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Estate Planning for Art & Other Collectibles

If you have a valuable collection of art, cars, jewelry, or another other collectible, you need to be aware of how to properly protect and pass on (or dispose of) these assets, both during your lifetime and at death. Here are some tips on estate planning for art and other collectibles:

Classify ownership correctly. When it comes to income taxes on gains or losses or the deduction for expenses to maintain a valuable collection, it makes a difference whether or not the taxpayer is classified as an owner, a dealer, or an investor. Dealers and investors may qualify for more favorable tax treatment, so getting this designation right is important.

Report accurately. Since there is no statute of limitations on estate tax fraud, the IRS can pursue your heirs if you fail to report and pay any taxes due on your collection on Form 706.

Plan to preserve value. The true value of your collection may be in jeopardy if it has to be sold to pay estate taxes. Making a plan now to lessen the estate taxes on collectibles can help preserve its value. There are a number of estate planning tools for this purpose, including using a collection to fund charitable contributions, making gifts during your lifetime, or other methods for removing these assets from your taxable estate.

Know the true value of your collection. Getting a professional appraisal on collectible assets is not only necessary for proper tax reporting, it is also crucial for establishing the value of your collection for a number of other purposes, including planning for future gifts, insurance, getting a loan with the collection used as collateral, and establishing an auction value if you plan to sell.

Keep an accurate inventory. You cannot plan for the distribution of your collectibles if you don’t have an up-to-date and accurate inventory. This inventory should include when items were purchased or sold, appraisal and insurance records, details on any loans or gifts to entities or other people, and damage or loss records.

Record provenance. To determine the value of any collectible, the provenance of each item is essential. Keep records on every item’s history and chain of ownership.

Have sufficient insurance. Not having the proper amount of insurance can be devastating to a collection’s value. You can choose to insure your collection either through blanket coverage, as part of your home’s contents, or as separately scheduled items.

Inform heirs. The collection you hold so dear may not have the same meaning to your heirs, so it’s important that you understand their intentions before you leave your collection to them. If they will sell the collection and you want it kept together, there are other methods of disposition you can consider.

Consider charitable giving. If your family does not want your collection, or if its inclusion in your estate will trigger a substantial estate tax, charitable gifting may be a solution. There are income tax benefits to making a gift during your lifetime to charity; just be sure the charity you choose will accept your gift and any restrictions you may want to place on its use.

The Dorcey Law Firm, PLC, provides estate planning services to Florida residents. Contact our Fort Myers law firm for your free consultation.

Categories: Estate Planning
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The Dorcey Law Firm, PLC - Fort Myers Attorney
Located at 10181 Six Mile Cypress Pkwy, Suite C, Fort Myers, FL 33966
Phone: (239) 330-6674
Local Phone: (239) 418-0169