Building an art collection is a lifelong project—and an investment of time, passion, and money. Often overlooked is the importance of planning ahead how you wish to pass it on, whether as an inheritance to your successors or as a donation to a museum or organization.
Certain art pieces could even become the most valuable asset in a family’s estate. Likewise, there could be consequences in terms of taxes for those who inherit them. Besides, your successors will need to invest in the preservation of these illiquid assets (assets that cannot be easily turned into cash).
Senior Wealth Advisor Zaida Montalvo and Financial Planner Laura Torres—both members of the Popular One team of experts—have offered some important pointers on how to establish an effective succession plan for your artwork.
- Inventories are essential. Make one and keep it updated, like museums do. You should include appraisals, purchase documents, photos of the pieces, the location for each artwork, and their insurance policies, among other information. Marianne Ramírez Aponte, Executive Director and Curator of the Museo de Arte Contemporáneo de Puerto Rico (MAC, in Spanish), stresses the importance of inventorying collections and regularly appraising the pieces “so the values are up to date with the market”.
- Conversation pieces. Talk with your possible successors about their feelings and wishes to keep the pieces, since they may have a high sentimental value, in addition to their monetary worth. In the case of successors who are less experienced in artwork maintenance and care, they could turn to institutions like the MAC, where they offer curatorial services for companies or individuals, including artwork packing and conserving.
- You can do it now. If you wish to do a living donation of your pieces, make sure it would not adversely affect your compulsory heirs (meaning those who are recognized by law as having the right to inherit at least a third of the legal portion of your estate, also known as the “tercio de legítima” in Spanish).
- For the greater good. Likewise, while you are living, you could also bequeath your artwork to charitable entities or museums, and receive a tax deduction on your Income Tax Return under “Charitable Contributions”. This way, you can benefit from a tax reduction for the year you realize the bequest. According to Pablo Pérez D’Ors, Curator in the Museo de Arte de Ponce (MAP, in Spanish), the institution has specific programs for different kinds of donations. You could even purchase a piece with the intention of donating it to a museum.
- Outside the family. Donating your pieces to charitable organizations or museums will allow you to receive a deduction in the Decedent’s Estate Tax Return for Bequests for Charitable Purposes. This alternative is the simplest one for your successors, if you so establish it in your will.
According to the experts, if Puerto Rico residents are interested in leaving their art collections as a bequest through their will, they should seek advice from a tax attorney. This will help you comply with the provisions in the Puerto Rico Civil Code and be aware of any possible tax implications on the inheritance, either here, in the United States, or wherever your collection or artwork is located.
Our Popular One experts can help you plan your estate, ensuring that your wishes and objectives are fulfilled.
Banco Popular de Puerto Rico, its subsidiaries, and/or affiliates do not provide tax, legal, or accounting consulting services. If you require legal, tax, or accounting advice, you must request these services from a suitable professional.