Planning Ahead for Your Art

Are you a big art collector but are not sure how this factors into your estate planning? You could be leaving behind major problems for you beneficiaries that go far beyond simply passing on these art related assets. First of all, if you don’t have the appraisal work completed, your beneficiaries or your executor could be dealing with challenges such as estate fraud.

While the federal estate tax and gift tax exemption is $11.18 million per person, and estate taxes might not be an issue for most people, if you’ve accumulated a substantial volume of artwork over the course of time, ignoring the value of this art could lead to problems later if you don’t report it appropriately. If you don’t report the value of your art collection, penalties, estate taxes, fines and tax fraud issues could affect your loved ones.

Since the statute of limitations for tax fraud is essentially limitless, you want to do your homework well in advance. Even if the estate tax exemption amount won’t be triggered by your personal art collection, you want to have clarity and organization regarding how you intend to dispose of these assets and its overall value. This can help to keep the peace among beneficiaries and decrease the chances that your loved ones will become involved in an estate planning or probate related dispute. The first step to take is making an inventory. Make a list of every piece of art and its overall value. If you’re not familiar with the values, you can hire an art appraiser to determine the fair market value of the collection. In addition to leaving artwork to beneficiaries with the appropriate value percentages, you’ll also be informed about whether or not any estate tax issues arise.

A trust may be a better way to pass on your art collection. If you transfer your art collection into a trust, this protects the privacy of your estate and the artists involved, as well as the beneficiaries. Schedule a consultation today with a knowledgeable estate planning lawyer who can help you figure out what you need to do in order to best protect your interests.

Actor Hoffman Made Mistakes With His Will

Regrets wrong doing. Closeup portrait silly young man, slapping hand on head having a duh moment isolated on gray background. Negative human emotion facial expression feeling, body language, reactionI came across an interesting article recently about the actor Phillip Seymour Hoffman and how he made numerous mistakes in his estate planning that are going to impact his partner and kids.

I thought his story could serve as a cautionary tale.

Hoffman, who died of a drug overdose earlier this year, supposedly did not want to make “trust fund kids” out of his three children. That may be admirable, but the way he went about it will actually do harm to his long-time partner and kids.

According to the story on marketwatch.com, probate court documents reveal that Hoffman’s wishes were that his kids get no part of his $35 million estate and that all of it go to his long-time partner Mimi O’Donnell, the mother of his kids but to whom he was not married.

When a wealthy person dies, he or she can do one of three things: leave the money to their family; leave it to charity; or leave it to the IRS in the form of estate taxes.

Hoffman’s lack of planning maximized the IRS’s take with no benefit to his family or to charities.

While I understand the desire not to create “trust fund kids,” there are ways to do it so they do not become spoiled layabouts.

Now, about 40 percent of Hoffman’s estate over the first $5.4 million will go to the IRS because he and O’Donnell were not married. That’s $12 million.

Much of that could have gone to charities he cared about.

And the matter of no trusts for his kids? What about their education? He could have set up trusts to fund just that. Or trusts to fund medical costs if ever necessary. Or he could have set up trusts that kick in only if the kids accomplish certain goals or earn a certain amount of money on their own. Apparently, he did include his first child in his will, but not the second and third since they had not yet been born when he made out the will.

Another reason why updating wills periodically is important.

Estate Planning Is No Game, Especially When You Own A Professional Sports Team

While virtually everyone can benefit from having an estate plan of his or her own, proper planning is particularly important for people of means—for example, owners of professional sports teams. Let’s take a look at what happened following the death of three such owners.

Joseph Robbie
Joseph Robbie was a highly successful businessman and attorney. He also owned one of the most successful teams in National Football League history, the Miami Dolphins. When Robbie passed away in 1990, his estate was valued at slightly less than $100 million, nearly 50 percent of which was lost to federal estate taxes. This, together with bitter infighting between family members, forced Robbie’s family to sell the team at a fraction of its value—a result that could have been avoided through proper planning.

George Steinbrenner

English: George Steinbrenner's life, work clip...

George Steinbrenner 1930-2010 (Photo credit: Wikipedia)

George Steinbrenner, the owner of the New York Yankees, a team worth approximately $1.6 billion according to Forbes, passed away in 2010. However, at the time of his death, the franchise was 95 percent leveraged due to debt from construction of the Yankee’s new stadium. While this sounds like a recipe for disaster, Steinbrenner had the “good fortune” to die in a year when there was no federal estate tax. In effect, he saved his heirs approximately $600 million by passing away in 2010. In the world of sports, pundits often say, “It’s better to be lucky than good.” In Mr. Steinbrenner’s case, it would appear that this cliché rang true.

Ralph Wilson
Ralph Wilson died earlier this year. He was the sole owner of the Buffalo Bills. He never made public his intentions for the franchise, so it is unknown if ownership will transfer to his family members, or the team will be put up for sale. The result may wind up revolving around the issue of estate taxes and whether Wilson put in place a plan to reduce or eliminate payment of these taxes upon his death.

If he did nothing, his family may have to pay hundreds of millions of dollars in state and federal estate taxes. However, if he left the team to his wife, his estate would pay nothing, thanks to the marital exemption. There are a number of other estate planning tools he could have used to protect the family’s assets, together with the Bill’s future in Buffalo. Given how little time has passed since Mr. Wilson’s death, it’s simply too early to tell what will happen to his estate and the franchise.

To learn more about the estate planning issues associated with these professional sports team owners, click on the links below.

A Tale of Two Families

How Steinbrenner Saved His Heirs a $600 Million Tax Bill

Estate taxes may hold key to Bills’ future after Wilson’s death

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