For California residents, estate planning is an important part of ensuring that valuables are distributed properly after death. However, there are potential tax and personal implications of inheriting collections that one should be aware of.
An expert recommends that owners of valuable collections make an assessment of their goals for each collection. Some wish to see their children enjoy the collection while others seek to preserve their legacy and assets. Owners should have a discussion with potential inheritors prior to making an estate plan. Some beneficiaries may not be interested in owning the collection, even for sentimental reasons, while others may want the items. Another option is to gift the items while the owner is still alive. This can have positive tax implications and give the individual a chance to see their loved one enjoy the items during their lifetime.
The federal estate tax kicks in at $5.34 million as of 2014. If an estate is larger than this, it may be beneficial to give the valuables as gifts in order to avoid the high tax burden. Anything up to $14,000, whether in cash or other valuables, avoids the need for filing a gift-tax return. Another option is to donate the items, particularly when none of the beneficiaries are interested in inheriting them.
Regardless of the decisions made, it is important to get a good appraisal of the collection. In some cases, the inheritor may also need to have an appraisal done to comply with estate-tax rules. An attorney may be able to help navigate through this process and draft the necessary documents. This can include not only a will but also the trusts and health care directives that comprehensive estate planning requires.
Source: Kiplinger, “Leaving a Collection to Your Heirs“, Vickie Elmer, April 25, 2014
