You may have seen the fairly new television series on Bravo titled “Untying the Knot”. It features a prominent divorce mediator helping couples split up their joint assets.
As part of the process, appraisers are brought in to value the personal property. The level of value may vary slightly by state, however in California the appropriate level is “Fair Market Value”. For television purposes, the appraisers are verbally reporting the values. In real life, a written appraisal report must be provided. It is important to choose an impartial and credentialed appraiser who may be called to testify at formal mediation or court.
In most cases, property owned prior to the marriage is separate and retained by the individual. Individuals with large collections or family heirlooms may want to consider having their items documented and appraised as part of their pre-nuptial planning.
As an appraiser, I cannot give legal advice. Please consult a professional attorney.
Kathi Jablonsky, ISA CAPP is a certified appraiser of personal property designated in Antiques and Residential Contents with the International Society of Appraisers. She is based in Southern California and serves the San Diego and Palm Desert regions.
As an appraiser, I receive calls daily from potential clients saying they have an antique to be evaluated. If the caller is in their twenties, they may be speaking about something only 30 years old. On the other hand, if I ask a room full of senior citizens how many of them think they are antiques, the majority of people in the room raise their hands. It’s a matter of perception.
Although we may see varying descriptions, there is a U.S. government definition for an antique. Guidelines were originally established by the U.S. Customs Service for import tariffs. In the Tariff Act of 1930 an antique was defined as an object made before 1830, after which mass production became common. In 1993, Title VI of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), also known as the Customs Modernization or “Mod” Act, became effective. These provisions amended many sections of the Tariff Act of 1930 and related laws. Thus, there is a rule of 100 years old to describe something as “antique”.
Kathi Jablonsky, ISA CAPP is a full time personal property appraiser designated in Antiques and Residential Contents with the International Society of Appraisers. She is based in Southern California and serves the San Diego and Palm Desert regions.
Insurer USAA posted an article titled “Are Your Prized Possessions Protected?” explaining the basics of homeowners insurance coverage and when valuable personal property insurance might be needed. Antiques, fine art, silver, jewelry and several additional items can be covered under a specialized policy. Included in the article is a list of steps to follow to get the most protection:
Check your current coverage. Before getting an additional policy, review your homeowners or renters policy and fully understand what the policy covers and what it doesn’t.
Update the appraisals. Keep appraisals current (at least every five years), and notify your insurance company if the value changes. Appraisals should be done by a certified professional appraiser with expertise and credentials in the type of item you are insuring.
Keep all documentation. Proof of ownership is required when you report a loss, so the more paperwork you have — receipts, appraisals, financing statements, and repair or cleaning bills — the easier it will be if you have to make a claim.
Details matter. Provide your insurance company with a full description of each item. For example, if you are insuring a diamond ring, you want to list the cut, clarity, carat, color, number and measurements of the diamonds, and the type of gold — the more detail the better.
Do your part. Keep your valuable possessions properly cleaned, maintained and safely stored to avoid damage, loss and theft.
An important part of special coverage is to have your valuable items appraised by a qualified appraiser, and updated every 5 years.
The IRS has released a list of tips to assist with obtaining tax deductions on charitable contributions. For non-cash contributions with a fair market value of $5,000 or more, a qualified appraisal is required by a “Qualified Appraiser”. See tip #9.
Giving to charity may make you feel good and help you lower your tax bill. The IRS offers these nine tips to help ensure your contributions pay off on your tax return.
If you want a tax deduction, you must donate to a qualified charitable organization. You cannot deduct contributions you make to either an individual, a political organization or a political candidate.
You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.
If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event or other goods and services.
Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.
Fair market value is generally the price at which someone can sell the property.
You must have a written record about your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution. A telephone bill meets this requirement for text donations if it shows this same information.
To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.
You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.
If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.
For more information on charitable contributions, see Publication 526, Charitable Contributions. For information about noncash contributions, see Publication 561, Determining the Value of Donated Property. Forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
I frequently receive calls regarding valuation for non-cash charitable donations, so I’d like to address questions from an appraiser’s point of view. I cannot give tax advice, so a consultation with the appropriate professional is recommended.
Prior to accepting the assignment, the appraiser will ask a number of questions:
What do you have to donate? How were the items acquired? Which charity are you donating to and is it a related use? When is the date of donation? Is it a 100% interest and unrestricted donation?
When is an appraisal required?
A Qualified Appraisal is required if an item or group of similar items has a Fair Market Value of $5,000 or more. It is also required if an item is worth $500 or more and is in less than good (e.g. poor) condition. The appraiser will also complete the appropriate sections of IRS Form 8283. The reporting requirements increase as the value of the donation increases.
Which value is used in donation appraisals?
The appropriate level of value for most tangible personal property donations is Fair Market Value defined by the Income Tax Regulations 1.170A-1(c)(2) as,
“The price at which the property would change hands between a willing buyer and a willing seller, neither being under compulsion to buy or sell, and both having reasonable knowledge of all relevant facts.”
Many times this is what the item would sell for in its current used condition at an auction, estate sale, garage sale or wherever the appropriate market is for each item. There are special rules pertaining to business inventory and artist’s donating their own work. These are considered ordinary income properties and the deduction may be limited.
The IRS has established the following requirements:
A Qualified Appraiser has earned a professional designation from a recognized professional appraiser organization for demonstrated competency in valuing the type of property being appraised, or has met certain minimum education and experience requirements.
The individual regularly prepares appraisals for which he or she is paid.
The individual demonstrates verifiable education and experience in valuing the type of property being appraised.
The individual has not been prohibited from practicing before the IRS under section 330(c) of title 31 of the United States Code at any time during the 3-year period ending on the date of the appraisal.
The individual is not an excluded individual.
Choose a 3rd-party independent appraiser that has no connection to the item, donor or donee. For example, the dealer who sold you the item would be an excluded individual.
Can the donor or donee tell the appraiser what values to place on the objects?
Absolutely not. The appraiser must independently arrive at a value through research of current market data. The appraiser is subject to stiff penalties from the IRS if the valuation is too high or too low.
What about the cost for storage, moving, cleaning, installation or maintenance of items donated?
These costs are not part of Fair Market Value and cannot be included on the appraisal. Consider donating money to cover some of these costs.
When does the appraisal need to be completed?
The appraisal should be completed no more than 60 days prior to the donation or anytime after, up to the deadline when the tax return is due.
Can the charity pay for the appraisal?
Usually the donor pays for the appraisal. If the donee pays, then the cost of the appraisal should be subtracted from the total amount of the donation.
There are many situations when an appraisal of personal property is needed for estates. If someone calls and says “I need an estate appraisal”, a few additional questions should be answered so the proper service can be provided. Depending on the circumstances, they may need an appraisal of the entire residential contents or just a specific list of items. The intended use of the appraisal will guide us in the right direction:
ESTATE TAX: Required by the Internal Revenue Service and many states. If the total estate is over a certain value threshold (currently at $5 million), then everything needs to be appraised and valued as of the date of death (or alternate date). The IRS requires a room by room inventory of the complete residential contents. Items of low value under $100 Fair Market Value can be grouped together with similar items. Many states follow the Federal level, however several states have a much lower threshold requiring an appraisal.
EQUITABLE DISTRIBUTION: To divide up items from the estate equally among the heirs. This may require an appraisal of the total contents or a specific list of items, depending on the needs of the estate and the heirs.
ESTABLISH A BASIS: Valuing assets or a collection at a specific point in time can provide a benchmark so that the basis can be stepped up to the current value as of the date of death. It can provide a comparison at a later time to illustrate growth or decline in value.
PROBATE: The probate court will require an inventory and appraisal of the estate assets.
TRUST INVENTORY: In California, the majority of estates are part of an established trust. An inventory and appraisal establishes the value of the property at the time it became subject to the trust.
ESTATE PLANNING: Planning for the future of an estate or collection is also important. An appraisal can provide a valuable tool so that owners can plan in advance for tax, distribution or donation. It can provide peace of mind for collectors to know how their treasured objects will be handled after they are gone.
In California, the appropriate level of value for each of these situations is Fair Market Value:
Fair Market Valueis set forth in IRS Treasury Regulation 20.2031-1 which states that, “The Fair Market Value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under compulsion to buy or sell, and both having reasonable knowledge of relevant facts.
The Fair Market Value of a particular item of property includible in a decedent’s gross estate is not to be determined by a forced sale price. Nor is the Fair Market Value of an item of property to be determined by the sale price of an item in a market other than that in which such an item is most commonly sold to the public, taking into account the location of the item wherever appropriate.”
As an appraiser I cannot give legal or tax advice, so a consultation with the appropriate professional is recommended.
Choosing an appraiser that is impartial (not interested in buying or selling the estate), credentialed, USPAP compliant and IRS qualified is very important. It’s also recommended to hire an appraiser who is knowledgable about regional values and state laws including the correct wording for the document.
2012 marks the 50th anniversary of the American studio glass movement. To celebrate this occasion, over 165 museums, universities and arts organizations throughout the U.S. are presenting exhibitions or programs relating to contemporary glass. The movement began at the Toledo Museum of Art:
In 1962, the Studio Glass Movement was born in a garage on the Museum grounds. Harvey Littleton, a pottery instructor, received the support of then-director Otto Wittmann to conduct a workshop to explore ways artists might create works from molten glass in their own studios, rather than in factories. A prototype “studio” furnace was built in the TMA garage, but for the first three days of the workshop all attempts to fuse molten glass failed. Finally, Dominick Labino, then vice president and director of research at Johns Manville Fiber Glass, showed up with advice on furnace construction, and with glass marbles that melted. Harvey Leafgreen, a retired glassblower from Libbey Glass, was then able to demonstrate his craft. Later that summer, many participants returned for a second workshop.
As an appraiser specializing in art glass, I am always looking for opportunities to view art glass and gain education. Last Fall I attended the Sculpture Objects and Functional Art (SOFA) Show in Chicago. I enjoyed the opportunity to view contemporary art glass and meet many artists, including Lino Tagliapietra.
The Art Alliance for Contemporary Glass (of which I am a member) has a calendar of events and celebrations for 2012 at http://contempglass.org/2012-celebration/events. While you’re at the website, check out “A Visual History of Glass” and “Featured Glass Art Videos”.
The Glass Art Society is having their annual conference from June 13-16, 2012 in Toledo, Ohio, the birthplace of studio glass.
The Corning Museum of Glass is having their annual seminar on glass October 18-20 titled “Celebrating 50 Years of American Studio Glass” in conjunction with exhibits featuring Harvey Littleton and Dominick Labino, founders of the studio glass movement.
If you have a chance, I encourage you to attend some of the programs and special exhibits celebrating the studio glass movement this year. It is a rare opportunity to view such a large amount and wide variety of contemporary art glass.
When it comes to art and cultural property crime, we’re used to hearing about high profile thefts at museums. According to the Art Loss Register, over 50% of thefts occur from private collections. There are hundreds of thousands of reported art crimes each year, not to mention those unreported. This includes theft, fraud and looting as well as trafficking across state lines and international borders. The category of art crime is rather broad and can include fine art, antiquities, collectibles, musical instruments, antiques, pottery, glass, silver, books, documents, textiles and much more.
In the March issue of the FBI Law Enforcement Bulletin, there is an excellent article discussing many of the issues relating to worldwide art crime: Protecting Cultural Heritage from Art Theftby Noah Charney, Paul Denton, and John Kleberg. It discusses how art crime on local and international levels potentially funds organized crime and terrorist activities. It also discusses what law enforcement agencies around the world are doing to combat this problem.
The FBI has an Art Crime Teamwith 14 special agents. They conduct investigations and manage the National Stolen Art File, a search-able database of stolen art and cultural property objects. An FBI Agent spoke to an appraisers meeting I attended a few years ago, and stated that 80% of the signatures on celebrity and sports memorabilia were fake. Buyer beware!
Personal property appraisers need to be aware of these issues, and exercise due diligence on appraisal assignments. Owners may be unaware they have been given or purchased a suspicious object with an unclear title. Items with questionable provenance or title may have a lower value, and ownership rights are subject to challenges and claims.
The New York Times recently published an article titled “The Specialized Art of the Appraisal”. It stresses the importance of keeping tabs on your collection, knowing what you have and the values.
“Whether it is fine wines, vintage movie posters or abstract paintings, some people spend a great deal of time and money compiling collections of valuables. Even if they’re collecting out of personal passion, rather than as an investment, it makes sense to keep tabs on how much the collection is worth.”
An appraisal is an essential tool to accomplish this goal. The article goes on to explain the importance of selecting the correct appraiser for the job, checking the appraiser’s qualifications and additional helpful tips.
“Personal-property appraisers aren’t licensed, but reputable professionals are affiliated with at least one of the three major appraisal organizations: the Appraisers Association of America, which focuses on personal property; the American Society of Appraisers, which includes specialists in real estate and other areas; and the International Society of Appraisers. ”
Credentialed members of these three associations have been tested in their specialty area and the Uniform Standards of Professional Appraisal Practice (USPAP), abide by a Code of Ethics and have to requalify every five years.
Fire season is upon us in California and it’s time to be prepared. As a personal property appraiser, I’d like to offer the following tips on protecting your valuable possessions prior to a disaster:
Photograph and inventory the contents of your home. You can do it yourself or hire a professional home inventory company.
Check with your insurer to see what your policy covers, whether you have an Actual Cash Value or Replacement Value policy and what might need to be appraised. Many items are not covered on standard insurance policies, such as breakage and earthquake damage. You may need to purchase an extra policy for valuable articles.
Antiques, collections, art and other high value personal property should be appraised for replacement value.