Estate Planning for Works of Art
Some people take great pleasure in collecting great pieces of art, but they also need to plan for what will happen to this treasured work after their passing — especially if the art increases in value over time.
Sound estate planning for art encompasses both tax and legal consequences for heirs, who may or may not appreciate a collection beloved by their benefactors. Additionally, assigning an accurate value to art can be a tricky process because of the unique nature of most art. This individuality makes it difficult to compare one work to others, but that element of the unknown may actually work to an advantage when it comes to estate planning.
In fact, a lower valuation of your art can be especially beneficial for your heirs because it will be taxed on that value whether you gift the art or leave it as part of your estate. Valuation is also an issue when the art is eventually sold, and also if an inheritance is essentially tied up in what is an “illiquid” asset.
Other strategies for estate planning
Transferring valuable pieces of art can trigger taxation, so one strategy is actually selling the art to the heirs — either for actual cash or a promissory agreement — and placing the art into a trust. The heirs may then essentially lease the art back, although this would require a formal leasing agreement to ensure validity of the agreement under the law.
Collectors may also consider bequeathing the art to a charitable organization, while still maintaining ownership for up to 10 years or upon their death (whichever comes first), and taking a prorated charitable deduction for each of those years under U.S. federal law.
Planning for how to handle an art collection can be a complicated process, so speak with a knowledgeable Florida lawyer at the Charles Law Offices for the guidance and advice you need.