The Collector’s Handbook, 10th edition is written by James Halperin, Gregory Rohan and Mark Predergast in conjunction with Heritage Auctions. Updated in 2016, it contains sections on administering, estate planning, evaluating and selling your collection. There are good references in the appendices as well. At 181 pages, there is a wealth of information and advice for collectors and their heirs on how to protect their investment.
There are discussions in several chapters about the importance of having your collection appraised for different reasons including insurance, planning, donation, selling, estate tax or division. It also mentions the importance of using professional and qualified personal property appraisers.
The book is available by free download on the Heritage Auctions website (registration required) or by hard copy for a nominal fee. I highly recommend taking the time to download and keep a copy of this handy reference book.
We don’t like to think about it, but there are several situations where our art, antiques and collectibles will be affected in a major way. Life’s events have a way of separating us from our possessions.
I would like add a fourth “D” to the list ….. disaster. Our beloved objects can be damaged or in the worst case scenario, destroyed. I discussed this subject in an earlier post titled “Protecting Your Valuables from a Disaster”.
Protection of your collection and planning for the future is essential. By having an inventory and professional appraisal, you can make informed decisions regarding insurance, donation, division or liquidation. At the end of every episode of the TV show “Strange Inheritance” they remind us “you can’t take it with you”.
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.