It is easy to forget about artifacts and pieces of art when you or your parents are creating estate plans. Many collectors have no idea or interest on what something is worth and typically are more focused on other assets such as real estate or businesses.
However, the taxman will undoubtedly take an interest when a family member dies. Taking precautions such as passing them on to heirs early can prevent unnecessary financial burdens.
What options are available?
First, you need to know what is in the collection. Get each item photographed, identified and valued, and gather any relevant paperwork.
When it comes to passing the items on, there are three basic options:
- Gift it: There are tax breaks for giving away art. Some collectors return objects to the tribes who created them, for whom they hold special meaning. Others donate to local or national museums to allow more people to enjoy the piece. You can also gift to family members. Restrictions govern how much you can gift tax-free.
- Transfer it: Transferring artifacts into a trust or limited company are tax-efficient ways to pass them onto heirs.
- Sell it: If sold when your father is alive, there will be tax to pay. If you wish to trade it after he dies, you will pay tax on the sale in addition to any estate tax you paid.
One thing is clear: The worst thing an estate planner can do is ignore the value of their collection and fail to include it in their will or trust. It can be difficult to include every single asset on an estate plan, so it is important for family members to seek out legal guidance to help make the process less stressful and tedious to deal with.