Last month I had the pleasure of attending the 36th Annual Magic City Art Connection in Linn Park and it was nothing short of amazing. Even though the park was covered with dancing, paintings, music, and sculptures from artists from all over the country, I especially appreciated the work from painters and sculptures here in the local Birmingham area. It wasn’t until a few years ago that I realized how many talented artists were right here in our backyard.
All of this excitement over art brings up an interesting situation to consider: how do you incorporate your art collection into your estate plan? Sure, you likely don’t have an authentic Picasso or Michelangelo, but you may have art that’s been passed down through your family; or maybe you want to start an art collection. Whether you collect paintings, audio recordings, or photography, your plan should include instructions on how to dispose of your most sentimental possessions. Below are a few estate planning considerations for art collectors.
Value of My Art?
When it comes to your estate plan, a primary consideration must be the monetary value of your art. This isn’t always the first thing collectors think about because their passion lies in the art itself, not the monetary value of the art. After all, we collect art because of an appreciation for a certain subject or medium, not the money. However, art collectors (especially high net worth collectors) must remember that their art will be among the many things considered when their estate is valued, which may have various tax consequences.
One way to get started on valuing your assets is to contact an art appraiser. Also, gather bills of sale for your art. This will be useful when the art changes hands in the future. This will also be helpful in determining the whether your art will appreciate or depreciate over time.
Disposing of Art in Estate Plan
Another consideration for art collectors is deciding how to dispose of their art in their estate plan. There are three main ways to dispose of art in your estate plan:
Selling Your Art and Distributing Proceeds to Beneficiaries – This is a very common choice for art collectors. One of the benefits of selling art is that the art will be included in the value of your estate, which may lessen or eliminate capital gains taxes that you would otherwise face if you sold the art during your lifetime.
Donating Your Art to a Charitable Organization – Donating your art to a charitable organization or a museum is an excellent way to dispose of your art. It can also be one of the more simple options. Donating your art through your estate plan will create a tax deduction based on the value of your art. Give while you’re living and you can take an income tax deduction, also based on the value of the piece or collection at the time of the donation. Depending on when and how you decide to donate your art, donors are often able to work out other details with the donees, including where the art may be placed in the museum.
Devising Your Art to Your Loved Ones – Another common option is to keep the art within the family by gifting it to your heirs in your estate plan. You could gift it directly to your beneficiaries in your plan, but a more secure way of transferring your art to your beneficiaries and controlling how they are handled is to transfer the collection to a trust you create while living. This trust can also be useful for tax purposes.
Speak With Your Family
Though estate planning may not be a very fun conversation to have with your family, it is very important to have, especially if you have an art collection. It is highly possible that your family may not feel the same way about your art as you do, which may have an impact on deciding who to give your art to and how to dispose of it at your death. Incorporating your art into your estate plan may be almost as complex as the art itself. If you have questions about how to incorporate your art in your plan, don’t hesitate to contact us today.