With careful planning, your art collection can continue bringing enjoyment even after you have passed.
Although there are different methods of gifting art, I want to focus on just one today: "sharing" the art.
According a recent article in Barron, titled "The Benefits of Owning Art Part-Time," you can enjoy tax benefits while still keeping the art part-time.
How does this work?
It can exhibit your art for half of each year and you can keep it for your own enjoyment during the other half.
Practically speaking, donating 50% of a $2 million dollar painting to a museum for fall and winter showing would allow you to still enjoy it at your home the other two seasons and claim a $1 million tax deduction—half of the market value of the painting.
What is the catch?
The IRS rules demand that your specified artwork be gifted completely no later than 10 years after signing the original agreement.
This gift of your artwork need not be to the same charity, but it must be gifted nevertheless.
When the gifting is complete, you can claim a tax deduction on the rest of the market value of the art.
What if you do not gift the art?
That original tax deduction becomes income, and you will be taxed accordingly.
So, what are some of the practical and legal steps you should you consider when making this gift?
For starters, you need to decide on a recipient for your art.
Usually, smaller local museums and charities are more flexible when it comes to these gifts. Other good options are universities or medical facilities
In the end, you will need a detailed agreement that identifies the recipient, as well as:
- Insurance, and
- Restrictions on loaning out the art.
Any time you contemplate making charitable decisions beyond a few dollar bills in the Salvation Army red kettle, you may be wise to consult an experienced estate planning to get the best benefit for yourself, your estate and the charity you are supporting.
By using the right strategies for your art situation, you can have your gift and keep it, too.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Barron's (May 17, 2016) "The Benefits of Owning Art Part-Time"