The more valuable an art collection gets, the tougher it is to create an estate plan for it. If you are not careful, your heirs might end up with a tax bill that they cannot afford to pay. Art is a wonderful thing to pass down through generations so be sure to speak with your estate planning attorney.
Children do not always have the same interests as their parents. A collection that the parents love is often something that their children have little or no interest in. Most of the time this creates few issues. If, for example, the parents collect old issues of National Geographic, the children can easily dispose of them after the parents pass away without consequence.
However, an art collection is different because works of art can be extremely valuable.
As the New York Times points out in "Estate Planning Can Get Tricky When Art Is Concerned," art collections require very careful estate planning. The biggest issue is that art is illiquid. If the estate tax is due, then the heirs have to come up with cash to pay it. This requires them to use other estate assets or to sell the art.
Unfortunately, it is not always quick or easy to sell art, and heirs who have little interest in art are often taken advantage of by professional dealers. The good news is that tax authorities will often accept low values for art collections as the true market value is difficult to assess.
If you have an art collection, it is extremely important that you have an estate plan for it. The last thing you want to do is just leave it to your heirs to figure it out. Contact an experienced estate planning attorney to navigate these waters.
Reference: New York Times (October 1, 2015) "Estate Planning Can Get Tricky When Art Is Concerned."