7718 / What are the gift and estate tax consequences of precious metals investments?
As collectibles, precious metals are capital assets, and treated like any other capital asset for purposes of making gifts (and determining the associated gift and estate tax treatment under federal transfer tax rates that are as high as 40 percent in 2013 and beyond). States may also impose gift, estate, or inheritance tax on such assets. As of 2024, 17 states, plus the District of Columbia, still impose an estate and/or inheritance tax.1 Most state exemptions are lower than the current $13.61 million federal estate tax exclusion effective in 2024,2 and a number of states have indicated that they will not raise state-level exemptions to match the currently high federal exemption.3 Financial planning needs to take both applicable federal and state law into account.
Planning Point: The American Taxpayer Relief Act increased the top estate and gift tax rate to 40 percent from 35 percent for estates beginning in 2013. However, for 2024 the lifetime gift and estate tax exclusion for estates increased to $13.61 million (as adjusted annually for inflation). Therefore, state estate and inheritance taxes are increasingly more important and need to be considered for planning purposes, although only about 19 states still impose one or the other or both.
In general, for current gift and estate tax purposes the fair market value of the asset at the time of the gift transaction or at death is usually used.
Planning Point: The stabilization of the federal gift and estate tax regime restores the clear need for the use of life insurance to cover the taxation of collectibles and other hard assets, like real estate. These types of assets often have significant value but may be difficult to liquidate in a timely fashion to maximize that value and still allow the estate to pay the required estate taxes in the required time frames.
1. See generally for more updated information, www.TaxFoundation.org. According to the site, only Maryland imposes both taxes.
2. Rev. Proc. 2023-34.
3. Op. cite, Footnote 1.