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.
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We wrote several months ago about the declining value of household furniture and other items – especially antiques that were highly desired decades ago.
The general rule if you’re selling home assets (typically in an estate or when moving into a retirement home situation) is that you won’t get as much as you think. Tastes change (grandfather clock anyone?), artists fall out of favour (or never gain much market value) and items fall into disrepair. And you usually have to pay a firm to come in and assess and sell the contents. It may not leave you with much.
Mind the small stuff
What can often get overlooked in content sales is the little stuff. We all bring our personal biases when assessing what’s junk and what could be a little treasure. If you see a figurine or small carving and don’t like it, you’ll assume that others won’t like it either. Under the weight of all the other junk you have to dispose of, the item can end up in the trash.
That can be a costly mistake. I was recently visiting an estate home being prepared for sale, and the daughter of the deceased pointed to a small ceramic cat at the end of the mantle. It was, to me, nothing much of note. It was about 2 inches high and 3 inches long and had stripes. I wouldn’t have thought twice about trashing it if I was clearing out the house.
That’s what the daughter thought too, until they had a friend over who identified the cat as an original ceramic piece by Swedish artist Lisa Larson. What was going to end up in the trash was actually a small sculpture worth hundreds of dollars. Oops …
Be mindful of the art-savvy owner
If a homeowner had a good eye for art during their lifetime, there’s a good chance that even small knick-knacks were bought with purpose and could have value. So, before you clear the little stuff off the mantle of someone’s home, it may pay to have an art-savvy friend tour the house just in case.
Thanks for reading – enjoy your day,
Whether art, history, science, or fashion is your thing, a trip to the museum is a sure-fire way to marvel at the ingenuity of humankind, spark new inspiration, or escape to a different time and place. It’s no wonder one of the world’s most popular museums, the Louvre, welcomed 10.2 million visitors in 2018 from all over the world.
Whether motivated by the desire to preserve heritage and culture, or a passion for education, according to this New York Times article, philanthropists have been instrumental in the exponential growth in museums that we have observed, particularly in the last 50 years.
Some donors gift their collectibles to an institution while alive, with conditional terms to the acceptance of their donation. Take, for example, philanthropist Wendy Reves who donated more than 1,400 works from the collection of her late husband to the Dallas Museum of Art, with the stipulation that they recreate five rooms from the couple’s villa in the South of France, including furnishings from the villa’s original owner, Coco Chanel.
Other donors gift their collections from beyond the grave. In other words, they include specific provisions in their will donating their works to a particular institution, also known as a bequest. In 1967, the late Adelaide Milton de Groot, bequeathed her entire art collection (which contained more than 200 paintings) to the Metropolitan Museum of Art in New York City.
While American museums are beholden to important donors, they are also running out of space to properly store and preserve items not on display. In fact, many American museums only showcase approximately 4% of their inventory, with the balance held in climate-controlled storage spaces. To address this issue, many American museums have taken to formally disposing of part of their inventory, a term also known as deaccessioning.
Conversely, Canadian museums are facing challenges on the acquisition side. For the last 30 or so years, the Cultural Property Export and Import Act (CPEIA) earned Canadian donors tax credits for the market value of their donated art as long as it fell within the scope of “national importance”. This incentivized Canadian donors to bequeath their art to Canadian museums, which ensured that important cultural property remained in Canada for the benefit of Canadians.
Recently, the federal court decision in Heffel Gallery Limited v Canada (AG) narrowed the definition of national importance in the CPEIA, meaning millions of dollars in artwork donations to museums and art galleries were halted. As explained in this article, the newly proposed Budget 2019, “proposes to amend the Income Tax Act and the Cultural Property Export and Import Act to remove the requirement that property be of ‘national importance’ in order to qualify for the enhanced tax incentives for donations of cultural property.” This is good news for both donors and museums.
It is still too early to know how these changes will manifest in practice, given that Heffel Gallery Limited v Canada (AG) is still under appeal, and Budget 2019 has not yet passed. Institutions such as the Canadian Museums Association are hopeful that the new changes will mean more tax incentives for donors and more artwork being donated.
All this to say, if you have a Basquiat or Degas yearning to be seen by the masses, it may just have its chance to shine, with significant tax breaks to your estate!
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I recently watched the documentary Finding Vivian Maier (which was originally released in 2013) and I was struck by John Maloof’s search for anyone who could tell him about who Vivian Maier truly was after her death. After her death, Vivian Maier (February 1, 1926 – April 21, 2009) gained fame as an American, Chicago-based, street photographer. During Vivian Maier’s lifetime, she was simply known to those around her as a nanny, and perhaps an eccentric with a camera around her neck.
Vivian Maier’s art was entirely discovered posthumously and it all began when John Maloof attended a local auction house in Chicago and bought 30,000 negatives for another project. In the course of considering whether the negatives were suitable for Maloof’s book on the history of the Northwest Side neighbour of Chicago, Maloof later became “obsessed with Vivian’s work, and made it his mission to reconstruct her archive”.
The documentary is a chronicle of Maloof’s mission to reconstruct her archive (and of Vivian Maier, herself), including how he found records of her birth from a New York City archive and how Maloof ended up in an remote village in France where her mother’s family lived.
Vivian Maier died unmarried and childless and, as it turns out, intestate.
According to the Chicago Tribune, a Virginia copyright lawyer and former professional photographer named David Deal became concerned that people were selling Vivian Maier’s photographs in manner that infringed copyright law. David Deal used the information that he learned from Maloof’s chronicles to locate one of Vivian Maier’s first cousins once removed. In 2014, David Deal became counsel to Francis Baille in a court case where Mr. Baille asked the probate court to name him as an heir to the Estate of Vivian Maier. Apparently, the information that David Deal used was the story of how Maloof had located another first cousin named Sylvian Jaussaud by hiring genealogists. As Maloof’s story goes, he bought Sylvian Jaussaud’s rights to Vivian Maier’s work for $5,000.00. Ultimately, Mr. Baille’s court case, which involved John Maloof and the Cook County public administrator’s office (the county where Vivian Maier died), settled under private terms that are sealed from the public.
In Ontario, where a person dies without a will, and there is no surviving spouse, children, parent, brother or sister, the property shall be distributed among the nephews and nieces. If there are no surviving nephews and nieces either, “the property shall be distributed among the next of kin of equal degree of consanguinity to the intestate equally without representation”. If there are no next of kin either, the property becomes the property of the Crown, and the Escheats Act, 2015 applies”.
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Last month, an amendment to Minnesota’s Uniform Probate Code came into effect to limit the rights of children conceived after the death of one or more parents.
The addition under 524.2-120 of the Code states as follows (at Subdivision 10):
Notwithstanding any other provision of this section and subject to section 524.2-108, a parent-child relationship does not exist between a child of assisted reproduction and another person unless the child of assisted reproduction is in gestation prior to the death of such person.
The exception at section 524.2-108 provides that a child conceived before and born after death, who survives for a period of 120 hours, shall be treated as if living at the time of death of the deceased. However, the update in the legislation clarifies that a child conceived after death does not constitute a child and would not, therefore, be entitled to related rights to inherit on intestacy or as a member of a class of beneficiaries created under a will.
In many other jurisdictions, including Ontario, there is limited clarity with respect to the rights of individuals conceived after death of a parent. While the Succession Law Reform Act specifies (under the definition of “child” at section 1) that a child conceived before and born after death will be treated as if he or she had been living at the time of death of a parent or other family member, the same cannot be said of posthumously-conceived children with any certainty.
In certain circumstances, a surviving spouse may have the right to use genetic materials, being sperm or ova of the deceased spouse, to conceive a child in accordance with the terms of the Assisted Human Reproduction Act. However, there is no legislation in Ontario that explicitly provides or denies children conceived after death status as a child, as if conceived or born after death. Case law in other jurisdictions suggests that inheritance rights to a parent’s estate and entitlement to death-related benefits may be more likely to attach to a child conceived after death if (1) a genetic relationship between the deceased parent and child exists, (2) consent is given to the posthumous use of genetic materials for conception, and (3) the evidence available suggests that the deceased agreed to support a child conceived using the preserved genetic materials.
As rates of assisted reproduction continue to increase, it will be interesting to see how this area of estate law develops in Ontario to address the issue of rights of posthumously-conceived children.
Thank you for reading and have a great weekend!
Cornelius Gurlitt passed away in May 2014, aged 81, and is well known amongst the art community for his vast collection of famous works of art ranging from Chagall to Picasso. A recent article in the Guardian highlights the storied controversy surrounding Gurlitt’s estate and the steps taken to comply with his Will.
Much of Gurlitt’s famed art collection was passed down to him by his parents and grandparents who allegedly obtained much of the artwork by Nazi theft during World War II. In 2012, during a tax investigation, German customs officials discovered over 1,000 pieces of art worth an estimated 1 billion euros.
According to the Wall Street Journal, while on his deathbed, Gurlitt apparently signed a Will bequeathing his estate (including the artwork) to a small museum in Bern, Switzerland, the Kunstmuseum Bern, on the condition that the museum take steps to determine which works had been stolen by the Nazis and to return those pieces of art to their rightful heirs. Apparently the choice of a foreign institution was made on the basis that Gurlitt felt the German government had treated him unjustly.
It appears that in the event the museum declined the collection, it would pass to Gurlitt’s distant relatives. Concern arose that in the event these relatives beneficially received the artwork, it would be difficult to ensure they complied with Gurlitt’s instructions for restitution. As such, pundits urged the museum to take on the task to ensure that the research into the artwork was done professionally and responsibly.
The museum has since accepted the artwork, with sorrow, and is showcasing Gurlitt’s pieces in conjunction with a second museum in Bonn, Germany, the Budeskunsthalle. Although the showcasing in Bonn seems contrary to Gurlitt’s request for a foreign museum, the museum is nonetheless following Gurlitt’s most prominent wish to ensure stolen artwork is returned.
Proceedings were commenced by the distant relatives to challenge the Last Will on the basis that Gurlitt was not of sound mind when drafting the Will. A successful Will challenge would result in the artwork passing to them. The proceeding was dismissed by a German Judge, while an appeal remains pending.
I find Estates intertwined with famed art to be an enjoyable topic to research and read, as per my prior blog about the 2015 movie, Woman in Gold. Perhaps though, it’s just an excuse to admire such beautiful artwork, with Gurlitt’s collection being one of the best.
Doreen So recently wrote about Howard W. Jones and how the developments that he made in reproductive technologies have the potential to impact estate planning and intestacy laws. An issue encountered in recent news may give rise to further uncertainty when it comes to the estates of individuals conceiving and being conceived through assisted reproductive technologies.
An article appearing in the Hamilton Spectator tells the story of how the paternity of a child conceived in vitro in Washington recently caused considerable confusion. After their baby had been born, the couple questioned whether the wrong sperm sample had been used, as the child’s blood-type was inconsistent with those of its parents. After this discrepancy came to light, the couple arranged for a DNA test to be conducted. The testing confirmed that the sperm donor and intended father was not a biological parent of the baby. Surprisingly, the results of the DNA testing revealed that the man was (biologically, at least) the baby’s uncle.
A geneticist at Stanford University investigated the situation and determined that the cause for the unplanned degree of relatedness between the mother’s husband and their child was a what is known as a chimera, rather than an error made at the fertility clinic.
Chimerism, also known as the “vanishing twin effect”, occurs when two zygotes fuse into one, which is estimated to occur in as many as one out of eight pregnancies. The fusion of two twins results in one embryo that may consist of DNA derived from both zygotes. In this specific case in Washington, some of the sperm donor father’s germline cells, being those that have the capacity to develop into eggs or sperm, were derived from his unborn fraternal twin. As a result, 90% of the man’s sperm contains his own DNA and the other 10% contains the genetic material of his “brother”, giving rise to the ability of the man to father his own genetic nephew or niece. The article reports that the man has another child, in addition to the newborn, who is, in fact, his biological child.
The incidence of chimerism, which is believed to be increasing with prospective parents more frequently obtaining assistance from fertility clinics, further complicates the issue of entitlement to a biological parent’s estate on intestacy and qualification as a member of a class identified within testamentary documents. It will be interesting to observe how the case law may develop to address these issues.
Thank you for reading and have a great weekend.
This week on Hull on Estates, Paul Trudelle and Nick Esterbauer discuss artwork and the special considerations that should not be overlooked when it comes to estate planning or administration involving this unique investment asset.
Should you have any questions please email us at email@example.com or leave a comment below.
When we think of assets, items such as real property, investments, bank accounts, and even jewellery and vehicles are what typically come to mind. Aside from cases where a client has an obviously valuable collection or rare painting, we may not immediately think of art as an asset. However, this may be changing as studies show that investment art is quickly becoming one of the fastest growing and dynamic markets in North America.
According to The Capgemini World Wealth Report of 2013, fine art made up 16.9% of high net worth individuals’ investments of passion, not far behind jewellery and watches. It is no longer uncommon to hear of art being sold in Canada for hundreds of thousands or even millions of dollars at high-end auction houses such as Sotheby’s. More than ever, art is being seen as providing a good source of return by investors. As the report points out, a well chosen piece of art can not only act as a hedge against inflation, but it also has the potential to outperform over the long term.
As a result, when dealing with estate assets where art is involved, it is important that the Estate Trustee manage investment art with the same level of care and attention that they would any other traditional asset. This may involve ongoing maintenance or ensuring proper insurance coverage is in place to protect against theft or damage. Together with obtaining a formal appraisal, these steps can help protect the Estate Trustee against liability while realizing the best possible return on the investment for the beneficiaries.
Obtaining an appraisal when administering estate assets that include investment art and in estate planning where art is to make up a significant portion of the estate, can be invaluable. For a testator, the formal appraisal can be of great assistance in determining the true value of an art asset. This will allow them to make a more informed decision as to the division of their assets. Appraisals are also a useful means for the Estate Trustee to avoid unpleasant surprises where the fair market value is later discovered to be significantly higher than the sale price, resulting in unanticipated taxes.
Thank you for reading.
I thought I would start off this week’s blogs by discussing planned giving. Planned giving provides a mechanism for people to contribute to programs that they support. In this way, people are able to target their philanthropic efforts towards programs that they believe will improve communities. The book, The Art of Giving: Where the Soul Meets a Business Plan, captures this idea perfectly and I recommend it as a must read. The authors, Charles Bronfman and Jeffrey Solomon, recognize that giving is meaningful and personal. So, for example, individuals who love animals may decide to donate part of their estates to animal welfare organizations.
So how do you want to improve your community? What about willing your body to a “body farm”? This is 1 of the 10 suggestions made in a CNN Report written by Elizabeth Cohen entitled “Ten uses for your body after you die”.
The body farm, as it is known, is located in Knoxville, Tennessee and has 650 skeletons scattered over 2.5 acres so that anthropology students are able to study bodies in varying stages of decay for the purposes of learning about body identification and time of death analysis.
If your charitable inclination is to donate your body to the University of Tennessee Forensic Anthropology Center (aka the body farm) click here.
If you’re undecided, check out the Art of Giving. It’s a good place to start if you are considering providing for charitable donations in your will.
Thanks for reading!
Kathryn Pilkington – Click here for more information on Kathryn Pilkington.