Thursday, September 29, 2011

Estate Planning for Collectibles

Many people knowledgeable about the value of their estates: stocks, bonds, real estate  Few pay attention to their personal property.  I think this is often because your collection represents you and your passions and memories; and a price is not easily put upon that.  So, people avoid addressing it, because they haven't necessarily made financial investments in the item as much as they have coveted, loved, studied, and enjoyed those purchases or inheritances. It's often the most challenging of all your estate planning analyses.  Like writing a personal diary.

You or members of your family have such collections. It can be an emancipation, a liberation and a satisfaction to know that, if you address what will, at least, happen to your personal property, you can truly rest in peace.  If you don't, some relationships you have spent a lifetime making (both friendly, familial and your relationship with your "stuff") can spiral down a long and sad vortex, before they address the collection's value and direction (equitable distribution, estate tax, sale, donation) that should have been the job of the collection's owner. 

Identification And Valuation

A good estate personal property appraiser with high ethical standards, familiar with de-accessioning or tax choices, working in conjuction with your financial and legal team, can truly be a godsend.  Attorneys, accountants, lawyers and estate planners all know about financial instruments, business and real estate.  Your art, antiques, collections and jewelry must be part of your estate consideration, and sometimes will be the most contested. 

An ASA or AAA appraiser is good first phone call to make.  Schedule a consultative visit to come up with an action plan.  Determine the necessary scope of the job and discuss previous appraisals, including insurance, timing,  provenance.  Cataloging and photographing your items is best done by the appraiser in USPAP  (Congressional standards) format, with research and valuation assignation following.  

Get it on your calendar.  We find that our clients are so happy with getting this process underway;  knowing that your collection will be MOST APPRECIATED by future owners is a blessing.  Your spouse, your children, your heirs will love and respect you forever.

Sale vs. Bequething vs. Gifting

Art, Antiques, and other collectibles are often ideal assets for charitable giving, particularly if they've appreciated significantly in value.

1. Who would want them? Who would qualify as an acceptable institution?
2. Is there an endowment requited to maintain the collection at a museum?
3. What about fractional gifting, where you share ownership with the institution?
3. Capital gains vs. taxes?
4. Love a charity and want them to benefit?  Perhaps selling a collection and donating the proceeds should be discussed.
5. Beware of the "empty hook syndrome."  American grandchildren are already assuming a huge burden for an exploding aging population.  Your grandchild might get stuck with this unncessary and princely (with "late fees") bill, too.

Whatever strategies and techniques you use to transfer art and other collectibles in a tax-efficient manner is important to estate planning.  Do it right.