Traditionally families build net worth through the accumulation of currency and property, but many individuals, whether they're aware of it or not, also own rare collectibles that can be worth a lot of money. Passing on these items to heirs doesn't cross the mind of many collectors, but accounting for these valuables in an estate plan is important. Deciding how to distribute collectibles will likely prevent disputes in the family later.
According to the IRS, collectibles include things like paintings, sculptures, antiques, rugs, gems, stamps, coins, and other items with some exceptions. Tax law will apply to these belongings whether someone decides to donate them to charity or divide them among family members. Ignoring the law can result in high taxes and penalties that could be easily avoided.
Art and other collectibles can have both financial and sentimental value that family members disagree about, so getting items appraised is an important part of the planning process. In order to account for fluctuating market value, the names of experts who can provide accurate valuation of items should be included in the estate plan. The total value of these collectibles, as calculated upon death, will be added to the value of the entire estate for tax purposes.
Individuals with high-value collectibles will likely benefit from the support and assistance of an estate planning attorney. Their job is to ensure all needed documents are in order, calculate ways to equitably distribute assets, and find tax saving opportunities. Laws regarding the inheritance of collectibles change from time to time, and an attorney should be up to date on every local, state, and federal provision. Starting this process early is recommended for clients with both simple and complex collections.