Collections and Estate Planning, Part 4: Charitable Giving
How do you feel when you think about giving away or donating your collection? Does it fill you with excitement to pass along something that has brought you so much joy? Or are you worried that there’s nobody in your family who will truly appreciate it? Perhaps they may even sell it.
For many collectors, finding the right “home” for their collection when they’re no longer able to enjoy it is a priority. You may decide to give the collection to one or more family members, either when you’re alive or as part of your estate plan. Or perhaps you may choose to sell the collection to someone who will cherish and take care of it. But you also have a third viable option: donating your collection to charity while you’re alive and before it becomes part of your estate so that you can witness the positive impact of your generous gift.
For tax purposes, we believe gifting your collectibles to charity only makes sense if the property has appreciated significantly. This is the same rationale as gifting appreciated stocks from your investment portfolio.
Charitable gifting requirements for your collection
There are numerous requirements to qualify as a tax-deductible gift when you donate collectibles to charity. The gift of tangible property must satisfy the following criteria:1
- You are donating to a qualified 501(c)3 charitable organization. This is no different from any other charitable gift. We recommend asking for proof that the organization is a recognized charitable nonprofit.
- The items are qualified capital gains property. In general, this means that you have held the property for more than one year and did not create the property yourself. If your collection includes items you made, such as artwork, you would only be able to deduct the cost of materials. You also must ensure that you were not gifted the property by the artist, creator, etc.
- The receiving organization must make “related use” of the donation. Your gift must relate to the tax-exempt purposes of the charity to which it’s donated. In other words, the organization must use your donation to help fulfill its mission. For example, donating a piece of art to a museum for display—the key being that the piece fulfills the museum’s mission by virtue of being on display for visitors to enjoy. As you can imagine, the “related use” rule can be quite challenging if you are looking to donate a unique item.
- The donated property must have a qualified appraisal. The IRS requires a qualified appraisal if the gift of property is greater than $5,000. If the gift is greater than $20,000, then a copy of the signed appraisal must be included with the tax return filing.
If you can satisfy all of the above requirements, then gifting your collection to charity might be an option for you to consider. From my experience, the next step would be determining the most appropriate and efficient means of making your gift. For example, should you make the gift outright or utilize a charitable trust?
Your Corient Wealth Advisor can help determine the most effective way to make your desired charitable gift within the framework of your overall financial picture.
Other articles in this series:
- Part 1: How Collections and Collectibles Affect Your Estate Plan
- Part 2: The Division of Assets
- Part 3: Potential Tax Concerns for Collectors and Collection Owners
1 https://www.irs.gov/publications/p561
ABOUT THE AUTHOR
Matt Mignon
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.
CONTENT DISCLOSURE
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
Advisory services are offered through Corient Private Wealth LLC and its affiliates, each being a registered investment adviser (“RIA”) regulated by the U.S. Securities and Exchange Commission (“SEC”). The advisory services are only offered in jurisdictions where the RIA is appropriately registered. The use of the term “registered” does not imply any particular level of skill or training and does not imply any approval by the SEC. For a complete discussion of the scope of advisory services offered, fees, and other disclosures, please review the RIA’s Disclosure Brochure (Form ADV Part 2A) and Form CRS, available upon request from the RIA and online at https://adviserinfo.sec.gov/. We also encourage you to review the RIA’s Privacy Policy and Code of Ethics, which are available upon request.
Our clients must, in writing, advise us of personal, financial, or investment objective changes and any restrictions desired on our services so that we may re-evaluate any previous recommendations and adjust our advisory services as needed. For current clients, please advise us immediately if you are not receiving monthly account statements from your custodian. We encourage you to compare your custodial statements to any information we provide to you.
