A Comprehensive Plan for Your Art Collection
As someone with a passion for art, you’ve got a better handle than most on the true value that your art possesses. Your collection has grown over the years and your genuine love for what you’ve collected goes far beyond a simple number on a balance sheet. Even though you’ve spent your time curating a collection that represents you, if you haven’t created an estate plan, the state can simply take your collection and sell it off to the highest bidder. Many of my clients who first meet with me already have their wills drawn up, but never thought to include their art collection as part of their plan. Not having a plan for your art is a dangerous mistake that can ruin any artistic legacy that you hoped to create.
How to Get Started
Before you even worry about your will, start by getting together the appropriate provenance documents for your art, including any appraisals and bills of sale. As a collector of fine art, you likely already have many of these documents together from when you insured your collection. If for some reason you don’t have insurance, make sure you create a catalog of your pieces, including photographs, and I recommend you talk to your insurance company about getting your artwork insured immediately.
Once you’ve got your portfolio fully assembled, you should meet with an attorney and discuss your wishes for your art collection after you’re gone. The goal of your meeting is not to have the attorney tell you how they think you should distribute your collection. Instead, be sure to explain to the attorney what your vision so that they can design an estate plan (a will or trust) to help your vision become a reality.
What Can You Do In Your Estate Plan?
Your attorney can help you determine what the best options are for your estate plan based on the legacy you want to leave with your art collection. Before you get started, you will want to consider your family members or heirs that may inherit your collection. Do they understand the true value of the collection? Would they know what to do with the artwork when you’re gone? If it needs preservation, are they up to the tasks that are needed or are they going to hang it in their garage next to a print of Dogs Playing Poker?
One option for you to consider is to leave your artwork directly to family members or individuals who you know would appreciate them (or otherwise benefit from them). These direct gifts are referred to as specific bequests, and if you are looking to divide up your art collection amongst multiple people, you’ll need to have a specific bequest for each person, including what they are to receive, in your will.
If you prefer to keep your collection intact, but would like multiple people to be able to own and enjoy it, you can transfer it to a trust or an LLC. This type of plan is where the importance of having planning professionals working with you is extremely necessary. While you may think you can go to a website and fill out a generic, mail-merged form that sets up a trust or an LLC, these can be filled with pitfalls and problems that can ruin your plans for your art collection. Using a trust or an LLC will mean that the executor of your estate won’t have to manage your art collection after you’re gone. A trust or an LLC is often set up while you are still living and instead of specifically giving pieces of your art collection to specific people, you can transfer your ownership in the trust or the LLC to those people after you are gone.
Depending on the nature and value of your collection, you may also want to consider donating your artwork to a museum or other charitable organization. If you do this before you die, you may even be entitled to a tax deduction (if you are going to consider this strategy, make sure you talk to your financial advisor and accountant about the various possibilities to maximize your gift). Some people would rather enjoy their entire collection now and instead make their donation to a museum or other organization upon their death. This is often the easiest way to handle your art collection in your will and let’s you control if the whole collection goes to one institution or allows you to spread it across various institutions that may have affinity for particular pieces of art.
The final general option I want to touch upon is selling your art collection. I left this option for last because to most of my clients, this is not the legacy they are looking to leave. Their collection means too much to them to be auctioned off to the highest bidder and leaving your executor to figure out taxes, sales commissions and possibly shipping and storage for your collection is not the legacy they would like to leave. If this is the route you choose, make sure to discuss it with your attorney and financial professionals so you understand the true financial impact it will have upon your estate.
The Barnes Collection
For anyone who thinks that just leaving your art collection behind with an informal plan is all that is needed, I encourage you to grab a copy of Art Held Hostage by John Anderson. It details the often exhausting legal squabbling and fighting over the the collection of Dr. Albert C. Barnes, which included 69 Cézannes, 60 Matisses, 44 Picassos and many other priceless works of art. After reading that book, I guarantee you will be rushing over to meet your attorney to make sure you don’t leave behind any such problems for your estate.
You wouldn’t throw your painstakingly curated art collection into a generic cardboard box and toss it into your basement. It is part of your legacy and deserves more respect than that. The legal equivalent of that generic cardboard box is a mail-merged form on a website that will probably only lead to more problems than you ever anticipated after you are gone.
Treat your art collection’s legacy with the respect that it deserves and make sure it’s got a proper place in your estate plan. A little planning today can protect your legacy tomorrow.
Andrew Ayers is a small business and estate planning attorney. For more information or to discuss options to protect your art collection and its legacy, visit his website at AndrewMAyers.com.