Tag: art donation
This week, we thought it would be interesting to touch on the intersection of law and art in estate planning.
Artwork collections, whether they are comprised of a multitude of works or just one piece, are often a treasured possession of their owners, carrying deep emotional significance and/or high monetary value.
In estate planning, the sentimental and financial aspects of an art collection can become intertwined. Testators and beneficiaries may have competing views. As a simple example, there could be disagreement on whether the art should be sold or kept within the family. That being said, the valuation of artwork is an issue that may often fly under the radar.
The value of an artwork collection can have serious repercussions on the administration of an estate, especially where the estate lacks liquidity to address expenses, such as estate administration taxes.
However, the valuation of art may not always be a clear cut issue, as discussed by Mr. Ronald D. Spencer, Esq. in this article. Value can vary drastically over time, and even where the value remains stable, there may be significant challenges in finding buyers, especially where the collection is large or mostly one artist, potentially burdening the estate with tax liabilities and no certain financial benefit in exchange.
Understanding and articulating one’s wishes concerning their art collection is the first step in minimizing the impact of some of these issues. You will want to set out your intentions and wishes clearly in your will.
Avoiding uncertainty can be achieved through several means. The collection can be distributed through testamentary or inter vivos gifts where appropriate beneficiaries exist. It can be sold, which may carry advantages where the valuation and marketability of the collection is uncertain over time and a potential buyer has been found. Donation to a charitable organization is also an option, with many registered charities dedicated to art.
Whatever path one chooses, it is important to understand the implications from a tax and transactional perspective to ensure the most efficient execution of the testator’s intentions.
Thank you for reading and have a great day!
Suzana Popovic-Montag & Raphael Leitz
I try to seize every opportunity I can to learn about art. In preparing today’s blog, I was intrigued to read about the UK’s Cultural Gifts Scheme and its relationship to estates.
The Cultural Gifts Scheme & Acceptance in Lieu allows UK taxpayers to donate important works of art and other heritage objects in return for a tax reduction, which includes inheritance tax. The donated work is then held for the benefit of the public or the nation at an eligible museum or gallery. According to this article from the Guardian, the Scheme was first introduced in 1910 as a way of allowing individuals to offset inheritance tax bills, and later, in 2013, to allow individuals to be able to make donations during their lifetime in order to offset future tax liabilities.
Any art admirer should have a look at the 2018-2019 Annual Report which provides a list of items that were received, along with some pretty pictures of the items :). It is a feast for the eyes and the senses. Some of the highlights include:
- a Portrait of the Emperor Charles V by Peter Rubens, which has gone to the Royal Armouries in Leeds
- a platinum and diamond necklace with black velvet ribbons, convertible to a brooch, made by Cartier in Paris c. 1908-1910, which has been allocated to the Victoria and Albert Museum
- 361 botanical drawings by the illustrator Florence Helen Woolward
- Bernardo Bellotto’s painting of Venice on Ascension Day, which settled £7 million of tax
- Damien Hirst’s Wretched War sculpture, given by the artist’s former business manager Frank Dunphy settling £90,000 in tax
In Canada, although art can be subject to capital gains, and possibly other taxes, it is possible for a donor to limit, or avoid the tax altogether, including by way of claiming a charitable tax credit. Individuals thinking about estate planning and/or donating art should seek the advice of a professional advisor to maximize the amount of savings.
Thanks for reading,
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