Americans love collections and homes across the country boast music collections, rock collections, sea shell collections and the list goes on. Often, these personal collections hold a great deal of sentimental value while their market value is nil. Typically, favored items are passed on to the family members who will treasure them while the collections’ value presents very little impact on the estate.
However, an art collection is different because works of art can be extremely valuable.
As the New York Times points out in "Estate Planning Can Get Tricky When Art Is Concerned," art collections require very careful estate planning. The biggest issue is that art is illiquid. If the estate tax is due, then the heirs have to come up with cash to pay it. This requires them to use other estate assets or to sell the art.
Unfortunately, it is not always quick or easy to sell art, and heirs who have little interest in art are often taken advantage of by professional dealers. The good news is that tax authorities will often accept low values for art collections as the true market value is difficult to assess.
If you have an art collection, it is extremely important that you have an estate plan for it. The last thing you want to do is just leave it to your heirs to figure it out. Contact an experienced estate planning attorney to navigate these waters.
Reference: New York Times (October 1, 2015) "Estate Planning Can Get Tricky When Art Is Concerned."