Kansas & Missouri Estate Planning

Estate Cash Is Still King In Overland Park, KS

When you breathe your last, which would your heirs (likely) need? A million dollars in cash or a million dollars in illiquid art? The family of Merton D. Simpson can clarify any uncertainty you may have, especially when it comes to having enough cash to bury you.

In short, “illiquid assets” can present a great challenge to proper planning for you, your family, and your estate. Cash truly is king when it comes to estate administration needs in Overland Park and elsewhere.

While there are countless examples, a very recent and public one is the case of the aforementioned Merton D. Simpson. As reported by The New York Times in an article titled “Art Worth Millions, Yet No Cash for Burial,” careful planning is required to meet “liquid” cash needs virtually every estate encounters. Whether paying last health care expenses or other debts, you at least want to have enough cash for your funeral.

Mr. Simpson’s entire estate was worth millions in a vast collection of African and modern art, not to mention art in his own name as an artist of no little esteem. Tragically, in the end there was no money for the funeral. In addition, what happens if and when the taxes come due? That’s when expensive collections of illiquid assets are sold a auction, oftentimes for pennies on the dollar. I've seen that happen.

Now there’s more to the story of Mr. Simpson and many more lessons to be gleaned regarding proper financial an estate planning, as well as a bit of family intrigue for good measure. The takeaway: if one dies with an estate of priceless, illiquid assets, then one’s estate may find itself metaphorically deep in the desert with a purse full of gold, but not a drop of cool water to drink.

Remember: When making your financial, tax and estate plans, don't go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS, and to download free tools to help you organize your estate, visit my estate planning website.

Reference: The New York Times (March 26, 2013) “Art Worth Millions, Yet No Cash for Burial”

When Charitable Gifts Become A Burden

It’s an awkward thing to give away or sell a gift made to you. However, it can be even more awkward when you can't hold onto a gift. No, this is not a post-Christmas catastrophe, rather it's the very real problem so many museums face every year.

One museum currently on the hook is the Brooklyn Museum in New York. The New York Times recently reported on its plight regarding a gifted collection in an article titled "Brooklyn Museum Finds Some Problematic Gifts Can’t Be Returned."

It seems that in 1932, Colonel Michael Friedsam gave a massive collection to the then fledgling museum. Nevertheless, since then the museum has grown and has too much to put on its walls, no longer displays items like historic battle axes, and half the Colonel’s collection turned out to be fakes or "not of museum quality."

Bottom line: the museum wants to give or sell the artworks and stop paying the exorbitant storage and restoration fees.

Now, it's not that the museum is unappreciative. No, it's more complicated even than that. Unfortunately, the Colonel's will legally excludes any option the Colonel's estate executor hasn't signed off on. Problem: the last executor died in 1962.

The lesson for those with artworks worth preserving for future generations is to include alternatives permitting like-minded individuals (executors) to further your objectives for your gifts in the future. In short, your estate plans should contain some flexibility in this regard.

The Colonel and his estate planners couldn't have foreseen the next 90 years, but therein lies the challenge. Predicting the future can be a very tricky thing and, certainly, a very inexact science.

So, how are your gifts structured?

Reference: The New York Times (January 15, 2012) "Brooklyn Museum Finds Some Problematic Gifts Can’t Be Returned"

Have You Made Plans For Your Art?

So, what are your favorite and most valuable assets? Aside from your loved ones, you may turn to your stock portfolio, your business, or your real property. For some, however, their favorite and most valuable assets may be hanging on their walls.

If your art collection is important to you and your heirs, and truly valuable in and of itself, then it's important to make proper plans to protect it.

In life we tend to limit our risks through various forms of insurance. Accordingly, when it comes to your art, this issue was addressed in a recent Forbes article titled "Should Your Art Be Insured?" This is not an easy question to resolve in every instance.

A previous article in Forbes explored another angle on personally-owned art. The article, titled "Is Art An Asset Or An Investment?," added another take on the world of such art. Remember: the value of your "art" is really whatever someone would be willing to pay for it.

As a read of these two articles will reveal, when it comes to your art, there is more to it than meets the eye.

Reference: Forbes (October 31, 2012) "Should Your Art Be Insured?"

            Forbes (October 5, 2012) "Is Art An Asset Or An Investment?"

When Your Estate IS a “Work of Art”

For many owners of artwork or decorative collectibles, "scenario planning" works well for individual or a small number of items.

Estate planning is a process, not a "one-and-done" event. Sometimes anticipating future curveballs in life may necessitate weaving scenario planning into your estate planning.

As the expression suggests, scenario planning requires thinking through "if, then" events. A recent example of such planning comes to us in the form of the Ilena Sonnabend estate and the Rauschenberg painting, "Canyon."

If you have been following this saga in the press, then you know "Canyon" is a mixed- media work (to say the least) that features the preserved remains of a bald eagle. Before you rush out to acquire a similar piece for your own collection, be forewarned: It is only legal to own such "media" with special permission, and it is outright illegal to sell it.

Hoping to make the best of that odd twist of legal fate, estate advisors counted the work as an asset without value for estate tax purposes upon Sonnabend's passing. Unfortunately for the estate, the Art Advisory Panel cried foul and pegged the value at $65 million, even if it couldn’t be sold in the U.S.

While a chorus of critics rose up against the heavy-handed IRS for this draconian valuation, a recent article in Forbes has a different take. Titled "'Canyon' Controversy - Blame The Advisers Not The IRS," the author blames the estate advisors and the lack of scenario planning.

In this situation, the main contingency happened to be the very object the estate advisors were giddy to exploit. They targeted the apparent lack of resale value of the art piece. As the article notes, this case should serve as an example to estate advisors and their clients regarding the value of scenario planning, especially in the current economic, tax and political climate.

Reference: Forbes (July 24, 2012) ""Canyon" Controversy - Blame The Advisers Not The IRS"

Art: Trash or Treasure?

As the saying goes, "One man's trash is another man's treasure." So it is with art and the IRS.

For some people, the most valuable art pieces are the classics that have survived a few centuries. Other people prefer styles that may involve a lot of dribbled paint and found objects. Of course there are people who really appreciate velvet Elvis paintings and those featuring card playing canines. In the end, to each his own.

The IRS, on the other hand, will assign a market value for taxation purposes. So, how do collectors and their estate planning attorneys make proper plans for the transfer of such treasures (or trash)?

Recently, estate planning issues regarding art have received media attention (to include the strange case of Ileana Sonnabend) as highlighted in a recent article in the Wall Street Journal appropriately titled The Art of Passing Along Art.

As the article notes, the major problem with making an estate plan to transfer art is the nature of "art" itself. For example, will your heirs appreciate your taste in art and how will the IRS value your art? In a worst case scenario, the heirs do not like the art, but the IRS does (for valuation purposes) and levies estate taxes on the value assessed!

Ultimately, you need to ask yourself why you are giving the art collection in the first place. Are you giving to an art-lover or in lieu of liquid assets? Are you actually giving to the beneficiaries or are you simply trying to find safe homes for the pieces?

Whatever your wishes, there are estate planning solutions. However, you need to prioritize your own goals and wishes for your loved ones, as well as for your art treasures.

Reference: The Wall Street Journal (March 2, 2012) "The Art of Passing Along Art"

When Modern Art Meets The IRS

When it comes to the IRS and taxes, the message is more often than not that you really can't have your cake and eat it too. Unfortunately, this also means that heirs oftentimes end up between a rock and a hard place. For an extreme lesson, consider the case of Ileana Sonnabend.

What do you do when something is both so valuable as to trigger taxation and yet also so valuable – and illegal – that it is without value on the market? Some readers might have run across this story last last month, but it gets coverage over in this recent article in Forbes.

Sonnabend was a bit of an art buff, to put it lightly, and her collection of modern art requires a Doctorate in modern art history to fully appreciate, with such names as Jeff Koons, Roy Lichtenstein, Andy Warhol and Cy Twombly rounding out the gallery walls. At her death, all of these works passed to her heirs and, to pay for the estate taxes thusly triggered, her heirs had to sell those very pieces.

It's a sad story, if you just stop there. However, then you miss the most unique of artwork (and, at the very mention of "most unique," it’s worth noting that some of these artists considered toothpaste a means of expression), a piece known as "Canyon by Robert Rauschenberg.

"Canyon" is really a "mixed media" piece incorporating a stuffed bald eagle, putting the production and sale of same on the darker side of the law as far as the Bald Eagle Act of 1940 is concerned. Accordingly, "Canyon" is not only art, but it's illegal art. Nevertheless, it squeaks by on a technicality: It predates the Bald Eagle Act. Go figure.

As such it is beyond value, quite literally, because it is restricted from the market. But that doesn't put it beyond the interest and reach of the IRS. Apparently, the IRS incorporated the piece as part of the taxable estate, even though it was beyond selling by U.S. law, it could still be sold internationally (and on black markets).

That's a strange place for a strange piece of art, tbut it does highlight the fact that art, as both real property and expensive property, requires more than a little planning. Sonnabend herself didn't take advantage of any estate planning, forcing her heirs to sell the very art for which the estate tax was assessed.

Again, to learn more about (and understand) the art you'll need a Doctorate, but to learn more about Sonnabend and her legacy you should consult the original article.

On a more personal note, to make proper estate planning arrangements for your own art (to include ceramic bullfrogs, velvet elvis painting and, of course, the dogs playing poker) and the rest of your estate, be sure to engage competent counsel to help you take advantage of available techniques that can save your own unique collection and the family you hope to inherit it.

Reference: Forbes (February 23, 2012) "Even Rich Heirs Deserve A Fair Shake From The IRS"