The Use of Rare Coins in Financial Plans
The use of rare coins as a planning tool has many applications to different types of investors. Some examples are:
Maturing Certificate of Deposit Owners
Rare coins offer a "hard asset" alternative to traditional paper assets. Many CD owners with several certificates find that a portion of these proceeds is suitable to diversify into a tangible asset.
Individuals Age 50+ Preparing for Retirement
Many mature clients are heavily invested in paper assets and looking for an alternative investment hedge in the event of steep market corrections or high inflation in the future.
Individuals Age 30-50 Beginning Long Term Accumulations
Rare U.S. coins have a long-term history of performance and may provide an excellent vehicle for diversification in growth portfolios. A recent independent, academic study conducted at Penn State University showed that the highest performing assets over the period January 1978 to December 2002 were stocks and rare U.S. coins.
Trusts Looking for Long Term Growth
Rare U.S. coins are outstanding for some trusts, providing potential long term growth, ease of evaluation, liquidity, and privacy. Rare coins can be used in net income make-up unitrusts (commonly called "NIMCRUTS"). Assets in this type trust are not required to be income producing at all times. Some funds may be placed in appreciating assets that can be easily liquidated when needed to transform into income producing assets. In addition, rare coins are unique investments that preserve history, are environmentally and politically correct. Rare U.S. coins enjoy status as a recognized and liquid asset worldwide.
Qualified Defined Benefit Pension Plans
Although rare coins (and other collectibles) were restricted from IRA's and individually directed pension accounts by The Economic Recovery Tax Act of 1981 (ERTA), certified rare U.S. coins can be placed in defined benefit plans without restriction. This provides another asset class diversification strategy to the investment plan. Consult with a tax advisor to insure the pension plan conforms to eligibility requirements before proceeding.
Individuals Looking to Gift Assets and Eliminate Income Taxes
As a result of the Tax Reform Act of 1986 (TRA '86), there was a change in how individuals may make gifts to minors. Prior to TRA '86 the donor could reduce his income tax liability and reduce the size of his estate by gifting assets to minor children. Any income generated by the gift would be taxed at the child's lower rate. Also, the death estate was reduced by the gift provided the donor did not die within a two-year period following the gift. The effect of TRA '86 was to simply allow the reduction of the net death estate by the use of gifting. However, the income stream from these gifts is still taxed at the donor's maximum rate. Since rare coins produce no current income or yield, the tax impact for donors is greatly reduced when rare coins are used in gifts for minors.
Gold or Silver Bullion Owners Looking to Exchange Assets
Many holders of physical bullion are looking to increase the growth potential of their hard asset portfolio. By converting all or part of their existing bullion holdings into rare U.S. coin portfolios, they can enjoy a much higher historical rate of return.
These are but a few of the applications in which rare coins can be utilized. Rare coins should be only a part of an overall financial plan. The recommended amount is usually 5%-15% of the total investment portfolio (excluding value of home, autos and illiquid assets such as long-term leases and non-performing real estate). As with any investment, rare coins may not be suitable for all clients. But for those clients who are fortunate to be able to include them in their asset mix, it is an investment that provides history and beauty as well as growth.