Special Estate Planning for Collections
Many people have collections about which they are quite passionate. The collections may be very valuable, for example, art collections, coins, stamps, or designer handbags. Or they may have more sentimental than monetary value, such as political bumper stickers, postcards, or rocks. Regardless of its dollar value, if you have a collection, it should be included in your estate plan. You should make arrangements in advance to ensure that the collection is handled in the way you want, and if it is worth a lot of money, that its value is maximized. The following are a few steps you should take to ensure your wishes for your collection are followed:
Collect relevant documentation. If you have a valuable collection, it is important to create a catalog describing each piece, including photographs, bills of sale, and appraisals. If you have an insurance policy covering some or all of your collection, it should be kept with your important documents as well.
Discuss your collection with your family members and loved ones. Although you may have invested a lot of time and money in your collection and may have a strong emotional attachment to it, it is not unusual for family members not to share your passion. It is important to discuss this with them to ensure that your estate plan is designed to minimize the burden your family could face in dealing with the collection when you die. However, it is also important to find out from your family members if anyone would like to inherit certain pieces or the collection as a whole. If more than one person would like to receive certain items, it is prudent to figure out a reasonable solution in advance. This will help to avoid conflict between family members after you die. Also, consider giving them your permission to sell or donate part or all of the collection.
Donate your collection to a museum or charitable organization. It is important to check with the organization to which you plan to donate the collection to make sure that it is able to handle housing or selling it, both of which could involve more expense than you might expect. Such organizations may request that a donation of cash accompany the bequest to offset the cost of maintaining the collection. Keep in mind that only a donation to a public charity will be tax deductible by your estate (or you, if you make a lifetime gift), and there are certain circumstances when even donations to a public charity will not be deductible.
Sell the collection. If you would like your family to sell your collection or anticipate that they will sell it, it will be helpful to them and likely minimize delays if you provide the names of dealers or auction companies that specialize in the type of collection you have, as this type of information may not be as easy to find for those who are not collectors. In addition, appoint an executor who is knowledgeable about the collection and its value. This will prevent the collection from being sold for much less than its actual value.
Make sure it is properly valued. Appraisals are particularly important, as they will help your executor, trustee, and family members determine the value of the collection. Be sure to use an appraiser knowledgeable about the particular type of items in your collection. This will ensure that these items are not sold for a price far below their actual worth or donated because of a lack of knowledge of their true value. Also, it will help you to make decisions about how to provide equitable gifts to your beneficiaries and whether to make gifts from your collection during your life or at death. Under federal tax laws, if the value of your collection exceeds a certain level, the estate must obtain an official appraisal for valuation purposes that will provide a value as of the date of your death. Determining the value of your collection is important to avoid tax penalties for undervaluing or overvaluing the size of your estate.
We Can Help You Design a Plan for Your Special Collection
Your collection likely means a lot to you. It also adds another level of complexity to your estate plan. We can help you think through your goals for your collection and develop an estate plan that will allow you to rest assured that your collection will be handled according to your wishes, even after you die. Call us at (423) 648-9829 or schedule a meeting through our website. We are more than happy to consult with you by phone or video conference if you prefer.