By Melissa De Groff
Estate plans for collectors of coins, art, stamps or other items will need to consider both the value and logistics of passing the collection to a new owner. Otherwise, they’ll need to create a plan to dispose of the items.
Addressing clients’ collections in their estate plans will provide them peace of mind and give their personal representatives direction.
The following steps are helpful, regardless of the type of collection:
Step One: Inventory
Do your clients have a current inventory of what they have? If not, the first step is to catalog the collection, including:
• A list of items and their locations.
• The dates of acquisition.
• The purchase prices.
• If applicable, the creator and date the item was created.
• Gallery or dealer names, along with their contact information, and any paperwork that refers to the item, such as catalogs and bills of sale.
• The current value.
The last step may require an expert to evaluate the items and determine their provenance and value. Some collections are so specialized that a local expert will not be available. If your online search does not reveal an expert for the particular type of collectibles, you’ll need to find out if the client consulted with someone familiar with their type of collectibles, such as a dealer, a repair person, an appraiser or an academic.
Step Two: Evaluate
Is the collection more valuable as a whole or as individual items? Do your clients have complete records to establish when they acquired each item, from whom and for how much? A single piece of paperwork can determine the provenance — and thus the value — of an item.
Are your clients collectors, investors or dealers of the types of items in their collection? The IRS will tax the sale or inheritance of collected items depending on the role the taxpayer played in acquiring the collection.
Is the item easily recognizable as valuable? Many people might recognize a painting by Edgar Degas is valuable but might not realize a 1923 Gibson F-5 Mandolin — with a label signed by Lloyd Loar — is also very valuable.
Is the collection, or pieces from it, liquid? In other words, how easily could clients (or their personal representatives) sell the item? A highly-sought-after item can easily be sold at auction or private sale — even if it is in poor condition — because of its rarity.
Are the items in the collection unique? Items that would catch the attention of other collectors and institutions hoping to acquire them would earn a premium because of their rarity. On the other hand, not all unique items are of sufficient interest to others to justify an auction.
Step Three: Managing the collection
What style of collection does your client have? Is it a mishmash of art glass or impressionist paintings, acquired mostly because they liked the look of it? Or is it a well-curated, cohesive group of first-edition books or Tiffany glass that makes sense as a whole?
The inventory and evaluation process can highlight lesser-value items, duplicates and items that no longer fit the client’s interests. This is a good time for the client to consider selling, gifting or donating some items from their collection to enhance the value of the remaining items or to make disposition easier.
Keep in mind that managing the collection continues after the death of the client, so it is important to counsel clients to choose their personal representatives carefully. A close friend (while a wonderful person) may not have the expertise or time to properly store and dispose of the client’s antique typewriters, art glass or archtop guitars. In some circumstances, a private curator or expert in the field may be better equipped to manage a specialized collection.
Additionally, clients should allocate funds in their estate plan to ensure this post-death management of their collection is done appropriately. For example, musical instruments need to be stored in a heat- and humidity-controlled space; stamps and books need to be kept dry; and vehicles require specialized transport. One way to fund this is for the client to purchase a life insurance policy and designate the proceeds to pay expenses associated with the collection (curator/PR, appraisers, storage, conservation, auctioneers, etc.).
Finally, counsel your client to think about the cost and logistics of specific bequests. Does the Indianapolis Museum of Art have room to display the 500 Roman coins the client wants to donate? If the items will instead be put into storage or sold to fund the acquisition of other art, is that acceptable to the client? If the designated recipient lives in another state or country, will it be difficult and costly to ship the item safely and legally? Shipping a set of first-edition Louisa May Alcott books to Minnesota would be relatively easy and inexpensive; shipping a set of antique ivory chess pieces to Wales might be both expensive and illegal.
The more work clients put into cataloging, curating and planning for the disposition of their collections, the more likely their collections will be treated according to their wishes.•
• Melissa De Groff is a partner at Kroger Gardis & Regas. Opinions expressed are those of the author.