This article is intended to help a family member, executor, or estate lawyer in the process of handling a large art collection as part of an estate settlement.
Organizing the lifelong financial affairs of a loved one, friend, or client is complicated and often requires generous amounts of patience, time, and organizational skills. The skills of a detective, banker, lawyer, and therapist are needed in equal parts. The situation can be made more challenging when the estate contains a significant art collection.
Moreover, if an art lover is serious, what started as a passion for a particular artist, period, or medium may end up as a collection with both financial and emotional value: Financial in terms of valuing the estate for tax purposes and emotional in terms of the family and other beneficiaries who knew the collector.
Also, cultural importance should also be considered. Art is complex, and so is an art estate plan, but by following these guidelines, you can avoid potential pitfalls and honor the collector’s passion and spirit.
Create A Plan For Art Collection
Here are some steps on how you can create a solid plan that will work for art collection:
- Identify scope & obtain any additional resources as needed
- Assemble Documentation
- Evaluate current storage methods & identify condition issues
- Relocate and/or consolidate items
Identify Scope & Needed Resources
The larger and more valuable the collection, the more likelihood the Estate will need to bring in additional resources. Because good professionals are frequently busy, begin reaching out early and setting up interviews.
Estates face a series of deadlines, and the sooner the calendar is set up, the more likelihood of an orderly process. In particular, appraisers should be retained and scheduled as soon as possible.
Gathering documentation is a critical step in the settlement process. The value of an artwork, in part, rests on proper documentation. Hence, request receipts for purchases, conservation work, past exhibits or retrospectives, catalogs, loans, notes, and any correspondence regarding the works, particularly from the artist or gallery.
Records will need to be in both physical and digital formats so they can be properly shared. Thus, consider someone with registrar training who can manage inventory, images, scanning, archiving logistics, condition reports, and handling artwork. Furthermore, a basic understanding of art identification, archiving materials, conservation, art mediums, and related health and safety is critical.
A minimum artwork record should try to include:
|Inventory Number||Size||Past Exhibitions|
|Date||Location||Bill of Sale incl. Sales Tax|
Protip: Use a cloud-based art inventory management system such as articheck.com or artlogic.net or ask the art storage facility to provide the service. Renwick Fine Art Services offers enhanced inventory management to its customers and is available online. These services make sharing inventory information quicker and easier, something that will make the overall process more efficient.
Evaluate Current Storage & Any Condition Issues
- Evaluate current storage methods: Artwork should be away from direct sunlight. Any extreme temperature or temperature fluctuations are harmful to art. The temperature fluctuations in uninsulated areas, such as an attic or basement, can cause many kinds of materials to expand and crack.
- Keep the humidity low: Ideally, all artwork should be stored at humidity levels between 40% and 60%. Photographs, especially negatives or color prints, must be kept in a cool and dry location with limited acidity. Susceptibility to natural disasters or other flooding should be evaluated (for example, impending hurricane season in the southeast).
- Research the possibility of existing storage accounts: Search past invoices and bills of ladings. Interview staff and family members. Also, many collectors have multiple storage account locations to meet insurance requirements.
- Conservation and damaged works: Start keeping a record of all damaged work. When looking for a conservator, check with your gallery or appraiser, a local museum, or a framing shop to see whom they recommend.
Protip: The appraiser you hire can be very helpful in identifying storage or condition issues. Ask for their help.
Consider Relocating And Consolidating Items
Consider immediately relocating expensive artwork to an art storage facility. Many types of art are extremely portable and can easily be lost, misplaced, damaged, or stolen during an estate settlement period.
A proper art facility offers many benefits to the executor as they can provide storage, packing, condition reports, and viewing rooms. Therefore, art facilities are typically centrally located and are convenient and accessible by appraisers, conservation specialists, dealers, and other prospective buyers, and visits are under close supervision.
Moreover, artwork is almost always handled separately from household goods and requires specialized teams, trucks, and art facilities. Almost all movers claim to handle works of art and other collectibles, but only specialized firms have the requisite expertise in de-installation, packing, and transport.
Far-flung items can be consolidated using specialized cross-country art shuttles that operate under strict protocols. Renwick Fine Art Services is experienced in consolidating large collections and has a network of art-handling specialists throughout the United States and Europe.
Protip: When in doubt, move quickly to safeguard items by moving them to proper storage. Beneficiaries, household staff, caregivers, and others may rightly or wrongly perceive an entitlement to specific items and may circumvent the estate process.
One of the primary purposes of an estate is to value the decedent’s assets as of the date of death. This valuation will determine the estate’s liability for state and federal estate tax purposes. However, there are a number of other key benefits:
- Items of greater value require special consideration in terms of handling storage and conservation considerations.
- Items of greater value require further analysis in terms of disposition, whether via art auction, donation, bequest, private sale, or other means.
- For equity purposes, the estate may wish to distribute items to beneficiaries based on their values.
- Less valuable items can be sold quickly and relatively easily via an estate auction or donated to local charities.
A properly executed appraisal protects the executor by forming a sound fiduciary basis for decision-making. It could be critical in case of a tax audit or lawsuit.
- Choosing what items to appraise
- Expected timeframe and cost
Protip: Make sure to include any items listed on insurance policies.
Selecting An Appraiser
There are a number of considerations that are critical when selecting an appraiser, and this could be the estate’s most important decision. Of primary importance is whether the appraiser is a member of a recognized appraisal organization and, therefore, adheres to an ethical code and keeps up with current appraisal methods.
In the United States, the Appraisers Association of America and the Art Dealers Association of America are likely the most recognized organizations specializing in personal property, especially art, antiques, and other collectibles, and either organization should answer most requirements.
Just make sure you have a written agreement and that the appraisal will be legally addressed to the Estate. A second critical consideration is an appraiser’s area of expertise. When narrowing down choices, it is important to take a look at the estate’s assets and determine any concentrations of item types or periods.
For example, say you had an estate consisting primarily of English antique furniture but also including a handful of early American portraits and another piece that is believed to be a small Picasso. Your primary appraiser might be a specialist in English decorative arts from that period.
That appraiser, in turn, would hire two additional specialists for the other items and provide you with a single report. Those other appraisers and their credentials will be listed in the report. Another way would be to hire a primary appraiser plus a Picasso expert and have a separate appraisal just on that potentially high-value item.
An estate with numerous high-value items from many genres may require multiple appraisers. Remember, good appraisers specialize and know their market. The art world is too diverse for generalists.
Choosing Items To Appraise
One of the critical roles of an appraiser is to help the Estate spot household items of significant value that should be appraised and consideration given as to how they should be sold, donated, or distributed to heirs.
Other items can then be sold at an estate auction or donated to charity. The benefit of the latter is that items sold or donated will have their value established, and the aggregate receipt from the estate sale or the donation will satisfy Estate reporting requirements. Moreover, these donations and sales should be completed quickly so the results can be used to calculate Estate net worth.
Expected Time Frame And Cost
Remember the 9-month deadline for Estate taxes.
Bequeath: When considering bequeathing fine art, one option is to create a personal property memorandum, which is a separate document from your will that lists the items of tangible personal property and the people you want to inherit them.
A personal property memorandum is a document that is separate from your will. It lists out all of the items that you want to pass on to a specific person, along with the name of the recipient. For example, you can use a personal property memorandum to leave your jewelry, paintings, books, or other tangible personal property to your family members and other loved ones.
A personal property memorandum has some advantages over including these items in your will. First, it is easier to update and change. You do not need to go through the formalities of making an addendum or amendment to your will, such as having witnesses or notarization. You can simply write a new memorandum or make changes to the existing one.
However, a personal property memorandum also has some limitations and requirements:
- It must be referenced in your will. You need to state in your will that you have a personal property memorandum and where it can be found.
- It must be signed and dated by you. You can write it by hand or type it, but you need to have your handwritten signature and the date on it.
- It can only be used for tangible personal property, not for money, real estate, stocks, bonds, or other intangible assets.
Sell: Deciding on how to sell an individual artwork depends on many factors, including value, type, documentation, and the target collector.
Auction houses typically handle higher-value items. The most famous auction houses in the US might be Sotheby’s, Christie’s, and Phillips, but an estate should consider auction houses by geographical dominance. Items of Chinese origin might sell better in Hong Kong, while George Rodrique’s “Blue Dog” might get a higher price in a New Orleans regional auction house such as Neals Auction House.
Higher-end auction houses will demand impeccable provenance, so the estate will need to have its paperwork in order.
Online auction houses are a great way to sell art and are usually easy to work with. These platforms can help you showcase your work in high-quality images and videos, provide authentication and certification services, and handle shipping and insurance. Recommended sites include Bidsquare, 1st Dibs, and Chairish.
There are numerous Art Dealers that specialize in selling art, often at no cost to the seller. Dealers can sometimes get a higher sales price than an auction house because they can approach known collectors who relish buying artwork that is not available in the marketplace.
Choosing an art dealer who specializes in selling art can be a challenging task, as you need to find someone who has the expertise, network, and reputation to market your work effectively. There are recent examples of shady art dealers who defrauded their clients, so research and due diligence are paramount.
Ask respected professionals you trust for names and check their membership in known and ethical dealer associations. Different dealers specialize in different types of artwork, so you will likely need more than one. Ultimately, choosing an art dealer is a personal decision that depends on your rapport and compatibility with them.
You should choose an art dealer that you feel comfortable with, who acknowledges your needs and preferences, who respects your opinions and vision, and who has a passion for art.
Local estate auctions may be the easiest method for disposing of less valuable artwork. The success of an estate sale relies heavily on the amount of exposure given to the sale prior to the event, as well as the reputation of the auction specialist. The best thing you can do is visit sales in your immediate area and see what exposure they received and how many visited the auction.
Donate: Donating artwork from an estate is a very popular method used by executors handling a large portfolio. Donating artwork can reduce estate tax liability; however, there are significant limitations and accounting rules that must be followed. For example, the “related use” rule limits the value of your charitable income tax deduction depending on the charity’s use of the gift.
Protip: Some estates, particularly artist estates, may have much more artwork than liquid assets. Executors should explore using artwork to barter against estate debts. People and vendors who knew the artist may value the artwork more than repayment.
Feel free to call Renwick Fine Art Services to discuss any aspect of handling fine art and collection management. We are here to help.
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