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Estate planning: Sell the coins or pass on the coins to my heirs?

derrybderryb Posts: 36,946 ✭✭✭✭✭
Just completed a lot of research on whether or not (given ample warning of an impending death) it is in the best interest of my heirs for me to sell my coins and leave them the cash, or pass the coins on to them. This of course applies to coins I am not planning on selling because I want the money for myself. Here is what I have learned:

When I sell coins coins I owe captial gains tax on the difference between the basis and sale price. The basis is the initial cost of the coin, improvement expenses such as professional grading, and selling expense. Also added to the basis are any buying costs such as an auction buyer premium. Basis is basically what I have tied up in owning and selling the coin. The higher the basis the lower the profit which results in lower taxes. For example if I sell a coin for $1500 that has a basis of $1000 I end up owing a capital gains tax on $500. This reduces the amount of cash that can be left to my heirs if I sell the coin.

On the other hand my heir will get more of my estate if I leave him the coins. Here's why: Inherited property receives a new basis at time of death of the previous owner. This new basis is the current market value of the property. In the case of my $1000 coin that now has a value of $1500, my heir gets to assign a new basis of $1500. He could then theoretically turn around and sell it for its $1500 market value and realize no taxable profit. Going this route, while requiring some effort on my heir to sell the coin, results in him getting a much larger share of my "coin estate." This applies to other inherited assets as well.

The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong

Comments

  • SmEagle1795SmEagle1795 Posts: 2,174 ✭✭✭✭✭
    Interesting, I'll be curious as to what other members know of this subject, but that sounds like a surprising loophole. I would think it would be difficult to calculate the current market value in many cases - if your heirs choose to sell instantly upon their inheritance, do they then not pay any taxes, as the current market value would be determined at that moment?
    Learn about our world's shared history told through the first millennium of coinage: Colosseo Collection
  • I believe similar principle apply to other assets including real estate - the cost bases of inherited house is it market value at the time of inheritance.
  • BUT! Then your child will have to pay taxes on the whole $1500.00
  • MrEurekaMrEureka Posts: 24,271 ✭✭✭✭✭
    Although I was aware of this, it occurs to me that I don't know what the rule is when inherited property is worth LESS than cost at the time of death.
    Andy Lustig

    Doggedly collecting coins of the Central American Republic.

    Visit the Society of US Pattern Collectors at USPatterns.com.
  • I inherit a farm at $10K an acre...Up on my parents death the said farm is worth $3K and acre, because this is where they bought it....But the market says the value per acre is 10k per acre...I would have to pay the difference of $ in taxes. As long as the property is not sold, if the property is under I think $3 million inheritance taxes are not collected. But if the property is sold taxes will have to be paid.


    You can also do a 1031 property exchange...Which will give you a year to trade your property for another property, if you can find someone to trade with.
  • derrybderryb Posts: 36,946 ✭✭✭✭✭


    << <i>BUT! Then your child will have to pay taxes on the whole $1500.00 >>


    Nope, your child pays taxes on the gain (difference between the basis and the sell price). In the case of the $1500 sale after inheriting the coin there is no gain, therefore no taxes due.



    << <i>I inherit a farm at $10K an acre...Up on my parents death the said farm is worth $3K and acre, because this is where they bought it....But the market says the value per acre is 10k per acre...I would have to pay the difference of $ in taxes. >>


    Nope, you owe no capital gains tax until you sell. And when you do sell your basis (your cost plus improvements) is the higher $10k an acre. This means you pay taxes, if any, on a lower profit than your parents would have if they had sold the property.

    Note that there is a seperate estate tax placed on estates of a certain value in the year the become an estate. This tax does not apply unless the estate is valued at more than $5,340,000. Do not confuse this with capital gains taxes that are due upon the sale of inherited assets. Inheritance tax, if any is due, is paid in the year of the death by filing an Annual Estate Income Tax Return.



    << <i>Although I was aware of this, it occurs to me that I don't know what the rule is when inherited property is worth LESS than cost at the time of death. >>


    Not positive, but i don't believe the heir is able to use it as a capital loss to offset other gains. Maybe an expert will chime in. If I am correct, in such a case, the heirs would receive no financial advantage of getting the coins instead of the cash since the previous owner, once market value dropped below the basis, could have sold them and realized no taxable gain.

    The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong

  • amwldcoinamwldcoin Posts: 11,269 ✭✭✭✭✭


    << <i>Just completed a lot of research on whether or not (given ample warning of an impending death) it is in the best interest of my heirs for me to sell my coins and leave them the cash, or pass the coins on to them. This of course applies to coins I am not planning on selling because I want the money for myself. Here is what I have learned:

    When I sell coins coins I owe captial gains tax on the difference between the basis and sale price. The basis is the initial cost of the coin, improvement expenses such as professional grading, and selling expense. Also added to the basis are any buying costs such as an auction buyer premium. Basis is basically what I have tied up in owning and selling the coin. The higher the basis the lower the profit which results in lower taxes. For example if I sell a coin for $1500 that has a basis of $1000 I end up owing a capital gains tax on $500. This reduces the amount of cash that can be left to my heirs if I sell the coin.

    On the other hand my heir will get more of my estate if I leave him the coins. Here's why: Inherited property receives a new basis at time of death of the previous owner. This new basis is the current market value of the property. In the case of my $1000 coin that now has a value of $1500, my heir gets to assign a new basis of $1500. He could then theoretically turn around and sell it for its $1500 market value and realize no taxable profit. Going this route, while requiring some effort on my heir to sell the coin, results in him getting a much larger share of my "coin estate." This applies to other inherited assets as well. >>



    I hope this is a hypothetical situation and an impending death is not near image

    If the situation is true...which I hope it is not...I would pre-arrange something with dealers I trust...or work out a deal with Heritage or Stacks. Then your family could make the choice with the advice you left them. Obviously if you have the time and connections you could do better selling yourself if your family is not interested in your collection.

    Edit to add...Does your estate surpass the threshold of several million dollars before estate taxes are incurred?

    I certainly hope this is a hypothetical question you are asking.
  • derrybderryb Posts: 36,946 ✭✭✭✭✭


    << <i>I certainly hope this is a hypothetical question you are asking. >>


    Me too. image

    My impending demise has not yet scheduled, at least not on my calandar.

    The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong

  • JustMe2JustMe2 Posts: 180 ✭✭
    Or you could donate it when your alive and your tax write off is equal to the current value and you do not have to pay taxes on the difference between cost and donation value.
  • jdimmickjdimmick Posts: 9,691 ✭✭✭✭✭
    IN this state an inherited collection or any property if not in excess of 5 Million $ is not taxable at all

    therefore leaving the collection to heirs would be fine
  • derrybderryb Posts: 36,946 ✭✭✭✭✭


    << <i>Or you could donate it when your alive and your tax write off is equal to the current value and you do not have to pay taxes on the difference between cost and donation value. >>


    All you did was reduce your taxable income by the item's value. If you are in a 20% tax bracket you just saved 20% of the item's value on your tax bill. Not much different than selling the coin outright for 20% of its value

    The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong

  • derrybderryb Posts: 36,946 ✭✭✭✭✭


    << <i>IN this state an inherited collection or any property if not in excess of 5 Million $ is not taxable at all therefore leaving the collection to heirs would be fine >>


    This applies only to inheritance tax. Capital gains taxes are a different animal that still have to be paid at the state and federal level whenever anyone, including heirs, sell an asset. The fact that it was inherited does not remove the requirement to pay the capital gains tax. The fact that it was inherited DOES raise the basis (cost) on which those taxes are calculated, resulting in less taxes.

    The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong

  • mustangmanbobmustangmanbob Posts: 1,890 ✭✭✭✭✭
    You pay taxes ONLY on ANY increase up to 6 months after the death, depending on probate.

    For example:

    Cost of widget on purchase: $2000

    Value of widget on death of the owner: $5000

    You sell the widget for $6000.

    You owe taxes ONLY on the $1000, not the $6000, not the $5000 at time of death, nor on the $3000 ($5000 value minus $2000 cost)

    There are ripples to this, that the estate can value items up to 6 months after death to reflect change in market value.

    Using the same example as above:

    5 months after death, widget has climbed to $5500, but the estate has not settled. Estate then values widget at $5500, settles estate, you inherit widget, and sell it for $6000, you owe taxes on $500 ($6000 sales price - stepped up value of $5500)

    This is a simple example, and there are exceptions.

    We have one going right now where the estate is working to LOWER the value of the widget, specifically stock price value. This stock is NOT widely traded, and the estate owns about 95% of it. They are dumping just enough to depress the price, so the VAST amount remaining has a lower value, saving about $1 BILLION in estate taxes. Now the remaining stock will be worth more later, assuming it goes back to where it was. Stock sold then will be taxed at capital gains tax.

    The flaw in the OP position is calculating the basis.

    Most assets (like coins) do not have a documented trail of purchase price, except for high end items. Many were purchased with cash, many do not have a receipt, and then the receipt says 1883-CC Morgan, but is it the same one in the estate. Producing a receipt from 10 years ago listing 26 coins, but only 12 are now documented in the estate leaves the question of what happened to the other 14, and what was the disposition of them for taxes. Even worse is tracing cost after the sale (safe deposit box, grading fees, etc.) ascribing them proportionally to each coin.

    This business, like many others, has a large cash component, so NOBODY has traceability on prices paid.

    It is not just coins. For example, I had a mutual fund stock that was given to me in 1956. It paid dividends quarterly in stock. Trying to find out WHAT was the price of each share (and the shares came in 1,000th increments, i.e. April 7, 1963 2.153 shares awarded as a result of dividends). I took blocks of this stock and donated to church / charity. I got the full current value to the donation, accounting nightmare went away, church / charity got full market price.

    I went through a similar issue with my Dad's stamp collection. He started in the 1030's, had the proverbial shoeboxes full of receipts, sold off stamps, bought stamps, etc. There was NO possible way on earth to determine his basis. He passed away extremely quickly without a chance to put his stamp collection in order. The SCOTT valuation is a joke. Most of his stamps were never graded, so it could be a $500 stamp or a $30,000 stamp.

    I was executor of his estate, split 50 50 with my brother. Since the IRS does, within reason, accept Scott Values (there were 1,000's of US) and Stanley Gibbons for British stamps (His collection was in the top 20 for Britain), so the collection was valued at Scott Price values. We are selling it off in pieces, and will probably never see any of them sold for the SCOTT PRICE, so most likely, no taxes will ever be paid.

    All this also assumes that your heirs, not counting any change in the market, can sell a coin for the same amount you would have sold it. The delta between the 2 prices could be FAR more than tax implications.

    Also, there could be estate taxes if the estate is valued high enough, both state and federal.

  • derrybderryb Posts: 36,946 ✭✭✭✭✭


    << <i>For example:
    Cost of widget on purchase: $2000
    Value of widget on death of the owner: $5000
    You sell the widget for $6000.
    You owe taxes ONLY on the $1000, not the $6000, not the $5000 at time of death, nor on the $3000 ($5000 value minus $2000 cost) >>


    sounds exactly like what was said in the OP



    << <i>The flaw in the OP position is calculating the basis.

    Most assets (like coins) do not have a documented trail of purchase price, except for high end items. Many were purchased with cash, many do not have a receipt, and then the receipt says 1883-CC Morgan, but is it the same one in the estate. Producing a receipt from 10 years ago listing 26 coins, but only 12 are now documented in the estate leaves the question of what happened to the other 14, and what was the disposition of them for taxes. Even worse is tracing cost after the sale (safe deposit box, grading fees, etc.) ascribing them proportionally to each coin.

    This business, like many others, has a large cash component, so NOBODY has traceability on prices paid. >>


    Simple. IRS says new basis is current market value. Old shoe boxes full of receipts are irrelevant as are old prices paid. Good record keeping by the inheriting party, beginning with documenting the new basis upon inheritance, will minimize his capital gains reporting headaches.

    The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong

  • stmanstman Posts: 11,352 ✭✭✭✭✭
    I would hope you would at least sell some of the collection and have a few of them drinks with umbrella's in them. If you don't chances are someone else will. image
    Please... Save The Stories, Just Answer My Questions, And Tell Me How Much!!!!!
  • MrEurekaMrEureka Posts: 24,271 ✭✭✭✭✭
    We have one going right now where the estate is working to LOWER the value of the widget, specifically stock price value. This stock is NOT widely traded, and the estate owns about 95% of it. They are dumping just enough to depress the price, so the VAST amount remaining has a lower value, saving about $1 BILLION in estate taxes. Now the remaining stock will be worth more later, assuming it goes back to where it was. Stock sold then will be taxed at capital gains tax.

    Please PM me the name of the company. I'd like to buy some shares at the depressed price. image
    Andy Lustig

    Doggedly collecting coins of the Central American Republic.

    Visit the Society of US Pattern Collectors at USPatterns.com.
  • CoinosaurusCoinosaurus Posts: 9,631 ✭✭✭✭✭
    Orville should be along shortly to correct all of us.
  • BroadstruckBroadstruck Posts: 30,497 ✭✭✭✭✭
    mustangmanbob, Thanks for your post as that was quite meaty and highly informative image
    To Err Is Human.... To Collect Err's Is Just Too Much Darn Tootin Fun!
  • BAJJERFANBAJJERFAN Posts: 31,090 ✭✭✭✭✭


    << <i>Just completed a lot of research on whether or not (given ample warning of an impending death) it is in the best interest of my heirs for me to sell my coins and leave them the cash, or pass the coins on to them. This of course applies to coins I am not planning on selling because I want the money for myself. Here is what I have learned:

    When I sell coins coins I owe captial gains tax on the difference between the basis and sale price. The basis is the initial cost of the coin, improvement expenses such as professional grading, and selling expense. Also added to the basis are any buying costs such as an auction buyer premium. Basis is basically what I have tied up in owning and selling the coin. The higher the basis the lower the profit which results in lower taxes. For example if I sell a coin for $1500 that has a basis of $1000 I end up owing a capital gains tax on $500. This reduces the amount of cash that can be left to my heirs if I sell the coin.

    On the other hand my heir will get more of my estate if I leave him the coins. Here's why: Inherited property receives a new basis at time of death of the previous owner. This new basis is the current market value of the property. In the case of my $1000 coin that now has a value of $1500, my heir gets to assign a new basis of $1500. He could then theoretically turn around and sell it for its $1500 market value and realize no taxable profit. Going this route, while requiring some effort on my heir to sell the coin, results in him getting a much larger share of my "coin estate." This applies to other inherited assets as well. >>




    That's fine and good if your heir/s have the wherewithal and patience to re-value and maximize the sales prices of the coins. In many cases heirs will get less than 50 cents on the dollar so you are better off to sell for them and give them the cash. In most cases the heirs won't do near as well as if you'd sold them, CG taxes notwithstanding.
    theknowitalltroll;
  • RedTigerRedTiger Posts: 5,608
    >> In many cases heirs will get less than 50 cents on the dollar so you are better off to sell for them ...

    I agree with Bajerfan. Collector coins are not to be like stocks or mutual funds, where there is a basically a single quote, and there might be 0.05% slippage in the quote, and the capital gains issue talked about far outweighs the potential price differential. The original poster is a part time dealer. Unless the heirs are also part-time coin dealers, they aren't going to get near as much when selling. If the heirs are highly disciplined with great instructions, and dealers and/or auction houses to help them, then they will net maybe 70% to 80% what the original poster can get for the coins. That is still a lot of slippage. If they are the typical overwhelmed heirs, it might be a train wreck. There are dozens of forum stories about witnessing heirs getting 10 to 20 cents on the retail dollar value for prized collections.

    Don't forget to factor in the stress. For the op, selling coins is almost a fun thing to do. For heirs it might be as scary as getting in a ring with several angry bears. It might come at a time when they are overwhelmed with grief, piles of detailed paper work to fill out, impossible demands on time trying coordinate schedules for dozens of other relatives and friends of the deceased. Selling a substantial coin collection might be the last thing they have the time and energy for. It may be so tempting to go to the next hotel coin buying event advertised in the local paper, with the likely result of 10 cents on the retail dollar. There are also a few skunk dealers that may do a song and dance, in order to trick and/or cajole the heirs. If a person is referring a trusted dealer, try for one that is significantly younger and healthier than the person with coins. Many dealers are as old as the collectors, and will not be in business when the time comes.
  • derrybderryb Posts: 36,946 ✭✭✭✭✭


    << <i>>> In many cases heirs will get less than 50 cents on the dollar so you are better off to sell for them ...

    I agree with Bajerfan. Collector coins are not to be like stocks or mutual funds, where there is a basically a single quote, and there might be 0.05% slippage in the quote, and the capital gains issue talked about far outweighs the potential price differential. The original poster is a part time dealer. Unless the heirs are also part-time coin dealers, they aren't going to get near as much when selling. If the heirs are highly disciplined with great instructions, and dealers and/or auction houses to help them, then they will net maybe 70% to 80% what the original poster can get for the coins. That is still a lot of slippage. If they are the typical overwhelmed heirs, it might be a train wreck. There are dozens of forum stories about witnessing heirs getting 10 to 20 cents on the retail dollar value for prized collections.

    Don't forget to factor in the stress. For the op, selling coins is almost a fun thing to do. For heirs it might be as scary as getting in a ring with several angry bears. It might come at a time when they are overwhelmed with grief, piles of detailed paper work to fill out, impossible demands on time trying coordinate schedules for dozens of other relatives and friends of the deceased. Selling a substantial coin collection might be the last thing they have the time and energy for. It may be so tempting to go to the next hotel coin buying event advertised in the local paper, with the likely result of 10 cents on the retail dollar. There are also a few skunk dealers that may do a song and dance, in order to trick and/or cajole the heirs. If a person is referring a trusted dealer, try for one that is significantly younger and healthier than the person with coins. Many dealers are as old as the collectors, and will not be in business when the time comes. >>



    Ok, talked me right out of it, even though it's a lot of capital gains taxes on my part. I was planning on them saving the taxes for themselves. But as you point out they will lose the savings and likely more through weak, undisciplined selling. Hopefully my plan will work out to their advantage when applied to the rental property.

    The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong

  • GrumpyEdGrumpyEd Posts: 4,749 ✭✭✭
    For collector coins, you probably have more knowledge and would do a better job of selling them than they could do.
    You can sell slowly and carefully and enjoy doing it and that will get better prices. Most inheritors might sort of have a fire sale and not do as well. Just a wild guess, if you had a week to sell every collector coin you had compared with selling slowly and carefully over a year or longer I'd expect you might get 2-3 times as much out of it compared to a quick sell.

    You could also trade or shift more into the most liquid things like stuff that's based mostly on metal value.
    Stuff like that is easier for them to deal with and they can use it almost like cash and sell when needed and easily split it between heirs or even get interested in learning from it.
    Ed
  • I used the farm as an example because I have this dilemma. Inherited this farm, has been in the family since 1875, hate to get rid of it, but it is so far away, 700 miles. I wish I had known this would have been mine when I was younger, I would have gone into agriculture.
  • guitarwesguitarwes Posts: 9,266 ✭✭✭
    One good question to ask is does any of your heirs have ANY interest in coins/bullion? Go from there. Although a little more work for you they may appreciate it in the long run. They may like the tangible inheritance vs. the cash knowing it came from their parent/uncle/grandpa/insert your relationship here/etc.
    @ Elite CNC Routing & Woodworks on Facebook. Check out my work.
    Too many positive BST transactions with too many members to list.
  • "We have one going right now where the estate is working to LOWER the value of the widget, specifically stock price value. This stock is NOT widely traded, and the estate owns about 95% of it. They are dumping just enough to depress the price, so the VAST amount remaining has a lower value, saving about $1 BILLION in estate taxes. Now the remaining stock will be worth more later, assuming it goes back to where it was. Stock sold then will be taxed at capital gains tax."

    Uh, how's that again?
    Do you suppose that the owners of that other 5% of the stock might feel that they are being defrauded upon discovering that the value of their own stocks are being artificicially manipulated downward in what is likely an illegal and criminal income tax evasion scheme that was designed so that the majority stock owner(s) can avoid paying their lawfully owed tax liabilities?
    Any wonder that the Country is going down the toilet?
    Maybe those poor billionaires just do not have enough money left over after their living expenses to pay their taxes, eh?

  • joebb21joebb21 Posts: 4,746 ✭✭✭✭✭
    I knew of a situation where a $500,000 coin collection was split among 3 heirs. 2 went right away to their local BM/Cash for gold and got $15,000 and $25,000 respectfully.

    The third took her time and researched and ended up selling her collection for over $150,000.

    The point was- if you want your heirs to capitalize on money, then sell the coins off yourself and give them the money. Giving them the coins can only cause problems- especially when you instruct them to consign to X auction house and they end up paying 20%+ in fees between sellers fees and buyers premium.
    may the fonz be with you...always...
  • dbcoindbcoin Posts: 2,200 ✭✭
    In general, it is easier for you to sell the coins now as you heirs will dump them for pennies on the dollar. If you leave instructions like bear did, then using the step up basis as you said is another strategy. that requires much planning on your part. The exception to that is for large estates where there will be an estate tax cut before capital gains are figured.

    What is the approximate value of the estate and what state is it? If it's less than $1M, I would sell them myself.
  • ebizgobroebizgobro Posts: 595 ✭✭✭
    "Ok, talked me right out of it, even though it's a lot of capital gains taxes on my part. I was planning on them saving the taxes for themselves. But as you point out they will lose the savings and likely more through weak, undisciplined selling. Hopefully my plan will work out to their advantage when applied to the rental property. "


    This has been an excellent thread and should be kept for future reference.

    The suggestions here closely follow my experience three years ago when I was the executor/trustee for a relative's estate. There was tremendous work and burdens on an executor/trustee who is not full time nor expert.

    I (not a lawyer or expert) was advised by my estate attorney to move quickly to liquidate the estate since the markets could change and the beneficiaries could criticize me if the markets went adversely.

    I sold the stock/bond portfolio as soon as I got control and this was fortuitous since the markets dropped significantly shortly thereafter. Even then, I received some criticism from the beneficiaries for not selling soon enough.

    There were coins (not certified, much Franklin Mint materials, material purchased from HSN, etc.). It took a lot of time to get what I could for these. As you know, the precious metals fluctuated. Many coins also could not be easily nor quickly liquidated without taking a big haircut. The amount of time that it took was inordinate compared to the value compared to the stocks/bonds.

    Bottom line: I think your choice to convert your holdings to cash could facilitate the faster disposition of your estate to the beneficiaries and reduce the future burden on the executor/trustee.

  • Sell the coins to your heirs at face value maybe ungraded or raw and show no gain.A dollar is a dollar right.
    Mark Anderson
  • BAJJERFANBAJJERFAN Posts: 31,090 ✭✭✭✭✭


    << <i>

    << <i>>> In many cases heirs will get less than 50 cents on the dollar so you are better off to sell for them ...

    I agree with Bajerfan. Collector coins are not to be like stocks or mutual funds, where there is a basically a single quote, and there might be 0.05% slippage in the quote, and the capital gains issue talked about far outweighs the potential price differential. The original poster is a part time dealer. Unless the heirs are also part-time coin dealers, they aren't going to get near as much when selling. If the heirs are highly disciplined with great instructions, and dealers and/or auction houses to help them, then they will net maybe 70% to 80% what the original poster can get for the coins. That is still a lot of slippage. If they are the typical overwhelmed heirs, it might be a train wreck. There are dozens of forum stories about witnessing heirs getting 10 to 20 cents on the retail dollar value for prized collections.

    Don't forget to factor in the stress. For the op, selling coins is almost a fun thing to do. For heirs it might be as scary as getting in a ring with several angry bears. It might come at a time when they are overwhelmed with grief, piles of detailed paper work to fill out, impossible demands on time trying coordinate schedules for dozens of other relatives and friends of the deceased. Selling a substantial coin collection might be the last thing they have the time and energy for. It may be so tempting to go to the next hotel coin buying event advertised in the local paper, with the likely result of 10 cents on the retail dollar. There are also a few skunk dealers that may do a song and dance, in order to trick and/or cajole the heirs. If a person is referring a trusted dealer, try for one that is significantly younger and healthier than the person with coins. Many dealers are as old as the collectors, and will not be in business when the time comes. >>



    Ok, talked me right out of it, even though it's a lot of capital gains taxes on my part. I was planning on them saving the taxes for themselves. But as you point out they will lose the savings and likely more through weak, undisciplined selling. Hopefully my plan will work out to their advantage when applied to the rental property. >>



    You know your heirs better than we do so a large part of the decision hinges on their desire/ability to liquidate [or keep] your coins after you pass on to that great coin show in the sky. If they don't mind shouldering the burden then the re-evaluation at inheritance time can be a useful money saving tool.
    theknowitalltroll;
  • ModCrewmanModCrewman Posts: 4,039 ✭✭✭✭✭
    derryb and mustangmanbob have provided good counsel in this thread. Some others...not so much. And I am a CPA.
  • bronco2078bronco2078 Posts: 10,244 ✭✭✭✭✭


    << <i>Sell the coins to your heirs at face value maybe ungraded or raw and show no gain.A dollar is a dollar right. >>




    image


    Find a trusted dealer that will trade you 90% silver for your silly collector coins and leave 90% to your heirs. Do this without any paperwork between you and the dealer at all.


    The heirs have the cost basis of when those changed hands from you to them? If so , in the event silver goes down they could cash out file legit and take a tax loss. If silver goes up tell them to sell for straight cash and not file any paperwork at all. Either way they keep all the money.






    image











  • MrHalfDimeMrHalfDime Posts: 3,440 ✭✭✭✭
    " ... that sounds like a surprising loophole."

    I'll let the financial gurus provide the answers to this, but I do so hate that word 'loophole' as it applies to tax law. It is not a 'loophole'. It is a legal means by which taxpayers cope with a convoluted and unnecessarily complicated and burdensome tax law thrust upon us by Congress. Until we see true tax law simplification, we are all left to fend for ourselves in dealing with our estates. We all need to become educated taxpayers.
    They that can give up essential Liberty to obtain a little temporary safety deserve neither Liberty nor safety. Benjamin Franklin
  • BillJonesBillJones Posts: 34,056 ✭✭✭✭✭


    << <i>I knew of a situation where a $500,000 coin collection was split among 3 heirs. 2 went right away to their local BM/Cash for gold and got $15,000 and $25,000 respectfully.

    The third took her time and researched and ended up selling her collection for over $150,000.

    The point was- if you want your heirs to capitalize on money, then sell the coins off yourself and give them the money. Giving them the coins can only cause problems- especially when you instruct them to consign to X auction house and they end up paying 20%+ in fees between sellers fees and buyers premium. >>



    There is more wisdom here than there is in going through the concepts of the tax basis and stepped up basis as a result of running a collection thought the estate process. Most family members have no idea as to how to dispose of a collection, unless you give them instructions as to who to see for selling the collection. Even then negotiating skills might be necessary to get the best or even a fair deal.

    If you have a family member who is a collector, and getting the money out of the collection is not an issue, GREAT! Leave most or all of the collection to that person. If you are not in that position, it's best to sell it before you pass on, because most people just don't have the skills to dispose of it efficiently.

    Most people view the process of buying a car as something that is worse than going to the dentist. Buying a car is much easier than selling a coin collection.
    Retired dealer and avid collector of U.S. type coins, 19th century presidential campaign medalets and selected medals. In recent years I have been working on a set of British coins - at least one coin from each king or queen who issued pieces that are collectible. I am also collecting at least one coin for each Roman emperor from Julius Caesar to ... ?
  • DeepCoinDeepCoin Posts: 2,781 ✭✭✭
    I would suggest examining the merits of a family trust and engaging a dealer (younger than you are!) who would be entrusted with the liquidation of the collection once the time comes. Because of the differing state laws regarding estates and the differences based upon estate values by state, I would suggest a good estate lawyer in your home town.

    At worst, you could run a decent collection through one of the big auction houses and not get taken to the cleaners. The obvious problem of heirs not knowing the best means of liquidation is the crucial issue IMHO.
    Retired United States Mint guy, now working on an Everyman Type Set.
  • TwoSides2aCoinTwoSides2aCoin Posts: 44,364 ✭✭✭✭✭
    May you rest in peace. Forget the kids, sell them (not the kds, the coins before you die). Kids don't care about what we geeks care about. Why hassle them with the crap ?
  • ARCOARCO Posts: 4,396 ✭✭✭✭✭


    << <i>Just completed a lot of research on whether or not (given ample warning of an impending death) it is in the best interest of my heirs for me to sell my coins and leave them the cash, or pass the coins on to them. This of course applies to coins I am not planning on selling because I want the money for myself. Here is what I have learned:

    When I sell coins coins I owe captial gains tax on the difference between the basis and sale price. The basis is the initial cost of the coin, improvement expenses such as professional grading, and selling expense. Also added to the basis are any buying costs such as an auction buyer premium. Basis is basically what I have tied up in owning and selling the coin. The higher the basis the lower the profit which results in lower taxes. For example if I sell a coin for $1500 that has a basis of $1000 I end up owing a capital gains tax on $500. This reduces the amount of cash that can be left to my heirs if I sell the coin.

    On the other hand my heir will get more of my estate if I leave him the coins. Here's why: Inherited property receives a new basis at time of death of the previous owner. This new basis is the current market value of the property. In the case of my $1000 coin that now has a value of $1500, my heir gets to assign a new basis of $1500. He could then theoretically turn around and sell it for its $1500 market value and realize no taxable profit. Going this route, while requiring some effort on my heir to sell the coin, results in him getting a much larger share of my "coin estate." This applies to other inherited assets as well. >>



    I am a bit of a tax scofflaw, but I don't see it as the government's right to tax my coin gains. It is a hobby that I pursue for fun, I don't write off my losses, and I am not going to pay capital gains taxes either.

    However, getting off my rant, capital gains would be my least concern. Passing coins onto heirs that neither understand the value nor appreciate the collection would be my primary concern. I have instructed my wife in the event of my passing, to send the coins off to Heritage. problem is. I love raw, low end coins ($5-$200) and Heritage is not the venue for the lower end coins. I now realize that I cannot pass on a collection (of any real value) to my heirs. They just wouldn't know what to do, it would be a major hassle and I wouldn't want to burden my family for what was a crazy and seemingly irrational passion for me.

    my .06 cents.

    Tyler

  • jmski52jmski52 Posts: 22,899 ✭✭✭✭✭
    Lots of great information in this thread. Thanks for asking the questions.

    Unless you can pass along your expertise in addition to the coins, the net from a liquidation will probably be a smaller fraction of the market value than you would be happy with. It's simply essential that whoever sells off the coins knows what they're doing or they're going to get screwed.

    My approach would be to leave some of the easy-to-sell lower premium chunks intact, and to sell most of the esoteric pieces that have significant premium. Some of the keepers could be low premium 1 ozers or such, so that fewer transactions are needed in order to generate some ready capital.

    There may still be advantages to the family in having some of the easy-to-sell lower premium chunks around for a rainy day, and the tax handling would be easier for them as long as the tax accounting framework is well-established in advance of their needs.
    Q: Are You Printing Money? Bernanke: Not Literally

    I knew it would happen.
  • Cant you sell some coins here on the bst, ebay craigslist dealers etc and avoid that tax? Therefore more money to your kids ?
  • pitbosspitboss Posts: 8,643 ✭✭✭
    If you enjoy the coins and are in good financial position then there is no reason to sell them just because your kids will get less money for them when you pass on.

    You have worked hard for what you have so let them do likewise and just enjoy what you have while you can.

    They will not think less or better of you for it and you will not be sorry you sold what you have worked so hard to collect.
  • kevinjkevinj Posts: 980 ✭✭✭
    I am writing a book on "appraising your own collection", and also just taught a class on the subject at a local community college to older individuals (50-88).

    This was one of the primary questions.

    One of the primary considerations was the knowledge and interest by the heir, if they did not care, they would most likely sell/spend it, for a value much less that what it is actually worth. If this is the case, it is better to sell them, as your experience will be able to sell them accordingly and the heirs will benefit more for it. I have a friend whose great grand parents collected coins extensively, they left it to his grandparents, who sold it for almost face value as they needed the money.

    Those heirs who were interested, especially given the premium for the coins, sought out to make sure they were getting the maximum. There were also some heirs who wanted the coins as they were part of the memory/legacy of those who passed and had enjoyed them, the coins had a special meaning.

    There are ways we discussed during the class to show them some coins to test the waters and see if there is interest.

    Also, if leaving coins as part of your estate, it is a good idea to include a list of the coins, general value, and a phone number of a trusted dealer.

    Kevin

    Kevin J Flynn
  • 19Lyds19Lyds Posts: 26,491 ✭✭✭✭


    << <i>Just completed a lot of research on whether or not (given ample warning of an impending death) it is in the best interest of my heirs for me to sell my coins and leave them the cash, or pass the coins on to them. This of course applies to coins I am not planning on selling because I want the money for myself. Here is what I have learned:

    When I sell coins coins I owe captial gains tax on the difference between the basis and sale price. The basis is the initial cost of the coin, improvement expenses such as professional grading, and selling expense. Also added to the basis are any buying costs such as an auction buyer premium. Basis is basically what I have tied up in owning and selling the coin. The higher the basis the lower the profit which results in lower taxes. For example if I sell a coin for $1500 that has a basis of $1000 I end up owing a capital gains tax on $500. This reduces the amount of cash that can be left to my heirs if I sell the coin.

    On the other hand my heir will get more of my estate if I leave him the coins. Here's why: Inherited property receives a new basis at time of death of the previous owner. This new basis is the current market value of the property. In the case of my $1000 coin that now has a value of $1500, my heir gets to assign a new basis of $1500. He could then theoretically turn around and sell it for its $1500 market value and realize no taxable profit. Going this route, while requiring some effort on my heir to sell the coin, results in him getting a much larger share of my "coin estate." This applies to other inherited assets as well. >>

    All well and good as long as.............

    A detailed description of the coins and their relative values are available to the heirs. Otherwise, the "could" be at the mercy of unscrupulous coin dealers of which we know exist.
    A list of "reputable coin dealers" could prove invaluable provided this dealers actually deal in the coins that were collected.

    For example, I doubt that my spouse and children could get more than $100 for my prototype IKE if a coin dealer has no idea what it is AND harbors a general disdain for Eisenhower Dollars. However, members in the IKE Group would be much better equipped to market and realize a fair price for such a unique piece.
    I decided to change calling the bathroom the John and renamed it the Jim. I feel so much better saying I went to the Jim this morning.



    The name is LEE!
  • TwoSides2aCoinTwoSides2aCoin Posts: 44,364 ✭✭✭✭✭
    The only thing that comes as NO SURPRISE, is death and taxes. So the plan is, " live long and prosper". Don't you be going anywhere on us. We will haunt you image

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