Got Art? Have you done art estate planning for where your art collection?
Author Daniel Grant’s article in the Wall Street Journal provides several tips on art estate planning for your art collection in the event of death or divorce. During such life changing events, such as death and divorce , moving assets can be costly and stressful. Reduce your taxes and stress with the following tips:
- Make an Inventory-Create a complete list of art in the estate, purchase dates (before or after marriage/divorce).
- Hire an Appraiser -Better to agree on one appraiser for all parties involved to avoid discrepancies, further debate, and additional fees). Sentimental appraisal is quite different than an official appraisal, based upon market value and demand, etc.
- Art Estate Planning -Collectors should specify where they want art work to go and to whom as part of their estate planning or will to prevent costly legal fees, time consuming litigation, and ease the process for finding a home for their beloved works. Calling dibs, is not enough. Verify that the recipient or heir will accept your gift as well as the potential tax burden.
- Security First -Secure the works of art in a safe place to prevent theft, movement, or damage. In the event of probate court, climate controlled environment might be needed to protect the works, as the probate court process can take many years.
- Plan Ahead -Art should be included in your estate planning, in particular for tax purposes and heirs.
- Selling and Gifting -Careful attention needs to attended to where the art work will go after the collector’s death (family, heir, museum, non-profit, charitable organization, etc). Gifts to non-profits can be donated over a period of up to 10 years allowing the donor to utilize tax deductions. A personal gift can be given up to $14,000 before it must be reported , in this case the art has to be physically transferred to the recipient. Art may also be placed in a tax exempt charitable remainder unitrust, where the collector sells the the art and receives distributions for the rest of their life at the regular income tax rate, rather than having to pay capital gains taxes of 28%. After the collector/donor’s death the remaining distributions from the sale will go to the designated charity.