What Will Happen to Your Art After You Die?
by Jeffrey P. Fuller, ASA, Accredited Senior Appraiser, American Society of Appraisers
What will happen to your art after you die? This is the question that many artists ask themselves. Many things can happen to the art after the artist’s death, depending upon how well the artist has planned for this event. An artist creates works of art during an entire lifetime. Some of these works of art will be sold. Inevitably there is a collection of works of art in an artist’s estate at the time of the artist’s death. These works of art will become a part of the artist’s estate.
A fair market value appraisal of all of the works of art in the artist’s estate must be completed so that proper estate taxes can be assessed to the estate. The executor of the estate will hire a certified art appraiser to appraise the fair market value of each work of art in the estate. The Internal Revenue Code defines fair market value as follows:
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 any compulsion to buy or sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includable in the 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 the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item whatever appropriate. (26CFR2.1 [Title 26 of the Code of Federal Regulations, chapter 1, part 2], section 20.2031-[b]).
An appraisal is the valuation of property by the estimate of an authorized person. The appraisal report should conform to the Uniform Standards of Professional Appraisal Practice promulgated by the Appraisal Standards of the Appraisal Foundation located in Washington, DC.
An appraiser is a disinterested third party witness who reports on the market. The appraiser’s fee should be based upon an hourly rate or on a fixed fee, and never based upon a percentage of the value of the estate.
To find a qualified appraiser, one may call a nationally recognized appraisal association such as the American Society of Appraisers in Washington, DC. One may also find an appraiser by means of personal reference or recommendation of local art institutions, or even by looking in the Yellow Pages under “Appraisers.” Beware of unscrupulous individuals, however, who refer to themselves as appraisers in order to get a foot in the door.
Fair market value is a specific concept of value defined by the Federal Government. There are three approaches to value: the cost approach, the income approach, and the market data/sales comparison approach. More often than not it is the third approach, market data/sales comparison, which is used by the appraiser in estimating fair market value of works of art in an artist’s estate. The appraiser will discuss in the appraisal report the most relevant market in which works of art by the artist are bought and sold.
The appraiser may ask the executor of the estate for the artist’s Schedules C (Business Profit and Loss), which the artist filed with his or her IRS Forms 1040 during the five years prior to the artist’s death. The appraiser may also ask for the past five years. To find market data, the appraiser may contact the artist’s galleries for records of any sales that may have been records for sales of works of art by the artist.
The appraiser will inspect every work of art in the artist’s estate. Each work of art will be described in the schedule description section of the appraisal report. Various attributes of each work of art will be noted by the appraiser, such as title or the work of art, description of the object, the date of execution, the medium/support, the size, where and how the work of art is signed, whether or not it is framed, the condition of the object, literature references where the work of art is cited, and an exhibition history. Lastly, after research, the appraiser will assign an estimate of fair market value to the work of art.
The appraiser will address the issue of blockage when appraising the fair market value of a large body of work by a single artist as of a given date of valuation. Blockage discounts of fair market value are common with the valuation of stocks. To arrive at an estimate of the blockage discount of fair market value of works of art in the estate, the appraiser may calculate the present value by using a unit sales, analysis implementing a discount cash flow analysis based on past sales of works by the artist.
Specific Tips for the Artist: To better position your works of art prior to their becoming part of your estate, a number of steps can be taken. Let someone you trust know as much as possible about your art before you die. If possible, prepare an oral history of your life and work. This can be done with a good friend asking questions about your life and art while the conversation is being tape-recorded. Another suggestion would be to make a videotape of yourself explaining the progress of your art throughout your life. Review a list of pertinent questions with a friend prior to taping. Then ask your friend to ask you those questions while the videotape is recording your answers. Watch the tape afterwards and add more to it if you wish. This may be the only document of its kind that will survive after you are gone.
It is not too late and never too soon to begin to sort through the art that you still own. Sort your art according to period executed and medium. Sign the works of art that should be signed. The works of art that you would rather not acknowledge should be discarded at this time so that inferior works will not remain within your estate. Again, do this with someone whom you trust who will become the executor of your estate or who will help the executor of your estate.
Inventory your work. A simple inventory system consists of a six-digit number beginning with the last two digits of the year in which the work of art was created. This is followed by a letter indicating the medium of the work of art, such as “P” for painting. This is followed by a three-digit number assigned consecutively to works of art made within the same year in the same medium. For example “98P001” would refer to the first painting created in 1998. This number can be written in pencil on the upper right hand corner of the back of each work of art.
Find art dealers to represent your work during your lifetime. To find an art dealer, look for those who exhibit works of art sympathetic in style to your own. Art dealers are in the business of selling art, which is what every artist hopes for his or her art. Keep track of your exhibitions and the collections in which you are represented. Assemble together all of the reviews of your works of art. Compile a curriculum vitae of your life.
In brief: Find someone you trust to oversee your art after you have gone. Put all of your works of art in your possession in order now. If the works of art in your estate have been maintained and good records kept, it is a much simpler task for the appraiser, and a less expensive one for the estate. It will make it easier for the estate to continue the task of managing the body of art you leave behind. In this way, you will live through your art forever.
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