31 Oct COLLECTOR’S NOTEBOOK: YOUR ART COLLECTION’S AFTERLIFE

Collecting art is fun! Selling … not as much. And even more so, 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, the recipient might be saddled with something they don’t know how to sell, much less how to value.

Art collections add a few wrinkles to estate planning. So to minimize the issues, here are some things to keep in mind when deciding what to do with your collection, helping to ensure that even if your next of kin doesn’t share your passion, they will know the value of the art they acquired.

Document and Sort

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 collectible books at rock-bottom prices.

To alleviate this concern, create a detailed inventory of your collection. Determining what happens to your collection starts with a well-documented list that includes where you acquired things, sales receipts, current market values, and the dealers actively selling those works.

This can be tedious, but it’s worth your time or the money to hire someone to create this document. The important things to note are the artwork’s dimensions, medium, frame or sculpture base, the price you paid, and the current prices of similar works at galleries or auctions. It’s also beneficial to include photos of the work, including the front and back of the piece and the artist’s signature.

For some collectors, this list is all you need to share with family members to start a discussion about future inheritances. For others, establishing the value of your art is just the beginning.

Know When to Hold ’em

If family members have ever said, “When you’re gone, we’re going to sell all of this because we don’t like it,” you will 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 if they’ve expressed such sentiments. Instead, consider donating, gifting, or selling your artwork on the secondary market.

There are some benefits to selling art from your collection even while you’re still purchasing work. 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 trade up or move on. Consider meeting with fellow collectors, dealers, and curators to discuss art and objects and learn more about the genre of work you most enjoy. These individuals are great sources of knowledge and will help you improve your eye. They will also come in handy when you decide to sell or donate things, and you may even find that you and your group buy, sell, or swap artworks with each other.

Know When to Fold ’em

Once you’ve identified the pieces that no longer fit with 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. We are saying 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 increased or decreased in value.

There are three main avenues for deaccessioning art: resales, gifts, and donations. Let’s start with resales.

Secondary Market

Reselling art is always an adventure. The easiest route is to work with a gallery familiar with the artist’s work. You’ll pay a commission on these sales, but you can often 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 compete with that artist for sales. One or two pieces won’t make a difference, but if you collected 10 or more works, it could crush an artist if you dump all those pieces on the market at once.

Auctions are another venue for reselling work. You’ll want to enter this world with basic knowledge about how auctions work and what to expect in the fine print on contracts. It’s worth noting that these impact artists’ careers as well, especially living artists. Works that don’t sell or sell for the minimum or below 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 style.

Giving Gifts

Here’s where your itemized list will come in handy. Often, family members have no idea what things are worth — they like or dislike something based on an emotional response. 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’ve most likely had your collection appraised for insurance. These appraisals should occur every three to five years because the market fluctuates and, if we’re being honest, you can’t stop buying art and it’s important to update your insurance documents with recent purchases.

Not only can the appraised values help you fairly divvy up your collection, but this information can help you understand the tax implications of these gifts. You’ll want to check with your accountant 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, 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 do 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 with a sizable art collection invited their 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; 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 to bequeath or realize 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 to be done within a specific timeframe. There are also restrictions on how long a museum has to hold donated art before it can turn around and sell it, and there are restrictions on what a donor can demand from 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 nonprofit’s mission. Again, talk to your accountant before you get into a sticky situation.

Donating art has many appealing aspects, whether 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.

Curator and writer Rose Fredrick shares her extensive knowledge about the inner workings of the art market on her blog, The Incurable Optimist, at rosefredrick.com.