For art collectors with valuable collections, leaving fineart to your heirs can create unnecessary complications without proper planning.Fine art may be included in your will and go through probate; however, it isoften best to create a trust to hold and manage the artwork.
The first complication is gathering the date-of-death valueof the collection. It is important to obtain an appraisal to determine thebeneficiary’s income tax basis in the collection. If the collection is valuedover $50,000 the Internal Revenue Service may require a special appraisal itemformat which could lead to delays in the probate process.
Heirs may face penalties and interest if the appraisal islower than the IRS audited appraisal. Beneficiaries of fine art should alsodelay in selling the artwork for at least six months if possible because thenew sale price, if higher than the date-of-death appraisal value, may be thevalue used by the IRS to determine taxes owed.
For executors dealing with art and collectibles in a Maryland estate, the first step to take following an IRS art valuation audit is notify the heirs, follow the instructions provided by the IRS and contact an experienced estate planning attorney like Stouffer Legal at 443-470-3599 in the Greater Baltimore area.