All of us have art, antiques and collectibles that we have acquired over the years. No matter what family heirlooms we have or what antiques we like to collect, there are few things we should all know about our collections and protecting them. Here are some tips about donations, obtaining insurance and tax implications.
If you want to make a charitable donation, there are some rules to know, according to the Internal Revenue Service. Before you make decisions about donations or financial matters, it is always wise to consult with a tax professional or accountant. This information should not be used in place of a consultation from a professional financial adviser or other expert in the field of tax preparation, accounting, etc.
You may receive a tax deduction for a donated item’s full value up to 30 percent of your adjusted gross income. If you donate a collection while you are still alive, you must be sure to make the donation properly. It is a little-known fact, but in order to command the biggest tax deduction for your donation, your donation must be for related-use. That means if you are gifting a work of art to an organization that is typically not in the business of displaying art, then your donation may not be considered related-use. So, you cannot get the full benefit for your donation if you donate your art to that charitable organization. But, if you donate your art to an organization or charity that displays art on a regular basis like a museum, then that is related-use and you can expect a higher tax deduction for your donation.
Donations are complex but insurance is pretty straightforward. The deal with insurance for your art, antiques or collectibles is simple. If something you’ve collected is valuable — based on monetary or sentimental value — then you’ve got to protect it with insurance. If you don’t insure it and something happens to it, you are out of luck. I think it is worth paying the premium to protect your valuables.
How do you get insurance? You need a current appraisal of value for your collection which meets the standards set by the insurance industry. Accordingly, personal property appraisals for art, antiques and collectibles should be updated every 3-5 years. Insurance coverage should be considered for your valuable collections, fine art, collectible objects, books, antiques, couture, historic documents, jewelry, wines, spirits, etc. Today, the appraisal process can be started online with a photograph and some basic information or with a video chat conference using FaceTime, Skype, Zoom, Google Duo, etc.
When it comes to inheritance and you are thinking about leaving your collection to an heir like children, grandchildren or friends, then you need to know this new information. The Tax Cuts and Jobs Act of 2017 offers tax savings and changes to the inheritance laws. The new law doubles the estate tax exemption to $11.2 million for an individual ($22.4 million for a couple) and this will expire in 2025. Check in with your financial adviser and tax professional to see how this may impact your planning.
Seasoned financial advisers tell their clients to collect those objects that are likely to appreciate the most in value. That’s good advice. But do you know what items are most likely to increase or appreciate in value? History shows us that investing in fine art, antique furniture, historic documents, specialty wines and spirits and jewelry will bring a good return on investment in most cases. Those types of items have historically maintained their value or increased in value over time. When it comes to protecting your collections, consider donations, insurance and inheritance wisely.