Collecting art is fun! Reselling…not as much. But figuring out what to do with someone else’s art collection can be incredibly frustrating. Think about it. If you didn’t collect it, you probably don’t have the same attachment. More importantly, though, the recipient is now saddled with something they don’t know how to sell or where to start, much less how to value it.
Because art collections add a few interesting wrinkles to estate planning, we’re taking a look at ways to minimize the issues and help you make sure that, even if your next-of-kin didn’t share your passion, they will know the value of the art you acquired and how to send it on to someone who does want it and will care for it.
DOCUMENTATION
A common concern for collectors is that their kids will put everything in a yard sale and sell it along with stacks of faded towels and chipped plates for pennies on the dollar. As any good bargain hunter—and lots of savvy collectors—will tell you, estate sales and thrift stores are great places to find art, antiques, and important books at rock-bottom prices.
When you’re gone, you can’t do anything about yard sales, but you can nip that concern before you go. Determining what happens to your collection starts with a well-documented list that includes where you acquired things and sales receipts, current market values, and a list of dealers who are selling those works.
This can be tedious, but it’s well worth your time or money to hire someone to create this document. We discussed this in “Art Appraisals 101,” in the April/May 2022 issue. Basically, the important things to notate are dimensions, medium (oil, bronze, glass, etc.), frame or sculpture base, price you paid, photos of the work including signature, front and back, and current prices of similar works selling at galleries or auctions.
For some collectors, this list is all you need to share with family members to kick off a discussion of who gets what. For other collectors, this list and the total valuation of your art is just the beginning.
KNOW WHEN TO HOLD ‘EM
If members of your family have ever said: “When you’re gone, we’re going to sell all of this because we don’t like it.”, you are going to want to keep reading.
When it comes to downsizing and refining your collection, you don’t want to leave this task up to your family, which, for above stated reasons, you really shouldn’t. Your options are to donate, gift, or sell on the secondary market.
There are some wonderful benefits to actively selling art from your collection even while you’re still collecting. Culling and refining your holdings is the key to creating an important and focused collection. Tastes change, especially if you are an avid collector. The more you look at art and get to know artists, the more adept you become at evaluating and refining your collection. You want to weed out lesser works and either trading up or move on. Consider making time to meet with fellow collectors, dealers, and curators to discuss art and objects and learn more about the genre of work you most enjoy. These folks are great sources of knowledge and will help you improve your eye. They will also come in handy when you go to sell or donate things. You may find that you and your group buy from, sell to, or swap things with each other.
KNOW WHEN TO FOLD ‘EM
Once you’ve identified the pieces that no longer fit your collection, it’s time to plan their departure. The best person to sell your art is you. Stay with us on this one. We’re not suggesting you open a gallery. What we are saying is that you, dear collector, know where you got these things and how much you paid. You probably also know something about the artist’s career and whether their art has gone up or down in value in the art market. I discussed resales in “How to Buy and Sell Art at Auction.” Give that article a read so you are prepared for what to expect on the secondary market or at auction. Auctions, in particular, can be tricky; you’ll want to go into that world armed with some basic knowledge about how they work and what to expect in the fine print on those contracts.
There are three main avenues for deaccessioning art: resales, gifts, and donations. Let’s start with resales.
RESALES
Reselling art is always an adventure. The easiest route is to go through a gallery already familiar with that artist’s work. You’ll pay a commission on these sales, but often you can negotiate the amount. You might even be able to trade for something they have for sale.
Here’s an important caveat: when reselling art by a living artist on the secondary market, you are competing with that artist for sales. One or two pieces won’t make a difference, but if you collected ten or more works, it could crush an artist if you dump all of those pieces on the market at once.
Auctions are another venue for reselling work. They can be, however, deleterious to artists, especially living artists. Sales that go at or below the minimum or don’t sell (bought-in), can damage an artist’s pricing structure by signaling a drop in the valuation of their work. For collectors, auctions are a well-known place to buy below retail, but when you do that, you are, in a sense, lowering the value of the thing you just bought. For this reason, active dealers and some artists with means, will jump in and bid those works up—or try to buy them before they appear in an auction where they may not sell at or above the high estimate. When considering sending things to auction, take the time to find the best place to represent those works. For example, a painting of a California seascape probably won’t do as well in a Chicago-based auction. Though auctions now can be followed and bid on over the internet, you might still want to place work where the auction house has a good track record for selling that kind of work.
GIFTS
Here’s where your itemized list of art will come in handy. Often family members have no idea what things are worth—they just like or dislike something based on an emotional attachment. While you want to make sure the people who love something wind up with it, you may also want to know that there is a fair distribution of art and objects among all. The best way to do this is to have your collection appraised.
If you have substantial art holdings, you most likely know to have that work appraised for insurance. These appraisals should be done every three to five years, as the market fluctuates and, if we’re being honest, you can’t seem to stop buying art and so need to have those new purchases added to your insurance documents.
Not only can the appraised values help you fairly divvy up your collection, but this information can help you understand any tax implications of these gifts. You’ll want to check with your accountant as to whether something exceeds the tax threshold. If you are wondering how anyone will know if you give away something that exceeds the gift tax limits, you’re right, they won’t unless that art goes up for sale. The issue there, as with inherited art, is capital gains tax, which is another question for your accountant.
When it comes to figuring out who gets what, there are lots of ways to this, such as having the kids walk around with a stack of Post-it notes to tag things. Or, if you’d like to make a game out of it, try this novel idea: hold a mock auction. One couple we know with a sizable art collection, invited the kids over, poured some wine, and gave everyone play money. Then they opened the bidding. Winning bidders either left with art that night or were duly noted in the will.
DONATIONS
Did you know many museums won’t accept unsolicited art donations? They may not hold collections, or they have too much in storage or have enough works by the artist whose work you’d like to donate. This is where involvement with your favorite museum curators is paramount. Many serious collectors want to know what curators are looking for so they can acquire that work with the intention of bequeathing it or for realizing a charitable tax deduction if needed.
There are strict laws around charitable donations, so we advise having a conversation with your accountant. The important thing to note is that, in order to write off an art donation above a certain amount on your taxes (check your state regulations), you will need a licensed appraiser to determine the fair market value and write up a detailed report. This can be costly, and it has the be done within a specific timeframe. There are also restrictions on how long a museum has to hold donated art before they can turn around and sell it and there are restrictions on what a donor can demand of the museum in exchange for their donation. The kind of museum or other non-profit organization can also be an issue if there isn’t a direct correlation between the art and the non-profit’s mission. Again, talk to your accountant before you get into a sticky situation.
Donating art has many appealing aspects when done while you’re alive or posthumously. For one, lots more people can enjoy that work and, unless otherwise requested, your name will be listed on the wall materials as the donor, which is a lovely way to immortalize your hard work and excellent taste.
