Estate Planning Art and Collectible Assets

The popularity of art and collectible assets cannot be denied. Contrary to the belief that art and collectibles are not convertible assets, the highly marketable exchange value of such tangible assets makes these tangible objects a viable option for safe-haven protection of value within a tax-exempt estate trust. Although some investors also consider the lasting memory of beloved and highly valuable treasures as personal object d’arte, the convertibility of these safe-haven assets makes them exceptionally wonderful when planning an estate. Planned giving specialists can read on to find out how these special assets fit into an estate trust’s nonprofit charitable giving plan.

Why Antiques, Art and Rare Collectibles?

When an estate becomes effective at the end of the owner’s life, antiques, fine art, and rare collectible assets can be sold at auction for a market price. Distribution of proceeds from art and collectible assets according to an estate plan, a will, or trust document, specifies the terms and conditions in which final beneficiaries will receive an inheritance. Future heirs of estate held artwork, antiques or rare collectibles may request liquidation depending on the directives of an estate.

Estate Planning for Art and Collectible Assets

The inclusion of valuable antique, fine art, and rate collectible assets in an estate, contributes to the net worth of a trust. Here are the top ‘8’ estate planning tips for transfer of antiques, art, and collectibles to an estate trust:

  1. Appraisal certification of authenticity is key valuation of high-ticket antiques, artworks, or other rare collectible items.
  2. Records such as bill of sale for auction or exchange, appraisal records, insurance policies, and record of damages, repairs, or refurbishment of items.
  3. Written will, estate, or trust documentation outlining assets and planned distribution of specified items to designated heirs.
  4. Market valuation of each item, including estimated taxes and liquidation costs affecting proportional equality of individual inheritors.
  5. Living trust exclusions and tax-exemption for transfer of annual income or lifetime gifts of artwork or collectible given to heirs prior to death.
  6. Directives for storage and shipping of tangible antique, art, and collectible assets, particularly where inheriting heirs reside elsewhere.
  7. Philanthropic contributions accorded tax-deduction from estate gifting of valuable collectibles to designated not-for-profit charities.
  8. Notification of a CPA, estate planning attorney, or investment advisor, of the decision to transfer artworks or collectibles to an estate trust, with directives for management and distribution of those assets among heirs should such dispute arise.

IRC Rules for Tangible Estate Assets

Estate planning for art and collectible assets involves review of federal Internal Revenue Service (“IRS”) rules for trust transfer. The IRS provides tax-exemption for transfer of fine art and other collectible items to an estate trust. Internal Revenue Code (“IRC”) defines “collectibles” as antiques, artwork, rugs, fine jewelry or other metals and gems, stamps and coins, and vintage alcoholic beverages. Under IRC Section 408(m), estates have the right to distribute tangible assets to heirs or charities tax-free. Special tax and estate laws differ by state. State tax boards permit distribution of artwork and other collectible assets to beneficiaries in other state jurisdictions, as provided for in the New York Consolidated Laws, Tax Law – TAX § 1115. Exemptions from sales and use taxes.

The IRS tax treatment of estate antiques, fine art, and rare collectibles as investment with deductible criteria. Estates may be subject to a low surtax for gains associated with market value of those assets. Beneficiaries are subject to individual tax filer standard capital gains tax rates after tangible assets or proceeds from their liquidation, is distributed. High net worth beneficiaries stand to lose from tax-deductible incentives associated with inherited collectibles. Market depreciation may not account for income or capital gains taxes, and estate tax penalties assigned to collectibles at time of transfer to an heir reporting high net worth on IRS record.

Increasingly popular with auction traders and collectors, antiques, fine art, and rare collectibles of valuable worth are ideal assets for safe-haven and tax-free estate transfer.

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