While some art lovers pursue their passion to enjoy in their own homes, others purchase art to enjoy now and in the future, for family members and other art lovers. But what happens when art lovers pass is often a mixed bag, and sometimes the tax burden that falls to heirs is disastrous.
Like many hobbies of the affluent, sometimes the search for and acquisition of a piece of fine art is just as enjoyable as gazing at it in their home. The hope is that such a piece will increase in value, but often less thought is given to what will happen to the art and the collection when they die.
This frequently means that at death they’ve amassed sizeable collections. However, it’s common that many affluent art collectors do a poor job of addressing their artwork in their estate plans, says Forbes in the recent article, “Estate Planning And Affluent Art Collectors.”
Failing to plan for the disposition of collections upon death can mean a lot of expense for your family. This is because they may have to pay higher estate taxes. It can also result in the unfair division of the art, creating family conflict and legal battles.
Unfortunately, wealthy collectors often adopt the default option of not properly planning. If the collector isn’t certain to whom to leave pieces, he or she will procrastinate until it’s too late.
However, smart planning can often resolve these issues. One option is to have corporate entities to own the art. This addresses many ownership issues and can simplify probate, because there’d be no need to retitle the art.
With a meaningful and valuable collection, proper planning means more than constructing an estate plan. It means building files of ownership to make certain there are no questions concerning provenance. The files should include certificates of authenticity, bills of sale and insurance records.
An estate planning attorney who is knowledgeable about art collections and inheritance taxes will know how to ensure that your art collection will be handled properly, whether you are endowing it to a museum, giving select pieces to family members before you pass or handing it down to grandchildren.
Reference: Forbes (January 8, 2018) “Estate Planning And Affluent Art Collectors”