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Estate Planning Can Turn a Lifetime of Collecting Art Into a Series of Difficult Choices

Museums, heirs and the tax man rarely want the same thing, which means collectors and their representatives must negotiate legacy on three very different fronts.

Collectors spend decades building collections of not only art but also vintage cars, watches and antiques, and just when a collection becomes really encyclopedic and cohesive—usually when the collector is in their 60s or 70s—the focus suddenly becomes how to get rid of it. Estate planning requires high-net-worth individuals to do something with their assets, of which art and other collectibles are a part, in order that their heirs are not saddled with objects they may not want and inheritance taxes they certainly will not want to pay. And if they have to pay inheritance taxes—up to 40 percent, depending upon the value of the estate—heirs generally prefer to be bequeathed cash rather than objects that they themselves may need to sell, which then occasions the payment of hefty capital gains taxes.

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Maybe some museum will want the art collection, landing it somewhere and permitting the collector to claim a charitable deduction for it, but maybe it won’t, because many institutions’ collections have outgrown their gallery spaces. (Or the paintings and sculptures in question are simply duplicative.) “Art can be a very emotional asset,” Sarah Constantine, a partner in the Manhattan law firm of Arnold & Porter, told Observer, and those emotions can get triggered by hearing that a collection isn’t of interest to next of kin or isn’t good enough for a museum and, actually, is an obligation to be dealt with rather than an heirloom to be cherished.

Constantine, like many legal, banking and art advisors, begins to have conversations with collectors about what to do with their assets, including their art collections, as they approach retirement or after they no longer are working. Sometimes those conversations include heirs, so she has a sense of how to advise her clients. “I have conversations with the beneficiaries,” she said, “thinking through with them that dad would like you to have this piece. Is this something you’re interested in? If you’re not interested, is........

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