For art collectors with valuable collections, leaving fine art to your heirs can create unnecessary complications without proper planning. Fine art may be included in your will and go through probate; however, it is often best to create a trust to hold and manage the artwork.
The first complication is gathering the date-of-death value of the collection. It is important to obtain an appraisal to determine the beneficiary’s income tax basis in the collection. If the collection is valued over $50,000 the Internal Revenue Service may require a special appraisal item format which could lead to delays in the probate process.
Heirs may face penalties and interest if the appraisal is lower than the IRS audited appraisal. Beneficiaries of fine art should also delay in selling the artwork for at least six months if possible because the new sale price, if higher than the date-of-death appraisal value, may be the value used by the IRS to determine taxes owed.
For executors dealing with art and collectibles in a Maryland estate, the first step to take following an IRS art valuation audit is notify the heirs, follow the instructions provided by the IRS and contact an experienced estate planning attorney like Stouffer Legal at 443-470-3599 in the Greater Baltimore area.