Many collectors hold onto their valuable items to the last minute, and the thought that the items could go to someone else is scary to many of them.
One of the reasons why collectors revere their items is because they come at a great cost and the demands for caring for the items is intense.
However, when you make an investment in these items you need to think about estate planning as well. The nature of collectible items and your attachment to them, the level of care needed all make them require specialized handling by the beneficiary.
Without a special estate plan and the right will, beneficiaries might find themselves handling family disputes that never end, high taxes and liquidity issues among other problems. Many people come up with a meticulous estate plan for all the other things and forget about planning for succession of their collectibles.
To understand what to do and when to do it regarding your collection, you need to work with a skilled estate planning attorney.
They Require Specialized Storage and Maintenance
Studies show that the online market size for collectibles and antiques is more than $1.5 billion in 2020. This tells you that collectibles are high-end items that need specialized attention.
When you design your estate planning document, make sure you put in place a clause that guides the beneficiary on storage and maintenance of the items. You must put aside funds for the handling of the collectibles, because it is a fact that these items require a lot of funds to maintain.
For instance, items such as art need specialized safes to keep them safe from the weather, termite damage and theft. If you collect wine, then look for specialized storage space. Make sure you include this information in the estate plan.
Collectibles Attract Capital Gains Tax
The government understands that collectibles appreciate in value as time goes by; this is why you will have to pay 8 percent more tax on collectibles ranging from sports memorabilia to art.
To avoid the tax, you can plan to give your collectibles to charity, or retain the collectible till death so that it gets sold when you pass on.
High Liquidity is Mandatory
When you have low liquidity, you risk losing out on the items due to the high taxes that you pay on them. Make sure you have allocated a large portion of the estate to be in cash so that your beneficiaries don’t have to suffer with the high taxes.
If a large part of the estate is in form of collectibles, then it might mean that the beneficiaries sale a part or all of the collectibles. Work with an estate planning attorney to understand how to handle the lack of liquidity.
What Should You Do With a Collectible to Maintain its Value?
It is a huge challenge distributing collectibles. For instance, if you have collected art pieces for many years, the value starts diminishing the moment you distribute the pieces. This is why you need to come up with a comprehensive estate plan that will guide the maintenance and distribution of the collectibles.
Having the right estate plan will reduce any conflicts that might arise and will also assist in managing the items.
When you assign an executor for the estate, it is vital that you get someone who has extensive skills in handling collectibles. You have invested a lot of money in the collectibles, therefore it is just right that you have a foolproof succession plan to avoid conflict and preserve your legacy.
Succession plans for collectibles vary depending on the kind of collectible that you have. Let us look at a few specific ones.
Handling a Wine Collection
A wine collection has both fiscal and sentimental value. The sad thing is that you cannot take the wine with you when you pass, but you can secure your cellar by making sure the collection is handled according to your wishes when you pass.
Here are tips on how to handle your wine collection:
- Assign an executor that understands your collection. Make sure you have an inventory showing what you have collected over the years.
- Keep all the items in one place – the collection and authentication documents.
- Ensure the wine cellar receives the right maintenance.
Estate Planning for an Art Collection
- Start estate planning once you deem that the collection has become important to you.
- Get the inventory in order.
- Know the value of your art.
- Come up with conditions on whom to handle the art.
Collectibles are valuable to any collector worth his salt. This is why you need to make sure you have a comprehensive estate plan for your collectibles. A skilled estate planning lawyer sees to it that everything is working out well for you.