It constantly surprises me to see the variety of things people collect. No matter what a collection consists of — rare books, art, sports memorabilia, vintage cars or something less common — it usually has deep personal value to the collector.
When a person dies, an estate administrator assists in passing their assets down to the heirs — honoring the person’s stated wishes. As a lawyer by trade with an estate planning background, I assist clients in estate administration and often see the aftermath when a person doesn’t communicate their wishes to their heirs. A cherished collection may be passed down to a family member who doesn’t hold the same level of appreciation for it. Or, on the other end of the spectrum, heirs might bicker over a single item with great sentimental value that can’t be split up, such as a mother’s wedding ring.
It’s difficult enough to lose a family member, but it’s even worse to have lingering bad feelings with your loved ones that could have been prevented with better planning. Here are a few pieces of estate-planning advice for managing a collection or other valuable assets:
1| Make your intentions clear.
Nobody likes talking about the inevitability of death, but when it comes to estate planning, it can be tremendously helpful for older adults to have an open conversation with their family members about their inheritances.
Perhaps a father has a prized gun collection that he wants to pass down to his son, but the son might not care about guns or is married to somebody opposed to them. It’s so much easier to have that conversation before the older family member dies to see if there are other options available. Maybe another family member is interested in the guns and just needs an opening to ask, such as a daughter who has fond memories of hunting with her dad.
2| Understand the true value of a collection.
When discussing a valuable collection, it’s important to distinguish between items with monetary value and others for which the value is primarily sentimental. For example, people often think their antiques and jewelry are valuable, but those items are often hard to sell and command only a fraction of the prices they might have in the past. The value of art also tends to be very specific, and even art museums might not have the space to keep a donated work in their collections.
For other items, the value isn’t always obvious to the layperson. That’s why, if possible, the original owner should explain their collection’s value to family members or their estate planner. If a collection ends up being sold after the original owner’s death, having this guidance can ensure that it’s sold as easily and as profitably as possible.
I once worked on the estate of a client who was a violin player with a local orchestra. She left behind a violin of European origin that I thought would be valuable, despite it being in poor condition. I took it to a violin dealer to get an estimate of its value and was surprised when he took more interest in two bows that were in the violin case. One of them turned out to be very rare and worth about $20,000. You just never know.
3| Consider simplifying your estate.
I’ve found that heirs overwhelmingly prefer to receive cash instead of tangible possessions. The reasons why are simple. Cash is the most hassle-free asset to transfer from one generation to the next, and it can be easily divided among multiple heirs.
Among the most difficult assets to pass down are vacation properties and timeshares. A parent or grandparent might have fond memories of time spent at a lake lodge, for example. But once they pass away, the ongoing costs of upkeep, property taxes or HOA fees can become a headache for their descendants, who might not even have the free time available to spend at the property. Even a period of moderate neglect can cause a property to lose value.
Timeshares, which allow participants to use a piece of vacation property for a set amount of time each year, can create their own set of headaches for heirs. Contracts frequently include wording that can require owners to pay maintenance fees for life — and that obligation passes down to any heirs who inherit those contracts.
I also often advise clients to move away from U.S. savings bonds, which can be a tremendous hassle for heirs to deal with after the original owner’s death. Liquidating them often requires working with Treasury Direct and going through a probate process. On top of that, they often don’t represent a large portion of an owner’s estate.
How Heritage can help
At Heritage, our advisors bring a wealth of experience in estate administration, which can be incredibly helpful when dealing with collections or other valuable assets. As fiduciaries, we’re charged with maximizing and protecting clients’ estates, so we can offer advice and clarity on passing your assets down to your heirs in an efficient, tax-sensitive way.
If we can help you with your estate planning, call us at 877.887.8899 to learn more.