Art collection in home as part of estate planning

Our New York Estate Planning Lawyers Help Ensure Your Art Collection Legacy

If you want to include collectible items in your estate plan, it’s important to understand the challenging issues they can present. Artwork, in particular, is an asset that’s difficult to successfully pass on to your heirs, so it’s critical that you plan ahead for how paintings, sculptures, photographs, drawings, prints, and other valued artwork are handled.

The estate planning lawyers at Landskind & Ricaforte Law Group P.C have worked with many New Yorkers eager to ensure the legacy of their artwork. Our skilled attorneys understand the special financial issues and possible negative tax consequences for heirs that accompany an art collection, especially if it involves an inheritance. Schedule a free initial consultation to learn how our dedicated legal team can assist you.   

Estate Planning: Options for Managing Your Art Collection

An art collection is an asset that must be managed with care. Typically, there are three ways to handle an art collection when you’re establishing an estate plan:

  • Bequeath the collection to an heir or beneficiary
  • Donate the collection
  • Sell it

However, some art assets aren’t easy to value and require careful planning to ensure the beneficiary doesn’t incur a huge tax burden with the acceptance of that gift. Our experienced estate planning attorneys explain what’s involved in each option.

Leave the Collection to an Heir or Beneficiary

If you’re an art collector, your acquisitions likely mean a lot to you, and you may believe that others share your love of a certain piece or artist and want to maintain your collection. But there’s also the possibility they would prefer to sell. So, if you want to leave artwork to an heir or beneficiary, first ask if they’re interested in having it—and don’t be offended by the response. They may not appreciate the pieces you want to bequeath them and might not want them at all. If you know this in advance, you can plan to protect the artwork through other means.  

Donate Your Collection

This can be a good strategy for avoiding capital gains and inheritance taxes and allows you to claim a charitable tax deduction for you or your estate. But you should work with your estate planning attorney to handle the donation properly. For example:

  • You must donate the artwork to a public charity. This means a 501c3 organization must receive one-third of its operating income from public donations. The donation shouldn’t be made to a private foundation to maximize the deduction potential.
  • Ensure it will be properly utilized. Whatever entity receives your donation must use the artwork for its charitable, tax-exempt purpose. If the organization doesn’t do this appropriately, your deduction could be less than expected. 
  • Clarify special requests in advance. Have a conversation with charity representatives regarding artwork specifications. For example, you may want your collection displayed in a particular area or wing of a museum, or request that your family name is attached to the display. 

Sell Your Art Collection

If your family or beneficiaries don’t want to maintain your art collection after you die, you may want to arrange for its sale. The proceeds will be included in your estate, and your family may be able to take advantage of the “step-up” in value. This means that if your estate heirs sell the collection, they’ll only pay capital gains tax on the amount by which the artwork has increased in value after your death. 

It’s important to speak with an experienced estate planning lawyer to discuss which option is right for your estate so they can calculate the corresponding financial losses or gains to your estate. 

Valuing an Art Collection

As you plan for your art collection's future, it’s essential to determine its value. Regardless if you plan to leave it to heirs, donate it, or sell it, you need to know how much it’s worth. The fair market value of a piece of art or the entire collection may not always be easy to establish. 

According to the Internal Revenue Service (IRS), any personal property that has “marked artistic or intrinsic value” greater than $3,000 must be formally appraised. Appraisers examine each piece in your collection and assess its intrinsic value, including how rare the artwork is, its uniqueness, and its historical or cultural significance.

Additionally, it’s important to understand the differences between an appraisal and a valuation:

  • Valuation. This is an estimation of the value or worth of the art piece or collection. This is made based on information from many sources in the art world, such as curators and art dealers. A valuation is often used to determine a selling price for the asset. It’s generally more formal and detailed than an appraisal and usually documents the asset in a comprehensive report for legal and/or financial needs. Often, a fee is paid to the person who does the valuation.
  • Appraisal. An appraisal is generally less formal than a valuation and doesn’t usually have an accompanying report. Typically, appraisals don’t require a fee. 

Mistakes to Avoid When Including Artwork in Your New York Estate Plan

If the artwork you’ve collected over the years makes up a large portion of your estate, take care to avoid the following mistakes: 

  • Purposely undervaluing your collection. You may be committing estate tax fraud if you give away or get rid of your art collection as a way to reduce the value of your estate. 
  • Incorrectly classifying the client. Collectors, dealers, and investors are each treated differently by the IRS. If you choose the wrong designation for the entity that receives your bequest, they could be at a tax disadvantage. 
  • Failing to keep an updated inventory. As an art enthusiast, you may buy new pieces periodically to add to your collection. It’s important for your estate plan to have a complete and accurate record of each individual piece. 
  • Not keeping a record of provenance. To help ensure your estate receives the maximum amount for your collection, it’s crucial that you show the chain of title for each piece, receipts for when and where you purchased the art, and authentication documents. 

How Our New York Estate Planning Lawyers Help You Manage Your Art Collection

The best thing you can do as a collector is spend time pre-planning with a skilled estate planning lawyer who understands what’s necessary to protect the future of your artwork. We can:

  • Help you create an estate plan that includes an effective strategy for your art collection.
  • Ensure your art collection is managed according to your specific wishes.
  • Provide information on asset protection methods should you choose to leave the collection to your heirs.
  • Establish a strategy that minimizes family arguments or disagreements and bequeaths your collection in a way that won’t cause internal family conflict. 
  • Help you choose the best option for designating your art collection based on the unique circumstances of your estate, your current and future income tax position, your estate tax position, and your family’s interest in the artwork.
Renata Landskind and Terence Ricaforte are dedicated to providing personalized service and individual attention to clients. Our team understands how to balance the attachment you have to your collection with sound advice that leaves it in gracious care for the future. Trust our extensive experience in estate planning for collectibles, including artwork, to help define the goals for your collection.