Incorporating Art and Collectibles Into Your Estate Plan
Artwork and collectibles are an important asset in many of our lives. When it comes to estate planning, you do not want to leave the future of your beloved collection to chance. If you are unsure how to manage it, you are not alone – many collectors do not consider putting their artwork into their Will or Trust when they initially set up their estate plan. Luckily, you have options to ensure your collection is handled to your specifications when you die.
Sell Your Collection
Artwork is more expensive to sell than other assets. The capital gains tax on art and collectibles is 28 percent, compared to the typical 20 percent.1 This can be reduced or even eliminated if the decision to sell is made after you pass. If you decide you want to have a say in who receives your collection, you will be responsible for paying a sales commission, other taxes and shipping costs.
Your beneficiaries may not understand the value of your artwork, so it is best to meet with an appraiser who can give you a better idea of what it is worth.
Leave Your Collection to Your Heirs
If your heirs want to keep all or part of your collection, you can specify this in your Will. The best way to ensure your artwork is cared for is to provide the recipients with the resources to maintain it. This includes a list of appraisers, insurance agents, historians and other specialists who have worked with you to develop your collection.
You can also transfer your artwork and collectibles using an LLC.2 The family members included will be responsible for the collection as a group. For example, if they decide to sell one piece, they will split the profits evenly. You must select at least one of your heirs to manage the collection, including maintaining insurance, display and storage for the artwork and making decisions regarding sales of individual pieces.
Donate Your Collection
If you donate your artwork to a museum or charity, you can claim a tax deduction of up to 30 percent of your adjusted gross income (AGI).3 The IRS requires a qualified appraisal made within 60 days of the donation date for any collection worth more than $5,000.
In some cases, you may be able to specify how your art is displayed, such as in a specific wing of a museum and whether you would like your name included with the collection.
Keep in mind that your artwork may not be permanently displayed in the museum you donate it to. Due to decreased funding and limited storage space, major museums often limit donations, particularly if you want to give your entire collection.4
Create Your Own Museum
Depending on your resources and the size and relevance of your art collection, this option may be in your best interests if you cannot find a museum willing to accept your donation. Your collection should be large enough to justify the costs of opening and maintaining a museum.
Protect Your Collection With an Estate Plan
Developing an estate plan is one of the best things you can do for yourself, especially if you have artwork or collectibles you want to protect. The attorneys at the Law Offices of David L. Carrier are committed to helping you preserve your collection. We will work with you to create an estate plan that safeguards these valuable assets and minimizes the stress your family may experience when you die.
Call 616-361-8400 to start planning for your estate today.
1 https://www.artworkarchive.com/blog/how-to-create-an-estate-plan-for-your-art-collection
2 https://www.investopedia.com/articles/personal-finance/071514/using-llc-estate-planning.asp
3 https://www.kahnlitwin.com/blogs/tax-blog/what-are-the-benefits-of-donating-artwork
4 https://fa.morganstanley.com/dowellgroupsb/the-art-of-donating-art.htm
