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| Risk & Reward |
The Collector's Conundrum
Mary Lowengard
05/03/2004
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Joan Starcke began acquiring Victorian majolica some three decades ago, “when
nobody was really interested in it.” The highly colorful pottery now fills her
New York apartment. Starcke loves her majolica, from the tiny butter-pat dishes
to the huge soup tureens, and speaks of it with affection and respect. “It makes
me smile,” she says. Yet when asked about what kind of plans she has made for
her collection on her death, she concedes she has none.
 | | COLLECTIBLES, SUCH as this Majolica wine cooler, may be treasures for us, but could mean hardship for our heirs. |
In this
respect, Starcke is hardly alone. Given the numerous legal and administrative
hurdles associated with the crafting of an estate plan for
collectibles—confronting a 28 percent capital gains tax on appreciated art,
securing accurate appraisals, skirting a wary IRS Art Advisory Panel, and then
finding the right legal vehicle—many collectors quickly become overwhelmed. Even
divvying up a large collection can be knotty. “Financial assets like stocks and
bonds are easy to divide up,” says Andrea Lawrence, an estate and fiduciary
specialist at Calibre, Wachovia Bank’s family office in Philadelphia. “But how
do you split a painting down the middle?”
Donating the collection to a
museum—once the simplest solution—has become problematic. Some organizations,
like the Museum of Modern Art in New York City, are becoming increasingly wary
of taking on entire collections because they have only limited space. “The
donation process can become an art in itself,” observes Michael Mendelsohn, a
collector of American Folk Art and a proponent of efficient planning for
collections. That is why multigenerational dynasty trusts or partnerships that
permit flexibility and exchange of units are the ticket for some collectors who
wish to bequeath artwork to future generations. When crafted correctly, these
trusts provide the additional benefit of blunting the effects of gift and estate
taxes.
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