself and my siblings, without much hassle about probate. But I have no idea how to convert all that gold into a more liquid investment like an IRA or a money market fund. How can I do this and not be inundated with fees and taxes?
Answer: Hopefully the gold is stored safely and properly insured. It would be a shame if burglars walked away with your inheritance.
If your mother’s estate is large enough to owe estate taxes, the estate will pay them, not the heirs. (The current exemption is over $ 11 million per person, so very few estates owe this tax.)
Under current law, gold will receive a new “increased” tax value on the day your mother dies, said Jennifer Sawday, an estate planning lawyer in Long Beach. You should note the price of gold on that day, using a reliable gold pricing site, and print the information for future tax purposes, Sawday said.
Once you have received the gold, you can take it to a precious metal exchange and cash it. If the price you get is higher than the price of gold on the day your mother died, you would have a taxable capital gain. If the price is lower, you would have a capital loss. You owe no tax and could use the loss to offset capital gains elsewhere or, if you have no gains, up to $ 3,000 of income per year until the loss is exhausted.
You can deposit the money in a bank account or open a brokerage account and choose your investments there. These investments can include a money market fund as well as stocks, bonds, mutual funds, etc.
An IRA is a type of retirement account, not an investment, and requires you to have earned income to contribute. The contribution limit is $ 6,000 this year, or $ 7,000 if you’re 50 or over, so you won’t be able to put much of your inheritance into an IRA anyway.
A great use of some of that money would be to hire a fee-based trust financial planner who can help guide you on how to invest the money wisely and with the goal of minimizing taxes.
Liz Weston, Certified Financial Planner, is a Personal Finance Columnist for Nerdwallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at AskLizWeston.com.