USA Law and Practice Contributed by: Jana Slavina Farmer, Adam Buchwalter and Dara Elpren, Wilson Elser Moskowitz Edelman & Dicker LLP
right. One good approach is for the author’s will to assign copyrights to a single person or entity to man - age the intellectual property, to make decisions about licensing, publishing catalogues, pursuing infringers, etc, without having to chase every heir for each deci - sion. Digital art and NFTs Digital art and NFTs pose unique succession plan - ning challenges. Unlike a painting on the wall, an NFT or digital artwork is typically accessed via online accounts, crypto wallets, or storage devices. It is rec - ommended that the owner maintains a secure list of digital assets and their access information, and makes arrangements for a fiduciary to obtain the list upon the owner’s death. Fiscal issues The primary fiscal issues associated with testamen - tary (by will) or intestate (without a will) succession are associated with estate and inheritance taxes. Because art is illiquid, heirs may be forced to sell pieces quickly to cover estate taxes. If a substantial portion of the estate is in art, it is important to implement strate - gies in advance to avoid a forced sale shortly after the decedent passes. Estate taxes Estate taxes in the United States are taxes levied on the transfer of a deceased person’s assets. The tax is applied to the total value of the estate, which includes real estate, investments and other assets including artwork. The federal estate and gift tax of 40% only applies if the total estate exceeds a certain threshold (more than USD15 million in 2026, an increase from USD13.9 million in 2025 due to The One Big Beautiful Bill (OBBB) being signed into law on 4 July 2025), but some states impose their own estate tax with lower exemption amounts. It is essential to ensure the value of artwork reported on the estate tax return is sub - stantiated by a qualified appraisal. Inheritance taxes There is no inheritance tax at the federal level, but five states (Kentucky, Maryland, Nebraska, New Jer - sey and Pennsylvania) have inheritance taxes levied on the value of assets received by a beneficiary of an estate. Inheritance tax is based on the relationship of
the individual to the decedent. Collectors with sig - nificant estates residing in these states may wish to consider available measures to limit the application of inheritance tax, including by establishing a trust and transferring artwork to the trust during their lifetime. 10.3 Tax Implications of Artwork Gifts and Donations In the United States, gifts are taxed on the donor, and the recipients of gifts are generally not taxed, either at the federal or state level. However, special rules may apply when the recipient is a foreign person. Gift Tax Any transfer of artwork to an individual for less than full consideration (whether monetary or in kind) is con - sidered a gift. Generally, gifts are taxable to the donor, unless an exception applies. Under IRS rules, there is an annual gift exclusion (USD19,000 in 2026) to each donee. Any gift in excess of the annual gift exclusion will utilise the donor’s lifetime exemption (USD15 mil - lion as of 2026) and reduce the amount available for them to leave tax-free at death. Gifts to one’s spouse are not taxable regardless of value unless the spouse is not a US citizen. Gifts beyond the exclusion thresh - old require a gift tax return (Form 709), which must be substantiated by a qualified appraisal. Gift tax returns are due on 15 April following the year in which the gift is made. Donations to Charities Gifts to qualifying tax-exempt charities, as defined by Section 501 (c)(3) of the Internal Revenue Code (IRC), can provide an income tax deduction to the donor subject to certain limitations depending on the nature of the gift and the type of organisation receiving the gift. Where artwork is gifted, the value of the donation must be substantiated by a qualified appraisal pursu - ant to IRS requirements. 10.4 Artworks Exempt from Inheritance/ Donation Taxes Gift Tax Exemptions Donations of artwork may be made during the donor’s lifetime, and are taxed as gifts. There is no specific exemption from gift taxes based solely on the type of artwork. Gifts of artwork are subject to the same types of exemptions discussed in 10.3 Tax Implica-
205 CHAMBERS.COM
Powered by FlippingBook