Wednesday, May 30, 2018
When a person purchases property believing it to be an investment, it is generally real estate or land. However, 80% of collectors of art see their collections as investments. The IRS defines collectibles under IRC Section 408(m) and could consist of works of art, rugs, antiques, any metal or gem (with exceptions), any stamp or coin (with exceptions), valuable alcoholic beverages or “any other tangible personal property." Proper planning of these unique items of personal property can alleviate unnecessarily high capital gains taxes to your heirs, income or estate tax penalties, or depreciation of the asset’s market value.
Below is a list of ways in which you can decrease disagreements and improve settlement of these types of assets.
- Obtain one or more appraisals from certified experts and certificates of authenticity.
- Keep detailed records of purchase date, price, appraisals, damages, insurance coverages and any improvements of individual items in collections.
- Talk to your heirs and ask which items are most important to them.
- Consider ways to equalize inheritance amounts and ways to respond to potential claims of fairness that may arise among your beneficiaries.
- Consider taking advantage of annual or lifetime gift exclusions by gifting personal property during your lifetime.
- Articulate in your estate documents who will bear the cost of storing or shipping items. Also, be aware of whether beneficiaries have the means to cover what could be expensive delivery of larger or fragile items they stand to inherit.
- Understand potential benefits of gifting to charity.
- Verify that your investment adviser, CPA, estate planning attorney and executor are aware of any collectibles that may have value.
See Dawn Doebler, How to Include Valuable Art and Collectibles in Your Estate Plan, WTOP.com, May 30, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.