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| Shared Passions |
Framing the Future
Regan Good
08/02/2004
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The costs and
administrative issues associated with establishing a private museum can be
monumental. “In order to maintain a museum and the works in a museum, you need a
rather large endowment—at least $50 million to $100 million. And you need a
staff. Private museums are very difficult to operate,” explains Janine
Racanelli, a wealth advisor at JP Morgan’s estate planning division in New York.
She is currently crafting such a plan for one of her clients. “This client is
lucky because he has very substantial liquid wealth,” she explains. “So the
questions for him are: What will be the legacy? Is it practical? Who would keep
the museum going? Is there enough public interest in the works? How does one
maintain the spirit of the original collector? How does one keep the collection
fresh and interesting? How will the building be kept? Is there enough endowment
for taxes? Salaries? Insurance?”
Egos aside, there are also cold-eyed
pragmatic reasons to give a collection to a museum. Even if Congress does
permanently repeal the federal estate tax after the one-year revocation planned
for 2010, our heirs might have to sell valuable artwork to pay off state death
taxes, or simply because they need the cash. If we do want to give our
collection to our children, the smartest strategy might be to provide them with
liquidity through a life insurance trust. This will enable their benefits to
come from a trust, rather than our estate, so they receive a payout that is
immune to estate taxes. Such trusts can cover the taxes on a gift of art to a
family member, thereby keeping the work in the family and avoiding undo
financial burdens.
If we want to sell our collection and leave the proceeds
to our heirs or to a charity, we can donate the collection, or parts of it, to a
charitable remainder trust. The trust can then sell the work and keep all the
proceeds without paying any capital gains or estate taxes.
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