How Can Art Fit Into An Estate Plan?
Like people all throughout the world, some Polk County residents have paintings, sculptures or other artwork that can have special meaning to them and their family. In addition, some of these collections can become quite valuable over time, even if the artists may not have been well-known at the time of purchase.
Given that a person's art collection might carry substantial value, even if it doesn't include a work by Picasso or Van Gogh, how should the art fit into his or her estate plan? In some cases, a person's children or other family members may be hopeful that they can inherit the person's art collection upon death. But in other situations, the potential heirs may have no interest at all in the art and prefer to try to sell it. Either way, collectors should think about how the art will affect their estate.
If people have a particularly valuable piece or collection that they want to pass on to their children or other heirs, they should understand its value. Though the person might have a particular valuation in mind, an appraiser might assign a much lower value to the piece because of illiquidity in the art market. While that might trouble the collector, it can be quite beneficial to his or her heirs. A lower appraisal means that the tax burden to the estate will be lower, regardless of what price the heirs might actually get in a sale.
In addition to thinking about the art's valuation, collectors may want to think about other strategies for transferring the art during their lifetime. Transferring the art to a future heir in exchange for promissory note, for example, can lead to tax advantages for the estate. Likewise, the owner might want to place the art in a trust and then execute a lease with the trust; this can allow the owner to enjoy the art during his or her lifetime, while affording any heirs some tax benefits when the person dies.
Estate planning that involves art can be just as complex as the art market itself. But, collectors should think about working their art into their estate plan. A thorough plan can help to minimize family disputes and ensure that the asset distribution process is as timely and tax-efficient as possible.
Rignanese & Associates is available to work with clients on their legal needs. Please reach out to us at 863.294.1114.
1. On behalf of Kelly Kennedy of J. Kelly Kennedy, Attorney/CPA, PLLC which has been acquired by Rignanese & Associates, PLLC.
Source: The New York Times, "Estate Planning Can Get Tricky When Art Is Concerned," Conrad De Aenlle, Accessed on Oct. 9, 20151.