Whether you are passionate about collecting art or simply looking for a diversified avenue to invest, the fine art market continues to hold value and in some cases is even booming. Art is a long-term investment and is considered fairly risky given that art is subjective. Here are some tips for ensuring that you choose wisely when diving into collecting fine art:
1. Rare art is valuable art. Choose original pieces, not prints or giclees for the best investment pieces. Giclees have become increasingly popular for personal use and enjoyment, but tend to decrease in value in the resell market. Giclees are machine-made prints reproduced on fine paper or canvas and look very similar to the original. But giclees are still copies. Buy it to enjoy over your sofa, but not as an investment.
2. Do your research on the artist. Authenticity of the work alone does not guarantee it will hold its value. Learn about the artist’s education and reputation.
3. Uncover the significance of the work. A story behind the art can often lead to higher sales prices.
4. Make sure the artwork is in excellent condition, containing no blemishes or tears.
5. Check to see if the artwork is signed, numbered or contains a remarque. The size of the collection may impact the value.
6. For very expensive pieces, consider having it appraised by several experienced appraisers.
Next Consider How Your Art Collection Impacts Your Estate Planning
The first step is to gather all of the provenance documents proving ownership and authenticity. Next, properly catalog, photograph, appraise and insure your collection. Include your resources such as appraisers, insurance agents, historians or specialists that can help future recipients manage and care for the collection.
You have several options at this point to consider for your art collection’s future.
1. Sell the collection during your lifetime. Liquidating the investment during your lifetime may be beneficial if you can yield a higher price due to your knowledge and expertise. Keep in mind that you will owe capital gains tax on any profits. Capital gains taxes on artwork is higher than other assets. Currently, art is taxed at 28%. Capital gains taxes are expected to continue to rise. You will also pay commission, sales taxes and shipping or packaging fees. The best place to sell your art collection is typically through a fine art auction house. You will pay the auction house a commission of the sale price (approximately 5-25%). Online auctions do not tend to attract buyers willing to pay the same prices as the established auction houses.
2. You can also choose to give your artwork to specific family members or friends. This can be done through a specific bequest in your will or trust document. A specific bequest will list the exact piece of art and specify which person should inherit that piece. If you do not want to decide which piece goes to each beneficiary, you can establish an LLC and place all of your collection in the business entity. You can then leave that LLC to several beneficiaries. They will then own shares of the LLC, not the art itself. They can choose to sell pieces and then split the proceeds according to their ownership shares.
3. If your family is not interested in your collection, you can choose to donate your artwork to a museum or charity. This may be your simplest option. Your art is delivered to the institution and your estate receives up to a 30% tax deduction of the adjusted gross income. If you want the work displayed a certain way or a plaque with your name to accompany the piece, be sure to leave those instructions in the estate plan. These conditions should be communicated by your executor or trustee and agreed upon before the institution accepts delivery of the work.
4. If you have a large collection, you can create your own museum. This can be a free-standing traditional museum or a traveling pop-up museum. Your estate plan should be very specific about how this will be managed and funded.
Whether you already have a collection or are considering an investment in fine art, contact the experienced estate planning attorneys at Stouffer Legal to discuss the impacts on your estate plan. You can schedule an appointment by calling us at (443) 470-3599, emailing us at office@stoufferlegal.com, or register for an upcoming free webinar using the link below:
https://attendee.gotowebinar.com/register/1686355484239383053
https://attendee.gotowebinar.com/register/2257699109627415311
