Estate plans must carefully consider valuable collectibles

On Behalf of | Jun 11, 2018 | Estate Planning

Collectors in Nevada should carefully prepare when passing their valuable collectibles on to heirs or donating them to charities. The Internal Revenue Service defines collectibles as artwork, rugs, antiques, certain metals and gems, stamps, certain coins, valuable alcoholic beverages or other tangible personal property meeting the tax agency’s guidelines. Specific estate and tax laws govern the distribution and valuation of collectibles, and heirs could be on the hook for high capital gains taxes without careful estate planning. The federal government could apply a long-term capital gains tax of 28 percent on collectibles.

To develop an estate strategy, a collector first needs to establish the value of his or her collection. Appraisals from multiple experts would be ideal for determining value. This process could take time because a collector will need to identify and contact appraisers with the right credentials. A collector should also ask heirs which items interest them. These conversations could provide insights about potential disputes among heirs and help a person decide who should receive what.

After establishing a collectible’s value and who to give it to, a collector could begin planning for the terms of an estate plan. In some cases, an estate might want to assume the cost of storing and shipping large or fragile items instead of imposing this cost on heirs. In some situations, a person might be able to give a valuable collectible as a gift to an heir and gain protection from taxes through the gift exclusion rules.

87A person could also seek out the advice of an estate planning lawyer. Legal research about federal and local taxes could alert a person to unforeseen tax consequences. To aid clients with will planning, an attorney could suggest approaches for protecting assets and limiting the chance of the IRS auditing their estates.