How to start planning for the future of a valuable collection.
A suite of early works from a celebrated artist. A complete set of first editions without a single cracked spine. A Brasilia buffet full of Pyrex. A spare room dedicated to artfully curated Star Wars memorabilia.
All passionately collected – and potentially at risk, without a thoughtful plan to either keep them in the family or share them with the world.
When it comes to collections and the people who pour their hearts into them, Liz Ochoa, an estate planning attorney and strategist supporting Raymond James advisors and some of their top clients, has seen it all. “Books, furniture, TV and movie memorabilia, cars – we see cars quite a bit. A collection of antique watches. Art, of course.” And she’s seen how it can all go wrong.
“The nightmare scenario is when heirs don’t realize there’s a collection or don’t know its value and end up selling something that their loved one invested years of work and passion into at an estate sale or on Facebook Marketplace. Then they find out years later how much it was worth – financially and emotionally.”
Collections are a critical and sometimes overlooked element of estate planning, with sophisticated techniques their curators can use to direct and protect the future of the valuables. But according to Liz, the most important part of the planning process is simple.
Who do you want to give the collection to? The answer is often loved ones, but some collections have the kind of mass appeal or, potentially, historical significance a collector might want to share with a wider audience.
“We see cases where collections are gifted to a charity or left in full or in part to a museum or organization associated with the items,” says Liz.
Do they want it? “That’s number one. Once we know that, we can get into details.”
With charities or museums, “wanting” often comes down to their ability to house and exhibit a collection. With heirs, it’s about gauging interest and the likelihood the recipient will fulfill your wishes. And that often hinges on how much you’ve communicated with them about a collection’s origins and your passion for it.
“Storytelling helps a lot with keeping the assets,” says Liz. “It’s about sharing the unquantifiable value of a collection – ‘your great-great-grandparents brought these through Ellis Island’ or ‘we started collecting this artist’s work after getting our first piece as a wedding gift.’”
Whether you have these discussions informally or make them part of an official planning process, talking about your collection with the people you hope will become its shepherds is crucial.
According to Liz, “In the best circumstances, people are aware of the gift, and they want it. And that’s all about communication.”
Once you’ve decided where a collection is wanted, consider how it gets there.
“This is where you need to get specific,” says Liz. “Do you want a collection to be given in full to a single person or entity? Or are you planning for multiple recipients? And if so, how is the collection to be divided? Are you comfortable letting the recipients choose or do you want to create a more directive plan?” Gifting vehicles like bequests and trusts can be straightforward or carefully customized to include specific conditions or instructions for recipients.
From a tax planning perspective, timing is the key. If your collection has increased in value over time and is expected to continue that trend, making the gift part of your estate would result in a stepped-up basis and a tax savings should your heir need to sell in the future. If it hasn’t increased in value, you might consider making the gift during your life to take advantage of gift tax exclusions.
You’ll also want to consider the financial impact of a collection’s maintenance says Liz. “Depending on the items, things like upkeep and insurance may need to be considered. So, an additional cash gift can help your heir get started.”
Knowing what your collection is worth isn’t just good practice, it’s required if you plan to make it a gift.
The IRS expects qualified appraisals for collections valued at $5,000 or more. And collections worth $20,000 or more must include a signed appraisal with the tax return.
“Most people who’ve put effort into a collection know approximately what it’s worth – they’ve been insuring it, for instance,” Liz says. But that doesn’t mean there aren’t some hidden gems.
“Where surprises often come up is when the provenance of an item or collection that’s been gifted generationally isn’t fully known – it’s great-great-grandma’s table lamp that turns out to be a Tiffany Studios original or granddad’s favorite lounger that’s an Eames.”
But even if the monetary value wildly exceeds expectations, Liz says it’s still very often personal passion that’s driving decision-making. “People are collecting these things and gifting these things because they love them. And making sure that passion lives on starts with planning.”
Bequest to a loved one
Donation to a charity
Gift to a public entity
Inventory of the collection
Guidance for recipients
Approximate value
Recent professional appraisal
Insurance information
Maintenance details
Raymond James does not provide tax or legal advice. Please discuss these matters with the appropriate professional.
