Leaving a valuable collection to your heirs
Do you collect vintage radios, 19th-century dolls or perhaps African sculptures? It may take some expert help to work out how to pass these on to your heirs. Parents’ collectibles can hold emotional meaning for adult children, and some collections carry financial value as well.
Before you choose a beneficiary for your collection, sit down with your family and find out who, if anyone, wants the items. Then consider whether you want to parcel out some items now, wait a few years, or hold on to everything until you die.
One reason to give away items before you die: The joy of seeing beloved objects bestowed now.
“Face-to-face giving is rewarding for the donor,” said Michael Whitty, an estate-planning lawyer with Handler Thayer, in Chicago. Whether you pass on collections now or after you die, he suggests giving heirs a “user manual” on how to maintain, insure and sell the valuables.
Tax considerations
Keep the tax tab in mind before you decide how to dispose of a valuable collection. Each year you can give each beneficiary up to $14,000 in cash, securities and other assets ($28,000 per beneficiary from a couple) without having to file a gift-tax return.
Anything above $14,000 counts against the estate-tax threshold — in 2014, $10.68 million ($5.34 million for an individual) — when you die. Therefore, couples who have amassed an estate well above the federal estate-tax threshold may want to parcel out valuable collectibles to children and grandchildren year by year.
A lower estate-tax bill may be an incentive to donate the collection if your kids don’t want it.
If you decide to sell, you will pay a maximum 28-percent capital-gains tax on collectibles — lower than the federal estate-tax rate. (Your state may also impose its own estate or inheritance tax.)
Before you start divvying up your collection, consider whether it is worth more intact or separated. A coin or stamp collection is more valuable together than apart. Most art and antiques usually fetch more sold piece by piece.
Appraising your collection
If you will gift a collection during your lifetime, you should get an appraisal done before you start giving it away, and update the appraisal every five years or so. If you plan to give one child a collection appraised at, say, $50,000, you could decide to give another child $50,000 in cash or other property.
Depending on the size of your estate, your heirs will need to get their own appraisal for estate-tax purposes. If the collection is unusual, such as antique African carvings, recommend an appraiser and have it valued while you’re still alive.
To find an appraiser near you, go to the website of the American Society of Appraisers (www.appraisers.org), the Appraisers Association of America (www.appraisersassoc.org), or the International Society of Appraisers (www.isa-appraisers.org).
Vickie Elmer is a freelance writer for Kiplinger’s Personal Finance magazine.
© 2014 Kiplinger’s Personal Finance; Distributed by Tribune Content Agency, LLC.