People can spend a lifetime curating art, having these smart estate planning strategies can be lifechanging. It can be a passion for many people and, often, it’s more about enjoying the art or the medium itself than about ensuring financial gain.
However, not everyone will share or even understand that passion – and not everyone will appreciate the art you love. If you have accumulated a sizable collection, have you thought about what you want to happen to it after you’re gone?
How To Handle Art Collections In Your Estate Plan
It is important that your estate plan address your art separately from your other assets.
The first step in estate planning for your collection is to document it thoroughly.
- Have the collection appraised,
- Take photographs of each item
- Assemble any paperwork relating to the authenticity and origin of the pieces in your collection – including artist notes, bills of sale, or insurance policies.
How Your Estate Can Benefit From Your Art Collection
When considering what to do with an art collection, you have three main options:
- Sell the collection. If your family is not interested in maintaining your collection after you are gone, then you may want to sell it.
If you sell the collection while you are alive, you will have to pay capital gains taxes on the collection’s increase in value since you purchased it. The capital gains tax rate on artwork is 28 percent, compared with the top rate of 20 percent for other assets.
If the collection is sold after you die, it will be included in your estate, possibly increasing the value of your estate for estate tax purposes, but it will be “stepped up” in value. This means that if your heirs sell the collection, they will have to pay capital gains tax only on the amount by which the pieces have increased in value since your death.
- Leave the collection to your heirs. You can give your artwork to individual family members, but a better approach may be to put the artwork in a trust or a Limited Liability Company (LLC). The trustee of the trust or manager of the LLC whom you appoint will be responsible for sustaining the collection, including maintaining insurance on the artwork, arranging storage, and making decisions about selling and buying pieces. You can leave instructions for care and handling of the collection. Any profits from the sale of items would be split among the beneficiaries of the trust or members of the LLC.
- Donate the collection. You can donate your artwork while you are still alive and receive an income tax deduction based on the value of the items. This can be a good way to pass on your collection while avoiding capital gains taxes. Should you choose to donate through your estate plan, your estate will receive a tax deduction based on the collection’s value.
How The Law Office Of Antoinette Bone Can Help
Deciding which option to take will depend on your circumstances and your family’s interest in the collection. It’s important to discuss these with your attorney to figure out the best option for you.
When it comes to Estate Planning, we at The Law Office of Antoinette Bone understand that everyone’s unique circumstances require different strategies. We take a personalized approach in helping our clients customize a comprehensive Estate Plan that fulfills their goals and considerations – including planning for your art or other valuable collections.
We look forward to assisting you in these or other related matters. Simply click the link to book an appointment or call us at (817) 462-5454 to schedule a meeting with Antoinette Bone in our Euless, Texas office.
To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.
Nothing in this message is intended to provide legal advice. This message is for educational purposes only.