Estate Planning for Collectibles: Wine, Art, Cars & More
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Estate plans are not only vehicles for passing cash, investments and real property along to named beneficiaries, these tools can also transfer more complex assets. How does one pass on a wine collection, valuable artwork, antique cars, or rare baseball cards that were accumulated over a lifetime?
For estate planning, wine collections require more than a simple provision in your Will.
Our North Carolina asset protection attorneys addressed preserving tangible assets, such as antiques and rare cars, in estate plans in an earlier post. We reviewed challenges with insurance, appraisals, and tax planning that should be planned for in advance. When it comes to highly specialized assets, the aforementioned issues are just a few areas for concern. Specific requirements unique to the type of asset should be reviewed with an attorney during annual estate plan reviews. For example:
Wine collections. Wine collections in estate plans require review of federal and state alcohol distribution laws. If no instructions were left for the disposition of a wine collection, an executor may elect to sell the collection as part of settling the estate. North Carolina allows a special one-time permit for the sale of alcoholic items in an inheritance, but this is not the case in every state. Understandably, the permit comes with some restrictions regarding the parties legally allowed to purchase the alcohol. Generally, wine retailers may only legally purchase alcohol from distributors. Another item to address when including a wine collection in an estate plan is storage. Without proper climate controlled storage, the wine collection may lose its value. Structure an estate plan to provide instructions and funding for the appropriate care of the collection.
Art collections. Including art in an estate plan may follow different objectives depending on whether the testator is the artist and creator of the work or if they are collecting work of other artists. Art created by the testator, or received as a gift from the creator, is treated as “ordinary income property” for tax purposes. Art not created by the testator will require documentation attesting to its validity. These items should be discussed with an attorney whenever art collections are included in an estate plan.
Classic car collections. According to the New York Times, “a $20 million [car] collection could face a $6 million tax bill and if the heirs have to sell vehicles to pay that amount, they could be liable for capital gains and estate taxes as well.” Estate planning with vintage vehicles may include trusts to help mitigate tax liability.
Whether a collection is accumulated as a hobby or with intent of investment, it should be properly addressed in one’s estate plan so that future generations, a museum, or other party shares in the appreciation and legacy of the items. A provision in a Will is typically not the best method for addressing a collection; for one thing, assets transferred by Will must go through probate, and are detailed in the public record (court file) and subject to court fees. An estate planning attorney can review asset preservation tools like custom trusts or Limited Liability Companies that can be funded with the collectible items and preserved for beneficiaries. These tools can allow the collectible items to pass on without the need for probate, and may come with tax advantages.
