This is a compilation of advice from experts and articles. We advise that you seek legal counsel before taking an action as these answers are supposed to be guidelines not action steps.
What should be done with my artwork?
You have a few options:
Sell your artwork before or after you pass. Selling art is more expensive than selling other assets. The capital gains tax on art is 28% vs. the usual 20%. The artist is responsible for paying a sales commission, taxes, and most likely, shipping.
If you sell the works after you pass, the capital gains tax is reduced or eliminated. Make sure the work’s value is clearly recorded and communicated. Sometimes family members or executors do not know the value of works and may sell them for less at auction after you pass.
Give pieces to your family and other beneficiaries. It’s highly recommended to leave records and resources to your beneficiaries so that they can maintain your art. This includes names of appraisers, insurance agents, framing experts, gallerists and other specialists.
Set up an LLC. You can leave artwork to multiple beneficiaries through an LLC. What is an LLC? A limited liability company (LLC) is a corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities.
An LLC allows family members to be responsible for the collection as a group. If they decide to sell one piece, they split the profits evenly. Can’t decide who is your favorite child? You can avoid choosing specific pieces for specific family members.
In an LLC, the heirs own the interests rather than the artworks. The managers are typically responsible for maintaining insurance, display, storage and sales. You can have more than one manager of the LLC.
Set up a trust. A panel of experts at a NYFA legal discussion highly recommended setting up a trust. Why? You can save on taxes. There is a one-time credit available; the IRS allows up to $5.5 million of the value of artwork to NOT be subject to taxation. The exempt amount of artwork can be set aside in a trust and not be taxed again. The appreciation of the work is free of taxation.
Donate to a museum or other type of organization. Donating artwork during your lifetime is called inter vivos gift. There are three requirements for an inter vivos gift.
- There has to be an intent to divest the title by the donor.
- The donee has to accept the artwork.
- The donor has to deliver the work to the donee.
If you donate your art to a charitable organization or museum before you pass, you get an income tax deduction of up to 30% of your adjusted gross income. The deduction is based on the value of the work at the time of the gift.
Donating your art to a museum is the simplest option. No one has to worry about tracking and managing separate pieces, your entire collection is delivered to the museum and your estate receives a tax deduction based on the current valuation.
Make sure your intent is clear. Produce a written document that clearly describes your intentions and the rights that are being extended through the gift. Note: An artwork’s copyright does not automatically transfer just because the physical object is gifted to someone.
Can I only leave artwork to my relatives?
You can leave artwork to anyone. A beneficiary/heir does not have to be blood-related. The technical term for heirs is a “non-charitable beneficiary.”
Why is it important to keep an inventory of my art? And what should it include?
Imagine your loved ones going through boxes of papers and manila folders trying to make sense of your collection. That seems brutal, right?
It’s good practice to keep track of your artwork in a systematic way whether that’s using an online or desktop database system or an organizational product like Excel. It’s even more important to make sure all that information is centralized and easily accessible when you pass away and cannot help those that have to sift through records and post-it notes.
There have been major lawsuits and issues over authentication from poor record keeping. When an artist fails to keep records of their works during their lifetime, it is hard to determine authenticity.
An art inventory should keep all records of your works including: photographs, sale records including the contacts, storage or consignment information, artwork materials and dimensions and any other relevant information that would be helpful for say, someone wanting to mount an exhibit of your work – press releases, notes about the creation process, etc..
How do I start the estate planning process?
First, start documenting and inventorying your artwork. Maintain accurate records (value, location, maintenance needs, etc.) and keep it all centrally located. You can find many desktop or cloud-based art inventory systems to fulfill your needs. Just Google it.
Keep all information related to your art and career in the same central location. This includes show reviews, photographs, invoices, correspondences with dealers, collectors, artists, etc.
Make sure to:
- Sign, date, and title all of your artwork….legibly.
- Price your work or get an appraisal.
- Assign an executor.
- Assign a power of attorney.
- Leave no loose ends. Make sure your representatives (executor, heirs, agents, etc.) know what you want done with your art.
How do I find a lawyer who will understand my needs as an artist?
Ask fellow artists, your art dealer, and other professionals. Check out Arts & Business Councils and Volunteer Lawyers Associations near you. They often have connections to attorneys practiced in art estates.
How much will this all cost? Storage, executor fees, taxes, etc.?
It depends. You’ll have to pay your attorney and most likely your executor. There will be taxes on selling your work. And there are additional costs for artist estates – storage, insurance, and appraisals. You can reduce the cost of storage by gifting it to organizations that will handle that aspect, like museums. It’s recommended to hire an accountant for all of this.
To learn more, read this helpful PDF produced by the Pittsburgh Arts Council.