Date: Fri 08-May-1998

Publication: Ant

Author: JUDYC

Quick Words:

EstatePlanning

Full Text:

Art Succession Planning

By Margaret Pomeroy Anderson

SOUTHPORT, CONN. -- When questions arise regarding what will happen to your

collection after you're gone -- don't worry.

A number of different ideas have been developed by bank trust departments,

financial planners, and major auction houses to handle your concerns. Does it

pass to your heirs? Do you leave it to a museum? Or do you sell now?

Whether one is an artist or a collector, it is important to think about what

options are available.

These options are collectively known as "art succession planning." On April 2,

BankBoston hosted a seminar at the Pequot Library to explore some of the newer

strategies. Vice president Catherine Tanzilli introduced the evening speakers

by giving a quick review of what she called "Estate Planning 101."

Afterward, well-known collector and benefactor Richard Manney and his partner,

Michael Mendelsohn, laid out their personal experiences and those of their

firm, CMBriddge, Ltd.

Often individuals leave a collection to their heirs with the belief that it

will be loved by its recipients in the same manner. But what if the heirs'

interest in the collection is purely monetary? Collectors may also have

confidence in their children's ability to divide an assemblage up amicably --

easier said than done. There are pluses and minuses to such a scenario.

An important part of art succession planning is breaking down the emotional

wall of the collector, which, when successful, has the best results for the

collector, the heirs, and the museums.

When this does not happen, a collection may be taxed as much as 55 percent and

sent off to auction to meet this expense. According to Mendelsohn, Christie's

and Sotheby's auction houses in New York City held sales last year alone

totaling more than $2 billion -- of that amount, more than 50 percent was

derived from the auction of items consigned from estates.

Gifts of art and antiques specified in a will may pass without problems to

designees; however, the value of the object(s) will be included in the total

valuation of the estate and consequently be subject to estate taxes.

Last November, for example, 58 works of art owned by Victor and Sally Ganz,

described as "the most important private collection of Twentieth Century works

of art ever offered at auction," were featured at Christie's. Before the sale,

each of the four art-loving Ganz heirs decided what they didn't want to hold

onto. All but one of the paintings were purchased, and, when combined with 39

prints, that single-owner auction totaled more than $200 million. The

financial implications of such a sale -- for heirs, auction houses and Uncle

Sam -- should give the collector pause.

If a charitable contribution is a serious option for a collector, professional

planners may be brought in. For example, CMBriddge looks over an entire

collection and makes arrangements to have it appraised. Their fees are based

on these valuations, and the firm has a list of desired works compiled by the

Museum Trustees Association in Washington, D.C., from data provided by member

museums. Once a match between a collector and a museum is made, a gift is

structured.

Depending on the donor's tax situation, a partial gift may be made in one

year. Any fractional interest can be deducted in successive years while the

donor is alive. The gift during lifetime does have tax benefits for the donor,

and any remaining fractional interest will be passed along to the museum at

the time of death -- the estate valuation and the contribution a wash.

Each item in a collection may not be of top quality. One strategy in gifting

an entire collection to an appropriate institution divides the collection into

three parts: One-third to be on permanent display, one-third to be lent or

placed in storage, and the remaining one-third to be sold in order to set up

an endowment for the collection.

This plan may benefit all concerned: the museum, the objects, and the

collector or artist. Mendelsohn described how a collector might use the tax

deduction even more creatively by purchasing life insurance or shares in a

mutual fund with the money saved.

Art succession planning is not just for million-dollar collections. Often,

artists themselves have the idea that they can donate their works and receive

a charitable contribution. Not so. An artist with a lifetime of work may not

know how to deal with his or her own collection, and may worry that heirs will

not know what to do either.

The entire collection might end up in storage, as was the case in a recent

lawsuit brought by the family of the noted African-American modernist painter

William H. Johnson (1901-1970) -- a situation wrought with inadequate

planning. After Johnson's death, his collection was stored in warehouse and

his works forgotten by the family for 15 years. When a foundation began

selling the collection to interested museums, however, the family sued for

ownership.

Proper planning can avoid such problems. A recent success story CMBriddge was

particularly excited about involved 82-year-old Florida artist Irving Trabich,

whom the firm discovered and whose life's work it subsequently matched with

the Florida Association Voluntary Agencies. A resulting one-man show,

catalogue, and promised future gifts were mutually beneficial.

We can also learn from the way Samuel H. Kress, of department store fame,

structured his donation of Old Master paintings. During his lifetime, he gave

many works to a number of smaller institutions across the country with the

understanding that they would be used as the foundation of a study collection.

Today, the Discovery Museum in Bridgeport, Conn., owns a charming group of his

Italian paintings, and Kress's name appears on museum labels across the

country, among them the National Gallery in Washington, D.C.

Because of thoughtful and thorough planning, Kress not only derived great

pleasure during his lifetime as a collector and donor, he also provided a

wonderful legacy for his heirs.