If you are an estate administrator tasked with the probate of an estate involving a large, expensive art collection, there are certain things that must be done in order to preserve harmony among the beneficiaries.
Paintings, sculptures and other artwork can have great sentimental as well as financial value. While not negating any of the sentimental value for the beneficiaries, estate administrators must concern themselves primarily with the market value of the collection as a whole and for each individual piece as well.
Along with the goal of determining as equitably and peacefully as possible which heir receives which piece of art, estate administrators should also try to minimize the taxes that will be owed.
Estate administrators’ first tasks should be to preserve the integrity of the collection. This may entail changing the locks or hiring security to protect the assets. It may be necessary to move pieces to climate-controlled storage facilities designed to hold fine artwork as the estate wends its way through the probate process.
For tax purposes, there is an uptick in value when art changes hands after a death. Thus, it may be appropriate to require all heirs to pay their own specific share of the taxes.
In order to derive an accurate valuation of the collection, a professional art appraiser should be retained. This person can also arrange an art auction if the heirs prefer to sell their legacies.
It should be noted that art collectors during their lifetime may benefit from selling their collections to dodge the estate taxes. A Los Angeles estate planning attorney can devise a charitable unitrust that is tax exempt but allows the art collector to collect distributions of the proceeds at regular intervals. These disbursements will be taxed as income instead of being hit with 28-percent capital gains taxes. The remainder of the funds is then left to the charity chosen by the collector upon his or her death.
Source: The Wall Street Journal, “Tips for Dividing Art in a Divorce or Death,” Daniel Grant, accessed Nov. 10, 2017