Prince William County
Prince William County
Building an art collection takes time, investment and expertise. It also brings great joy to those who collect, often highlighting certain aesthetics, time periods, mediums or artists that interest the collector. It is a reflection of the person, how he lives, what he values and where he has been.
An art collection is one of the most personal assets a person leaves behind. It is a tangible reflection of a person’s life, what he values, where he has been.
Too often, the collector doesn’t decide how this intensely personal collection should be handled after his death.
All of the time, energy, finances and joy invested in the art can be wasted if the collection passes on to a dispassionate relative by default. To ensure that doesn’t happen to you, it is imperative to plan ahead.
It is difficult to establish fixed values for artwork and other collectible items. It depends on the artwork’s condition, trends in the market and the personal interest of the seller and potential purchasers. Guidelines and resources provided by the Smithsonian Institution should help you find an approximate value for your artwork.
Next come some difficult, but necessary, conversations with family and relatives. You want to determine if your children or other heirs share your passion for the art collection. In many cases, even if a relative is interested in art, that person may not appreciate the medium, artist or time period that is the focus of your collection.
Shared passion does not always equate to shared values. Be sure that an intended recipient is not more interested in the value of the collection than in the works themselves. And a collection is just that, a specific group that shares your vision of art. Probe to find out if a relative is willing to keep the grouping together, or would prefer to sell certain pieces. This may weigh into your decision. Such conversations can be tough to have, but are needed to start planning.
There are three alternatives to consider in disposition of art. All can be conducted during life or at death. There are pros and cons to both options.
Art collectibles are very expensive to sell–during life or at death–compared to other assets. It is crucial to avoid estate tax liability by having your collection appraised now. If you consider selling while still alive, know that there are capital-gain rates plus the costs of sales commission, insurance and sales tax involved.
A better financial decision may to wait to sell upon death, when the entire value will be included in the estate. In this scenario, capital gains tax may be decreased or eliminated because the tax basis for the art collection is increased to fair market value at the time of death.
The natural fallback is to transfer the art to your heirs in your will. If you want to keep a collection within the family rather than break up the grouping to gift individual paintings, you may want to look into transferring the collection to an entity that you create while the collection is being formed.
The entity owns the art, and upon your passing, family members own interests in the entity instead of the art itself. You can appoint managers of the collection who make decisions about selling pieces.
Another option is to put the collection in a trust that can be changed anytime while you are living. This allows you to determine the beneficiaries, and avoids probate and estate-tax issues for those beneficiaries. You are also able to specify exactly what should happen to your collection.
An experienced estate planning attorney can provide important details and help you establish the framework for leaving your art to your heirs.
Perhaps your loved ones are not interested in your art collection. If that’s the case, donating your art to a museum or charitable organization is likely the simplest option.
If you donate while you are living, you are entitled to an income tax deduction. The deduction is based on the value of the work at the time of the gift.
If your collection is donated after you pass, it is delivered to the institution and your estate receives a tax deduction based on the current valuation.
In either case you may specify any requests, and they should be agreed upon before the delivery of the artwork. You may want to have the art displayed in a specific wing of a museum, or have your name included next to the description.
There are several options in considering the final disposition of your art collection. Each choice becomes more detailed when viewed through your unique collection. Discussing your thoughts and concerns with an estate planning attorney will provide you with an idea as to what may work best for you and your family.
Remember, in the end, you should move forward with a plan that makes you feel fulfilled and comfortable about a collection that represents so much about your passion and your life.
David Wilks has practiced law in Northern Virginia and
Prince William County for more than thirty years as
a tax lawyer by training and education. Read More