USA – NEW YORK Trends and Developments Contributed by: Caryn Young and Allison Sweeney, Withers
to museums or other institutions across the globe that are properly considered New York situs assets. Attention must be paid not only to the laws of New York with regard to such assets, but also to the laws of the foreign jurisdictions to which the collection might be connected. For example, if a work is cultur - ally significant to the country in which it is located, a country could deem it a national treasure and restrict its export. Without careful planning and consultation with a trusted advisor, a transaction involving artwork and its subsequent movement across borders could trigger significant Sales & Use Tax or VAT Tax. Collec - tors must take care to ensure that their advisors are coordinated in planning and reporting across jurisdic - tions to ensure records of the collection are current and consistent. It is important to consider the physical location of art - work not only in the collector’s life but also at their death to determine where probate might be required or to which authorities death taxes may be due. Certain states (eg, Connecticut) charge probate fees based on the value of the decedent’s assets, and certain states (eg, New Jersey) may require filing a tax return based on the relationship of the beneficiaries to the dece - dent. Neither of these requirements are necessarily neutralised by the use of revocable trust as a testa - mentary substitute. Even in states where a revocable trust can help the executor of the decedent’s estate avoid probate, care must be taken to ensure assets have been properly assigned to the trust during the decedent’s lifetime. Beyond the transactional, tax and probate costs to consider, the collector (or their executor/trustee) should be aware of the logistical challenges that may arise in managing an art collection physically located in multiple jurisdictions (eg, obtaining access to art - work stored abroad after the collector’s death and arranging for a timely appraisal) and factor these logis - tics into the plan for moving the collection forward. Complex issues in the transfer of art to the next generation Perhaps as important as deciding how and where to own an art collection during a collector’s life is to consider its continued existence at the next genera - tion. As noted earlier in this Article, it is essential for
the collector’s advisors to understand the collector’s goals in order to effectuate their wishes for the next chapter in the collection’s life. There are those for whom it is essential that their chil - dren make a family tradition of art collecting (regard - less of the children’s interest in doing so). An impor - tant aspect to consider in transferring art to the next generation is the family dynamics at play. A collector’s adult children may have varying expertise in the art world, varying tastes in artwork, or even varying levels of interest in collecting significant works of art. In deciding which specific works to bequeath to spe - cific children, a collector should consider that some children will place greater importance on the emotion - al value of a work while others will prioritise monetary value. It is important that a collector revisit specific bequests to children often to address any values that may have fluctuated significantly in the intervening years or any emotional considerations that may have changed. For example, did a collector many years ago specifically bequeath different works to two children which had the same cost basis, but one has since skyrocketed in value while the other has not? Do the children get along? Or will a perceived slight fuelled by small differences in bequests ignite decades of repressed anger and frustration among family mem - bers? Perhaps it would be better to consider gifting the chil - dren equal shares of an entity that holds the entire art collection. The children could then manage the collec - tion (and weather any fluctuation in value) as co-own - ers. If a single painting were sold, the children would share in the proceeds of sale. Or if the children some day decided they can no longer maintain the collec - tion, it could be brought to auction as a whole, thereby increasing its marketability and value, especially if the children co-own the right to publicity of a famous col - lector (eg, a celebrity or other known entertainer). It may be the case that the collector would like to remove themselves from the determination as to the final destination of their collection altogether, and leave the choice entirely to the discretion of a trustee. The collector could leave a letter to make known their wishes as to the display, maintenance or distributions
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