Do You Have Artwork or Other Valuable Collectibles?
Important Financial Issues to Consider ~
By Herb White, MBA, CFP ~
Whether you have a stash of vintage comic books, paintings by noted artists or a collection of sports cars, have you taken the steps to preserve their value, lessen taxes on them and ensure their ongoing care? The transfer of your valuables and collectibles is an important part of estate planning. Consider what might happen without a plan for your treasured items.
A typical family scenario goes like this: Mr. and Mrs. Brown have been collecting valuable Western curios and paintings they have found at sales over the years and proudly display them in their home. Mr. Brown figures he will simply include them in his will, leaving the collection to his wife and eventually his children. He has not yet taken the step of assessing the value of these items, nor has he involved other family members in his decisions on dealing with them.
The consequences of not taking action to safeguard their collectibles can be huge. The Browns have failed to ask some important questions—
- For starters, do our family members even want the curios? Will they have the knowledge and desire to care for them? That 17th century hobby horse could end up as a toy for the great-grandkids.
- When they do name the beneficiaries in their will, the Browns need to be very specific here, listing each item and who will inherit what. This will help them avoid the potential for family discord. To be on the safe side, they should also identify primary and alternative beneficiaries, and keep the will up-to-date.
- Might there be a smarter way to deal with these treasures? If the collection has value, perhaps the Browns should consider a museum or charitable organization. It would be a shame if the kids didn’t want to care for the items and just stuffed them in the attic or sold them off. Many other questions need to be asked. For instance, should the Browns keep the collection intact or will they need to sell some pieces to pay for their own expenses?
- What if the Browns’ collection was extremely valuable—a sports car collection or priceless art? In this case, their options and decisions broaden. For instance, should they keep the collection in the family, gift it to a foundation or museum, or establish a family foundation that lends the collection to various museums?
- For any valuables, have good records been kept to help ensure worth? For example, can the Browns prove the collection is authentic? The more supportive information they have on their collectibles, the better. Keeping good records regarding taxes and appraised value will help when assessing capital gains, gift and donation deduction amounts, and even insurance claims.
- They will need to consider estate taxes. The taxes can be minimized by passing along their property. By consulting with a tax advisor on this complex issue, they will learn about options, such as making a charitable gift of their collectibles that offers an immediate tax deduction.
- The Browns should have sufficient liquidity to avoid a treasure having to be sold to raise fast cash. They can also ask about life insurance strategies to match the value of the donation.
No matter what approach you choose, it is important to communicate clearly with family members and other beneficiaries. Be sure to write down your wishes so there won’t be any misunderstandings down the road.
Also, be sure to take advantage of potential tax benefits and learn the best strategies to safeguard your valuable collection—large or small—by talking to a trusted financial or tax professional.
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Provided by courtesy of Herb White, MBA, CFP©, a CERTIFIED FINANCIAL PLANNER™ with Life Certain Wealth Strategies, 8400 E Prentice Ave, #715 Greenwood Village, Colorado, www.lifecertain.com, (303) 793-3999. Securities and investment advisory services offered through Woodbury Financial Services, Inc. Member FINRA, SIPC and Registered Investment Advisor. Life Certain Wealth Strategies and Woodbury Financial Services are not affiliated entities.