August 9, 2018

For those art collectors thinking about passing on their most valuable collection to others when they pass away, valuation and organization of this collection is strongly recommended. One way to pass on artwork is extremely risky. This refers to the matter of simply putting post-it notes on the artwork on the wall to explain who gets what. This approach, however, could represent that a significant portion of the value of the estate goes towards estate taxes. 

Estate taxes might not be an issue for many since the federal estate tax and gift tax exemption is $11.89 million per person. However, if an art collector accumulated a great deal of artwork, ignoring the overall value could cause problems later if it is not appropriately reported. You could pass on penalties, tax fraud, unexpected estate taxes and fines to the person who receives the art, in addition to prolonged IRS proceedings. Since the statute of limitations for tax fraud is limitless, you need to understand the possible complications well in advance. Even if artwork comes in at a value well below the estate tax exemption amount, clarity and organization regarding the disposition in the value of the individual artwork plays an important role in keeping the peace among your beneficiaries. The first step in this process is to make an inventory. List out each piece of art and its recommended value. Hire an art appraiser who has extensive experience in the field if you want to verify that the information is correct. It is not a good idea to attempt to ballpark the value of art. Rather it is much more effective to use an actual art appraiser and keep documentation from this process.

Any large items or special collections in your estate deserve extra attention. If you don’t put in the effort for your beneficiaries on these items, the problems all fall to your loved ones. You might be doing unnecessary harm or causing confusion that can be eliminated with just a few meetings with your estate planning lawyer. If you’re not yet sure that what you have qualifies as a collection, consider carrying out the valuation process and talking to your lawyer.