An art collection creates much joy for those that love art. It can also be a serious investment. So, when an art collector contemplates estate planning, what will happen to his or her collection is a serious consideration.
For many it is already is a serious consideration. According to Reuters, investment bank UBS recently surveyed art collectors with more than $5 million in investable assets and found their primary concern was the best way to pass on their collection. Handing down a collection can be tricky, particularly if your heirs do not know much about art. Here are four tips to help you pass along your collection.
Figure out a plan, and discuss it with our family
You may wish to pass your artwork on to your heirs. While it is a wonderful idea, you need to put that in writing, whether you through a will or a trust. Before you make it legal, you should talk to your family members first. Your son or daughter may not want a painting you had planned to give to him or her and may just prefer cash. It is important to know where you stand before you sign off on all the paperwork.
It is also good idea to explain to your heirs why you are gifting them certain pieces. This lets them know your reasoning and could prevent family squabbles later.
You may also decide you want to create a museum or donate your collection to a museum. Both are complex processes, and you will need a plan in place to bring either option to fruition. It is also important that you discuss a donation with a museum ahead of time, as many museums already have a substantial amount of art in storage. Not to say that they would not want your collection, but the museum may not have room to store it.
Consider giving up some art now
Individual estates over $11.4 million now must pay estate taxes, but it is scheduled to revert to $5 million in 2025. If your collection is particularly valuable and is likely to continue to appreciate, it may be wise to move some pieces into a trust now. By putting art in a trust, that is the value it will be taxed at later, no matter what the estate tax limits or value it eventually reaches.
Find an art consultant
You may already work with an art consultant. If so, let your executor or trustee know you would like this person to continue to look after the collection after you pass. Even if your heirs are not knowledgeable about art, there will be someone who can guide them and teach them about art collection. You should also consider including some money in your estate plans to pay for the consultant’s services.
Recognize that your heirs will ultimately do what they want
You love art, but your children or other heirs may not feel the same way. While you are around, you can educate them about art and show them why it is important to you. However, this does not guarantee they will develop a passion for it.
Even if you decide to leave your collection to them, they may not decide to keep it. Recognize there is nothing you can do about that, and accept it.
Passing on a considerable art collection can be complicated, but there are steps you can take to make the transition more successful.