Commonly Asked Questions about Estate Planning – ANSWERED!

This is a compilation of advice from experts and articles. We advise that you seek legal counsel before taking an action as these answers are supposed to be guidelines not action steps.

What should be done with my art work?

You have a few options:

Sell your artwork before or after you pass. Selling art is more expensive than selling other assets. The capital gains tax on art is 28% vs. the usual 20%. The artist is responsible for paying a sales commission, taxes, and most likely, shipping.

If you sell the works after you pass, the capital gains tax is reduced or eliminated. Make sure the work’s value is clearly recorded and communicated. Sometimes family members or executors do not know the value of works and may sell them for less at auction after you pass.

Give pieces to your family and other beneficiaries. It’s highly recommended to leave records and resources to your beneficiaries so that they can maintain your art. This includes names of appraisers, insurance agents, framing experts, gallerists and other specialists.

Set up an LLC. You can leave artwork to multiple beneficiaries through an LLC. What is an LLC? A limited liability company (LLC) is a corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities.

An LLC allows family members to be responsible for the collection as a group. If they decide to sell one piece, they split the profits evenly. Can’t decide who is your favorite child? You can avoid choosing specific pieces for specific family members.

In an LLC, the heirs own the interests rather than the artworks. The managers are typically responsible for maintaining insurance, display, storage and sales. You can have more than one manager of the LLC.

Set up a trust. A panel of experts at a NYFA legal discussion highly recommended setting up a trust. Why? You can save on taxes. There is a one-time credit available; the IRS allows up to $5.5 million of the value of artwork to NOT be subject to taxation. The exempt amount of artwork can be set aside in a trust and not be taxed again. The appreciation of the work is free of taxation.

Donate to a museum or other type of organization. Donating artwork during your lifetime is called inter vivos gift. There are three requirements for an inter vivos gift.

  1. There has to be an intent to divest the title by the donor.
  2. The donee has to accept the artwork.
  3. The donor has to deliver the work to the donee.

If you donate your art to a charitable organization or museum before you pass, you get an income tax deduction of up to 30% of your adjusted gross income. The deduction is based on the value of the work at the time of the gift.

Donating your art to a museum is the simplest option. No one has to worry about tracking and managing separate pieces, your entire collection is delivered to the museum and your estate receives a tax deduction based on the current valuation.

Make sure your intent is clear. Produce a written document that clearly describes your intentions and the rights that are being extended through the gift. Note: An artwork’s copyright does not automatically transfer just because the physical object is gifted to someone.

Can I only leave artwork to my relatives?

You can leave artwork to anyone. A beneficiary / heir does not have to be blood related. The technical term for heirs is a “non-charitable beneficiary.”

Why is it important to keep an inventory of my art? And what should it include?

Imagine your loved ones going through boxes of papers and manila folders trying to make sense of your collection. That seems brutal, right?

It’s good practice to keep track of your artwork in a systematic way whether that’s using an online or desktop database system, or an organizational product like Excel. It’s even more important to make sure all that information is centralized and easily accessible when you pass away and cannot help those that have to sift through records and post-it notes.

There have been major lawsuits and issues over authentication from poor record keeping. When an artist fails to keep records of their works during their lifetime, it is hard to determine authenticity.

An art inventory should keep all records of your works including: photographs, sale records including the contacts, storage or consignment information, artwork materials and dimensions and any other relevant information that would be helpful for say, someone wanting to mount an exhibit of your work – press releases, notes about the creation process, etc..

How do I start the estate planning process?

First, start documenting and inventorying your artwork. Maintain accurate records (value, location, maintenance needs, etc.) and keep it all centrally located. You can find many desktop or cloud-based art inventory systems to fulfill your needs. Just Google it.

Keep all information related to your art and career in the same central location. This includes show reviews, photographs, invoices, correspondences with dealers, collectors, artists, etc.

Make sure to:

  • Sign, date and title all of your artwork….legibly.
  • Price your work or get an appraisal.
  • Assign an executor.
  • Assign a power of attorney.
  • Leave no loose ends. Make sure your representatives (executor, heirs, agents, etc.) know what you want done with your art.

How do I find a lawyer who will understand my needs as an artist?

Ask fellow artists, your art dealer and other professionals. Check out Arts & Business Councils and Volunteer Lawyers Associations near you. They often have connections to attorneys practiced in art estates.

How much will this all cost? Storage, executor fees, taxes, etc.?

It depends. You’ll have to pay your attorney and most likely your executor. There will be taxes on selling your work. And there are additional costs for artist estates – storage, insurance, and appraisals. You can reduce the cost of storage by gifting it to organizations that will handle that aspect, like museums. It’s recommended to hire an accountant for all of this.

To learn more, read this helpful PDF produced by the Pittsburgh Arts Council.

 

Estate Planning for Artists: A Glossary of Need-to-Know Terms

Dead artists leave two bodies, their own, and a body of work.” —Harriet Shorr, Artist

There’s no sugarcoating estate planning; it’s not easy to talk about and it’s no small feat, especially when you’re an artist. Makers leave behind a large, valuable, physical body of work that must be dealt with at their death.

As an artist, it’s imperative that you have a plan for your artworks so that you can control what happens to your assets and make sure you’re not leaving behind a big, convoluted mess for your loved ones to clean up, like properly sorting, storing, insuring and/or selling your works.

This post provides a list of key terms to help you navigate the ins-and-outs of estate planning.


Art Inventory

This should be a familiar term. An art inventory lists all of your works of art, their locations (studio, on loan, etc.), and descriptive information like dimensions, date, title, and medium. The inventory should also include installation and maintenance information, contracts, exhibition records, and intangible assets such as copyrights, trademarks, and other intellectual property.

Even if you don’t sell your artwork, a complete inventory of your work will help determine the monetary value of your artistic estate.


Attorney (aka Lawyer)

Estate planning for artists involves much more than just drafting a will. Ideally your attorney is someone you trust, is familiar with your work, and is knowledgeable about the art world along with the laws of trusts and estates.

Make your lawyer aware of your concerns whether they are avoiding estate taxes, providing income for your family, ensuring your work remains publicly accessible, etc.

Many states have a Volunteer Lawyers for the Arts division, which provides legal assistance and education for artists. Here’s an example of New York’s VLA.


Attorney(s)-In-Fact

A privately appointed fiduciary who handles your legal and financial matters in the event you become incapacitated or disabled, either temporarily or permanently. It can be a family member, friend, or professional fiduciary. It does not have to be an attorney.

What’s a fiduciary? Read below for the definition.


Beneficiary

The person(s) receiving the benefits of the deceased’s property, aka the trust.


Codicil

Document that amends a will.


Cultural Executor

Aka Art Advisor. This person is a legally-appointed representative responsible for representing and carrying out the wishes of the deceased with regards to their cultural property (e.g. artwork). It is a more specific type of executor (definition below). The cultural executor is ideally someone familiar with both the testator’s body of work and the art market for the work. Who is the testator? You! The artist.


Estate Tax

Federal tax on property (cash, real estate, stock, or other assets) transferred from deceased persons to their heirs.


Executor

The fundamental duty of the executor is executing the estate. If there are assets to be sold, the executor has to sell them. If your estate is owed money by galleries and such, the executor must collect it. The executor also pays bills like funeral expenses and income or estate taxes, and files insurance claims. The executor follows the instructions in your will and distributes the property in accordance with your wishes. The executor also chooses an appraiser to appraise your art work.

When choosing your executor, choose someone who is knowledgeable about the art world and sympathetic to your work. Make this person aware of your priorities. And, don’t be afraid to have multiple executors; it alleviates a lot of pressure.

An executor’s job usually lasts 3 to 4 years, but may last considerably longer if there are assets to dispose of or manage, such as copyright interests.  

Your executor bears the burden of sorting, cataloging, caring for, and disposing of your work and other assets if you don’t organize it beforehand. Find an online artwork management system and start organizing your artwork!


Fiduciary

Somebody who is charged with legal duty to act on behalf of somebody else, like trustees and executors.


Roadmap

Craft a roadmap for your executors to follow. This is like a “how-to” for your will.


Testator

The person making the will (aka, you).


Trust

It’s not just for the 1%. A trust is a legal entity created for the benefit of the testator’s designated beneficiaries. It is a living and breathing document that can stay private.

Revocable vs. Irrevocable Trust: You can change a revocable trust. You cannot amend an irrevocable trust once you set it up. So irrevocable trusts are rarely set up,  unless, you’re planning for Medicaid or life insurance.


Trustee

Privately appointed fiduciary who manages the assets in a trust. You can liken the Trustee to a CEO – (s)he runs the business, but does not own it.


Will

The document that states how you want your property to be disposed of at your death.

60% of people die without a will. If you pass away without a will, the State will govern how your property will be distributed. Generally, property goes to your family in this order: spouse & children > parents and sibling(s) > other relatives).


Stay tuned for more posts about estate planning!

Artpreneur Provides Business Skills for Artists

Feeling lost around the business of art?

Artpreneur gives you the tools to succeed. Its resources range from budget management to insurance coverage to estate planning. It also covers topics that will give artists a leg-up like uncovering the RFQ/RFP process and tips for writing an effective artist statement.

Artpreneur is an online library of art business articles, webinars and videos for artists (including musicians and public artists) and art organizations. It was created by the Arts & Business Council of Greater Boston, a chapter of Americans for the Arts, to support artists and creative entrepreneurs in creating sustainable business practices.

Here’s a highlight of some of the resources available to you, for FREE, from Artpreneur.

 

Arts & Numbers: Budgeting for the Creative Class

Budgeting: Where do you start start? What decision-making tools are available? How do you manage cash?

This webinar covers strategies for combatting the four major financial challenges artists face every day: managing the “professional treadmill”; budgeting; combatting cash shortages; and finding creative fulfillment through professional goals. Elaine Grogan Luttrull, CPA and founder of Minerva Financial Arts, and author of Arts & Numbers: A Financial Guide for Artists, Writers, Performers, and Other Members of the Creative Class leads the 25-minute webinar.

 

Understanding Entities for Artists

This webinar walks through the different kinds of business entities and structuring options. Learn how to get started and maintain the entity. Hear the pros and cons of sole-proprietorship and discover the differences between an S-Corporation and C-Corporation. Understand basic tax consequences and make the best decision for your career.

 

Insurance for Public Artists

Insurance is a standard element of public art projects. Chris Hawthorne from TGA Cross Insurance speaks to the different types of liability issues that arise during public art projects and the kinds of coverage available. Work with subcontractors? Learn about risk transfer agreements. Discover how you can insure your studio and your works whether they are being installed, hanging in a studio, or placed in storage.

 

What You Need to Know About Estate Planning

Protect your legacy and develop an estate plan with the help of the Volunteer Lawyers for the Arts (VLA).

In this webinar you’ll learn key estate planning basics and vocabulary. Understand why artists need to take extra care when planning their estates. Webinar hosts,  Jim Grace, Executive Director of the Volunteer Lawyer of the Arts and the Arts & Business Council, and Peter Caruso of Prince Lobel Tye LLP, walk through the estate planning process. You’ll get the low-down on inventory, storage, funding plans, valuation, distribution of work, and copyright planning.