Collections and Estate Planning, Part 2: The Division of Assets
Whether you collect first-edition books, sports memorabilia or anything else, you’ve likely put significant time, effort and money into the items you’ve accumulated. Regardless of their worth, it’s not unusual for you to want these items to go to someone who will appreciate them while you’re still living or after your death. But you likely don’t want the types of unpleasant surprises that you often hear about in the news. Instead, clear communication and a solid game plan can help you avoid conflict and misunderstandings about your collection when it comes to the division of assets.
We previously wrote about the importance of family involvement regarding your collection. To ensure an orderly transition and minimize family conflict, we believe it’s imperative to prepare detailed written instructions on how your collection should be divided among your heirs. In our view, your overall financial picture is important to consider, particularly if your collection has substantial value and could involve tax or estate planning considerations.
Even if the collection is relatively small, detailed instructions will help to ensure your family is clear about your wishes. The sentimental value of your collection could be huge, even if the collection is just a fraction of your actual estate value. And, when it comes to how you divide your collection for transfer, you have several options. Which option you ultimately choose will depend on your family’s particular circumstances and dynamics.
Equally divide the collection among your heirs
At first, dividing up your collection and giving each family member an equal share might seem like the most logical and straightforward option. Unfortunately, it can also be the most burdensome, as it will require that you regularly assess and designate exactly which pieces go to each heir. If you choose not to take these steps, fluctuations in each item’s value may result in those “equal shares” having great differences in worth. And don’t forget that continuing to add to your collection may make the process even more complicated.
Knowing the collection’s up-to-date worth might be important to you if your goal is equal distribution of the collection based on value (i.e., an equitable distribution). It might not be as important if you’re interested in dividing the collection by sentiment or other factors (i.e., a strategic distribution). In a strategic distribution, you may divide the collection based on how family members feel about it or their ability to maintain it. For example, one family member may have a great attachment to a particular piece of the collection, regardless of its value. Such sentiment may play into your decision. In other cases, a family member may have a challenging financial situation and be tempted to sell the property. In such cases, you may choose to structure your estate to protect the items from such disposition.
Leave the collection to one heir
Choosing one heir to receive the collection is often the simplest solution. However, it might only be appropriate if that heir wants to continue upholding the collection. If you choose this option and there are multiple family members, from our experience, it’s usually a good idea to tell them why you made the decision to leave it to one person in order to avoid confusion or hard feelings. If the equitable division of the overall estate is important to you, you can have the collection appraised and make appropriate adjustments to your estate plan so other relatives receive greater proportions of other assets to compensate for the difference.
Dispose of the collection
Depending on your situation, the best option for you and your family may be to sell the entire collection so that your heirs inherit the monetary proceeds. However, this option also brings up many additional questions. For example, would you like to continue enjoying your carefully built collection for as long as possible? Should you sell all or most of the collection now or direct your collection to be sold as part of your estate plan? Are you interested in donating any of your pieces? We suggest making those arrangements with the recipient as part of your estate plan as well so clarity is maintained.
There may be important tax, estate and family dynamic implications to these decisions, which are unique to every collector. Discussing your collection with your Corient Wealth Advisor and other trusted professionals can help you effectively evaluate the best decisions for you and your family.
Other articles in this series:
ABOUT THE AUTHOR
Matt is a Wealth Advisor in our Morristown, NJ, office. He is responsible for managing client relationships and advising families and individuals on financial planning, tax planning and investment management. Matt is a CERTIFIED FINANCIAL PLANNER™ professional and Certified Investment Management Analyst (CIMA). He served on legacy firm RegentAtlantic’s Financial Planning Committee and Neighborhood Nonprofits Group. He also serves on the Morris Museum Board of Trustees.
Matt has developed a specialty service to support all aspects of our clients’ collections—from building and cataloging to estate planning and inheriting.
Matt graduated from Colby College with a BA in Economics and a concentration in financial markets. Matt also holds a certificate in Financial Planning from Northwestern University.
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