Why Estate Planning is Important for Artists and Art Collectors
September 13, 2023
By Valencia Tong
What happens when you die? While it seems impolite to ask this personal question directly to a living artist or an art collector, it is indeed an important and timely question. Deep down, everyone knows that death is inevitable, but few people talk about it openly.
The sheer number of euphemisms for death in literature and art is enough to show that not everyone can get past the perceived faux pas of discussing such a topic without some sort of embarrassment.
So how does one plan ahead to manage the legacy planning process?
While most artists and art collectors focus on building their career and art collection during their lifetime, driven by passion or other immediate practical concerns, they find it challenging to think about the future in concrete ways. This is why selecting the right, trustworthy professionals who can provide guidance to address the needs of artists and art collectors can sometimes be perceived as a long, arduous process. However, it does not have to be this way.
There are resources available to smoothen the process. As part of the initiative known as the Artist Legacy and Estate Planning Clinic, the Center for Art Law connects artists, estate administrators, attorneys, tax advisors, and other experts to create meaningful and lasting solutions for expanding the art canon and art legacy planning.
Succession Planning Goals
Understanding the motivation and goals behind the legacy and estate planning process helps artists and art collectors gain clarity in their next steps.
Sometimes, a personal event like losing a loved one, an accident or a health crisis could trigger the awareness of the need for legacy planning. What if the artist or art collector becomes incapacitated? Is there someone that they can trust who has the expertise to carry out their wishes? Who can provide for them and their family if they are no longer able to do so themselves? Other times, when an artist or an art collector has reached a certain level of success or age, they start to think about how to deal with the artwork and other assets that they have accrued. One concern that comes to mind is taxes. Depending on the legislation in various jurisdictions, the tax liability may be different. Besides the obligations for tax filings during one’s lifetime, some artists or art collectors may start to think about the legal implications of the transfer of taxes upon death.
When it is time for the disposition of assets and providing for family after death, especially when the heirs live in different locations, the complexities of future-proofing the legacy planning process arise. There are artists and art collectors who travel frequently for personal and business reasons, and cross-border transactions are increasingly common. Artwork and other assets may be located in different jurisdictions. It could feel like a headache to many artists and art collectors, who would rather use their energy to attain more achievements during their lifetime. As such, working with professionals who could handle the planning process could allow artists and art collectors to focus on their goals.
Efficient Property Transfer
According to the New York City Bar, your will is presented to the court in a probate proceeding after your death. Then, a judge approves the terms of the will. After the debts are paid off, the assets, properties and possessions are distributed to beneficiaries. The “Surrogate’s Court” is where the probate proceedings in New York State take place. The location is based on the county in which you lived when you died. Your estate includes assets, property and possessions. The executor is the representative appointed by the court.
However, even if the artist or art collector has a will, the probate process is costly and takes a long time, and it is not the most efficient way of transferring property after death. Moreover, the probate process requires court filings, which means that certain details become public.
A revocable trust, when set up correctly, provides the advantage of avoiding probate, allowing the artist or art collector to quickly and efficiently pass property to the beneficiaries they name. Using a revocable trust as part of the estate planning process also provides more privacy because it avoids probate and does not need to involve the court.
In addition to physical artworks, artists and art collectors need to pay attention to the intellectual property of the works of art and plan their transfer accordingly. There may be a time limit after the death of the artist before copyrighted work becomes available in the public domain. For example, Vincent Van Gogh’s The Starry Night (1889), is in the public domain because he passed away over 70 years ago.
Moreover, with recent technological advancements, if the artworks in the collection only exist virtually as a form of digital asset, such as NFT or AI art created by artificial intelligence, it is important to consult professionals who possess the expertise in terms of digital legacy. For example, when giving the authority to beneficiaries to manage the account, they need to be able to access the content as well. This is especially relevant to artists with a large archive. Thinking through the practical steps for managing the digital aspects of their work allow the transition to be done smoothly.
Experienced legal professionals will be able to provide guidance related to the core estate planning documents.
Legal and Tax Considerations
An art collection is often a significant part of an estate. When artwork appreciates in value, there may be a need for art appraisals for the estate planning process to fulfill certain legal and tax obligations. When applicable, upon the death of the artist or art collector, there needs to be enough liquidity of the estate to pay estate tax within a specific time frame. Sometimes, this is done through the sale of artwork to liquidate the collection. Experienced professionals will be able to provide guidance in terms of how to maximize sale proceeds while minimizing taxes.
Depending on the situation, there may be estate planning strategies for the disposition of artwork, which fulfills both philanthropic goals and minimizes estate taxes. Working with trust and estate lawyers with a network of museum professionals, accountants and appraisers will clarify the ideal methods for charity donations and estate planning. Searching for the appropriate museum which accepts the donated artwork takes careful planning. Most artists and art collectors would like their artwork to be in good hands, so identifying the target beneficiary of their property is of paramount importance.
For artists and art collectors who would like to start the estate planning process, identifying trustworthy professionals, known as fiduciaries, who can act on their behalf and manage their property, is worthwhile.
Estate planning allows artists and art collectors to achieve their personal goals and ensures a smooth transition for the next generation. Working with professionals with expertise in various aspects of the estate planning process helps artists and art collectors leave a legacy.
- Center for Art Law, Artist Legacy and Estate Planning Clinic, Center for Art Law (Jun. 21, 2023), https://itsartlaw.org/events/artist-legacy-and-estate-planning-clinic-2/
- Paul Chazan, Probate Proceeding – Executor Responsibilities, NYC Bar (October 2018), https://www.nycbar.org/get-legal-help/article/wills-trusts-and-elder-law/probate-proceeding/
- Stacy E. Singer and Jonathan W. Michael, How Does a Revocable Trust Avoid Probate?, ACTEC (Apr. 11, 2019), https://www.actec.org/estate-planning/how-does-a-revocable-trust-avoid-probate/
- Karen Hube, What Happens to Your Digital Properties After You Die?, Penta Magazine (Mar. 23, 2023), https://www.barrons.com/articles/what-happens-to-your-digital-properties-after-you-die-200ec15c/
- Artist Legacy and Estate Planning Clinic
- The Aspen Institute, Notes on Estate Planning for Artists Endowing a Private Foundation, Artist-Endowed Foundations Initiative/AEFI
- Joan Mitchell Foundation, Creating a Living Legacy: Estate Planning Workbook for Visual Artists
- Anna Sulkin, Landlord vs. Descendants: Who Has Right to Artist’s Estate? Wealthmanagement.com
- Matthew Erskine, Estate Plans For Creative, Entrepreneurial And Easily Distracted People, Forbes
- Erin Bury, What happens to your NFTs and crypto assets after you die?, TechCrunch
About the Author:
Valencia Tong is a graduate student at Columbia University. As an award-winning art writer and consultant, she is interested in the legal aspects of art business, intellectual property, technology, and estate planning. She can be reached at https://valenciatong.com/.
Disclaimer: This article is intended as general information, not legal advice, and is no substitute for seeking representation.
- Center for Art Law, Artist Legacy and Estate Planning Clinic, Center for Art Law (Jun. 21, 2023), https://itsartlaw.org/events/artist-legacy-and-estate-planning-clinic-2/ ↑
- Paul Chazan, Probate Proceeding – Executor Responsibilities, NYC Bar (October 2018), https://www.nycbar.org/get-legal-help/article/wills-trusts-and-elder-law/probate-proceeding/ ↑
- Stacy E. Singer and Jonathan W. Michael, How Does a Revocable Trust Avoid Probate?, ACTEC (Apr. 11, 2019), https://www.actec.org/estate-planning/how-does-a-revocable-trust-avoid-probate/ ↑
- Karen Hube, What Happens to Your Digital Properties After You Die?, Penta Magazine (Mar. 23, 2023), https://www.barrons.com/articles/what-happens-to-your-digital-properties-after-you-die-200ec15c/ ↑