USA – NEW YORK Trends and Developments Contributed by: Caryn Young and Allison Sweeney, Withers
Mastering the Art of Estate Planning: Tips for Art Collectors in New York For many collectors and artists who have spent a lifetime painstakingly building an art collection, the collection is a work in progress, an ongoing project without final form. So too, then, should the collector’s estate plan be dynamic, evolving with both the col - lection and its collector over time. Both the seasoned collector with a storied collection and the fledging collector who is only just beginning to amass their treasured works can benefit from a thorough review of their assets, their goals and their motivations by a trusted advisor. The resulting plan to structure (or restructure) an art collection will address not only how the artwork should be held, but where, and eventually, by whom. Many of these important considerations are the same for both artists and collectors, and are fur - ther discussed below. How to own art As with any asset, the determination of the best way to structure an art collection or to hold a specific work will depend on the collector’s universe of assets and overall goals. Such a determination will require an in-depth analysis of what the collector is trying to accomplish and why, which assets may be best suited to a particular planning technique, and the interper - sonal dynamics of those individuals who may stand to benefit at the next generation. No one approach will suit every situation. Generally, outright ownership of artwork will provide the collector with the most control, but the least pri - vacy, least creditor protection, and least tax savings. The ownership of artwork in an entity like a Limited Liability Corporation (LLC) or Family Limited Part - nership (FLP) creates greater privacy for the owner, allows for shared ownership of an art collection or single artwork among family members and creates the opportunity for fractional interest discount planning, but ever-developing reporting requirements (eg, the Corporate Transparency Act) and the possible forma - tion of a tiered or multiple entity structure can increase the administrative burden of maintaining the collec - tion. An irrevocable trust affords the grantor more control over the disposition of trust assets after their lifetime, can facilitate efficient tax-planning, and afford its beneficiaries creditor protection, but is perhaps the
least flexible option to accommodate changing life cir - cumstances over the years. Further, in certain states, the vehicle in which the artwork is held can affect its taxation at the owner’s death. Thus, the cost/benefit of each ownership vehicle must be weighed against the characteristics of each asset and what the owner Diligent planning considers not only the best way to own artwork, but the best place to do so. Deciding where to own art involves balancing lifetime consider - ations of access, enjoyment and anticipated expenses against the practical realities of estate administration at the collector’s death. hopes to achieve. Where to own art New York State imposes an estate tax on the assets of a New York decedent, and is structured such that, generally, an estate that exceeds the exemption amount (USD7,350,000 in 2026) will be taxed not only on the assets exceeding the exemption amount, but on the entire value of the estate. Further, though any unused Federal Estate Tax exemption is “portable” between spouses, the unused New York State exemp - tion amount is not. As a result, any unused New York State exemption amount remaining at the death of the first spouse cannot be recaptured at the death of the second spouse. New York also imposes estate tax on certain assets (eg, real estate and tangible personal property such as artwork) of a non-resident decedent that are located in New York. A New York non-resident collector must consider that storing artwork in a Manhattan apart - ment or a storage facility in New York can subject the work to New York estate tax at the death of the col - lector. Therefore, though a collector with New York ties can mitigate estate taxes owed at death with careful planning, a collector who is not a New York resident may wish to avoid subjecting any portion of their col - lection to New York estate tax at all. Even if a collector is based in New York, it is more than likely that their collection touches different cor - ners of the world. For example, a New York collec - tor may have more than one residence in the United States or abroad, or store different works of art in facilities worldwide. Others may have works loaned
252 CHAMBERS.COM
Powered by FlippingBook