I'm really sorry. You and I are going to die someday but our collections will still remain. That is because collections do
not usually die. They remain, more or less, forever. Some of us collectors have artifacts that are thousands of years old. In fact, if you go into your yard
or nearby park and pick up a rock, chances are good that the object is over a billion years old. "Stuff" lasts
forever. People do not. So, what happens to your stuff hen you are gone?
A SAD STORY
Pete was an avid collector. He started collecting arrowheads in his dad’s fields when he was a kid and expanded his searches into artifact shows and auctions. Over the decades, he amassed an enormously
large and valuable collection of 16,008 American Indian artifacts. He loved Clovis and paleo points, copper and effigy pipes in particular. Pete didn’t think much of his mortality. His focus was on family, job and his collection. After he retired and the kids and grandkids grew up (and moved away), Pete and his wife Doris, spent their days on their hobbies, traveling and church functions. Pete
wasn’t very interested in Doris’s doll collection; Doris wasn’t interested in Pete’s Indian stuff. Both spent their time on their collections with minimal crossover. Doris didn’t know a Clovis point from a discoidal. Pete didn’t know a porcelain from a rag doll.
One day Pete was run over while walking on the sidewalk. The gal who hit him was 85 years old and lost control of the car after a kid ran into the street. The kid and the old gal were fine. Pete was not. He died. Believing that he would someday make a will, Pete delayed going to the family lawyer
and thus left Doris with a big problem. Since there was no will or even written instructions as to who would get what, Doris had to wing it. Among many other considerations (funeral, burial
plot, estate taxes, insurance, switching car and property titles, bank accounts, credit cards, stock investments, pension, etc.) Doris had to deal with Pete’s collection.
Pete’s 4th son, Willie, was 27 when his dad died. He, unlike the other three older sons and one
daughter, shared his father’s love of Indian artifact collecting. Pete and Doris assumed that the artifact collection would go to Willie since the other siblings didn’t give squat about the subject but there was a problem. Since Pete did no estate planning (and he did not put his collection into a trust which would avoid probate), the collection had to be included in Pete’s probate estate. To her horror, Doris learned that under state law, when someone dies without a will, one half of the estate goes to the surviving spouse and the other half goes to the children in equal shares. The biggest problem was, how do you divide an artifact such as the bird pipe into equal shares? To find a value for each item, Doris had to hire an appraiser (at the cost of 10% of the value of the collection) to inventory and value the collection. Pete’s buddies, at the artifact club, though knowledgeable, did not qualify by IRS standards to appraise collections which they would have done for free.
Accordingly, Doris had the daunting task of listing and evaluating all the 16,008 Indian artifacts. Each artifact required a description, including how, when and where it was acquired and what money was spent for its purchase. Pete kept no inventory, no notes, few receipts. He just filled drawers and frames with his beloved artifacts. Some of the artifacts where purchased for considerable sums. For example, the Hopewell bird pipe cost $2500.
Doris had to hire a private collections manager at the hourly rate of $125 an hour to list and organize the collection. She thought that Pete would rather have given the collection to the local
museum but they refused to accept it. Without records, the artifacts might qualify for NAGPRA (Native
American Graves Protection and Repatriation Act) or ARPA (Archaeological Resources Protection Act)
considerations resulting in fines and considerable paper-work for the museum and staff.
“No thanks” they said.
Pete was turning in his grave. The reason was that several of his children, learning there was a valuable collection, instantaneously became collectors of Indian artifacts and demanded their share from the plan administrator, their mother. Of course, each child demanded their “equal” shares (which were not equal). Each demanded more of ‘their’ share because: 1. Dad loved me more, 2. Dad loved
you more so I deserve more compensation, 3. I need money more than you. 4. I’ve been sick and need
the money for drugs. 5. I am well but I need drugs too. 6. Ramón isn’t paying child support and we
need money for Disneyworld...etc. In fact, after searching the Internet sites, many of the children were absolutely certain the value of the collection was five times the actual appraisal and would increase dramatically in the future.
The collection could not be immediately sold The collection could not be immediately sold or gifted because of the greedy fighting children. The
kids began to pick and complain. Families took sides. Two of the sons hired attorneys. So did the daughter’s estranged husband, Ramón (who was trying to get more money in the impending divorce proceedings). Claims in the probate court were made drastically increasing everyone’s legal fees. Willie was left out (he was not the complaining type) and Doris could not cope with the feeding frenzy.
She received 4 or 5 calls every day. The probate process and related litigation between family members intensified. The collection complicated matters. Doris paid $14,000 (10%) for appraisal and $7,600 for the collection manager’s services because the children could not agree on anything. To add insult to injury, some of the children went to Court and actually challenged the appraisal Doris received. They almost forced her to hire another appraiser. The Probate judge finally made a ruling that the value of the collection was $149,000 after a hearing attended by four attorneys. In later hearings, the children could not agree who would take which artifacts, so the judge ordered an auction.
Money was getting tight and the lawyers’ fees were eating up the estate. In addition, her lawyer told her that as the administrator of her husband’s estate, she had the fiduciary duty to her children (including the ones who no longer get along with her) to protect and insure the collection or she could be held liable by some of her children for any loss. She had to keep the massive collection locked in a couple of safes. These costs were another $8000.
Finally, after 18 months of anguish and lawyer fees, Pete’s estate was settled. His collection went up for auction (not to Willie) resulting in $82,000 of proceeds. Doris used those proceeds to reimburse the estate for the $33,000 she spent on the collection appraisal, management, insurance, storage, etc. The auction house took a big chunk
of the value of the collection and “because of the recession” they said, “bid prices were unrealistically
low”. The children were still at each other’s throats and demanding more money. Two even accused Doris of holding out on them. Just as things started to calm down, Doris got government letters asking about past income tax issues related to the collection. One was Federal, the other was State and though Pete’s estate did not approach
the exclusion limits, the bureaucracies did. To make matters worse, a letter from the US Department of the Interior was asking about some of Pete’s artifacts which they believed were originally found on Federal lands. A criminal NAGPRA investigation was being initiated and they had a few questions they wanted to ask Pete and Doris!
There is an old saying, “death is not the end, its litigation and taxes”.
A COLLECTIONS DISPERSAL PLAN
What Pete did not have was a Collections Dispersal Plan (CDP). He had left no instructions, will nor did he plan a way of navigating through the tax, legal and regulatory traps. As a result, Pete’s collection, rather than being
an asset to his loved ones, was broken into pieces, sold off at low value and served as a psychological as well
as a financial wedge etween family members. It nearly destroyed Doris and it caused irrevocable damage to the family. Even though most of us do not have large estates or collections the size of Pete’s, we still may potentially share the same problems.
A CDP requires several issues that must be correctly met in order to be successful.
You should have a written plan of which all family members must be aware. A legally executed will is ideal for this purpose. Because of the risks, hire a lawyer to do these documents. Do not do them yourself to “save money” (it may
just be the opposite). Sometimes it helps to have a signed, notarized letter of intent or instructions as to what should be done with your collection. Make sure this letter works in concert with your estate planning documents. A
good time to let the family know is when you have a family function. If everybody is over for Thanksgiving dinner,
mention it after dinner. Have an actual sit down and read the letter to all. Give everyone a copy so there will
be no misunderstandings later on. You don’t have to die the next day. Just let everyone know of your wishes. This
will prevent a lot of future in fighting.
You may want to establish your desire to give gifts. If Willie gets your collection, then tell everyone about it and give Willie ownership (not necessarily possession) of parts of the collection each year. So long as the value is below $14,000 annually, there are essentially no estate/gift taxes. Do it in writing so it is official and so the rest of the children will not challenge the gifts after you die.
Willie can collect the items upon your death. You keep them until. If you include your collection in a will, no artifacts can be distributed or removed from the house (or bank vault) until the case is probated or until every person named in the will gives their written consent. Otherwise, taking items before the estate is closed can cause a problem. Remember, unless there are instructions to the contrary, the executor needs to maximize the return on all sales. He or she cannot sell or gift the collection to Willie for free or at a below market price unless instructed in a will. If your will states that Willie gets your stuff, then it cannot be sold unless the estate is broke and has other obligations.
2. YOUR COLLECTION:
You really should know what you have. Complete a written and photographic inventory and inform your spouse, responsible family members and estate planner. Let them know what you have. Keep all papers as to location acquired, date, purchase price (receipts) and description in case there is a NAGPRA/ ARPA issue or accusations of wrong doing (e.g.” did you dig that pot up from an Indian Reservation?”) Receipts of cash paid for artifacts may be used to reduce the taxes your estate may have to pay. Keep all evidence of their value. This will help with appraisals. You can’t use eBay or auction houses ads of similar items since the published asking prices are made-up and seldom paid on a “buy it now” basis.
Keep the artifacts safe. Don’t let them bleach in the sun, get ruined from a leaky roof. Beware of visitors
and workers who enter the house to repair or clean. Check their backgrounds. Relics are small and can often
“walk” out the door. Don’t leave them lying around to be casually picked up.
If you are going to insure the collection you will need a legitimate appraisal. This may cost up to 10% of the collection’s value. Remember, the value of a collection is seldom as high as the money spent to acquire the relics. Even though you spent a lot of money on this or that artifact, auctions or private sales can reduce 30-50% of the relic’s value in commissions, fees, shipping, insurance, permits, etc. You may love your
collection and feel it is very precious but others will take an indifferent view of your stuff. It will have no emotional value to them.
3. BEWARE OF TAXES
At this time, there are no federal taxes on estates less than $5,450,000. Most of us don’t have to concern ourselves about the federal government. State taxes are a different matter. Each state differs in the thresholds
and amounts of the taxes. Some states have no estate taxes; others impose taxes of various amounts. There are
mechanisms (e.g. certain trusts or exemption planning) that can reduce this tax but you must have the paperwork
done perfectly and to do this, a local lawyer may be consulted. As mentioned above, avoid the do-it-yourself internet lawyer services (or low cost lawyers- you get what you pay for). The documents that the Internet services provide do not adequately accommodate planning for collections. Use them at your peril. Ask around and check carefully.
4. DONATIONS & GIFTS
Donations to a non-profit organization (e.g. church, school or museum) must be reported on your estate’s tax filing forms. Amounts in excess of $5,000 require you to file a special
IRS form. In addition, amounts in excess of $5,000 for a single item must have a legitimate
appraisal to be deducted. See IRS Publication #526 (IRS web site).
If you are going to report to the IRS (recommended for gifts in excess of $14,000 per year per person-must be reported), you should get an appraisal, especially if the person you are gifting to will sell the piece later. This will help you establish the value of the
gift for estate purposes and help the recipient value the piece in a subsequent sale. If you cannot establish the value on the date of the gift, the IRS has been known to treat the entire sales price as a taxable capital gain. Appraisals may be audited by the IRS advisory panel. In 2012 only 51% of all appraisals audited, were accepted by the IRS as accurate. Select your appraiser carefully. Make sure they give you a “qualified appraisal” under the IRS rules and that your accountant files the gift tax return correctly. If you know of several names of professionals who do this work, make a note of their contact information in your inventory papers.
As far as gift taxes, the government actually gives you a bit of a break. In 2016, the government will not tax you on the first $5.45 million of estate gifts you make during your lifetime (exception: gifts to one person over $14,000 annually can be taxed). However, even if you will never give away this much (or die with this much), many estate lawyers advise filing a gift tax return during the year of the gift to document the value of the gift in the case there are estate tax problems later (such as Congress lowering the limit to $1,000,000, etc.) Three tax years after you file a correct gift tax return, the IRS will not be able to challenge the value of the reported gift.
Donations to museums and Universities are tricky. Some museums will accept your collection with open arms. Others will be picky since it costs the museum (staff time, storage) to curate each and every artifact. No item can come from a grave or federal/tribal land. You must supply information of where you foundpurchased the artifact and provide a statement from the seller/dealer as to the provenance of the relic. Some museums require a chain of ownership or a documented history of the relic if acquired prior to 1970. The concern is about “looted artifacts” covered by the 1970 Unesco Convention which prohibits trade in illicitly exported cultural artifacts. Your executor must prove all this to the satisfaction of the museum.
Forget the thought of requiring the museum to sign an agreement to” keep your collection in part or whole forever”. Rarely will a museum sign such an agreement because it restricts their flexibility. A new director may someday want to trade or sell your collection. There are cases where the museum just tosses out the artifacts (see Greg Perino and the Gilcrease Museum). If the museum does actually sign an agreement to keep your collection and then disposes of it in 50 years, who will be around to make a claim or file suit to stop the transfer? No one.
Museums will not make appraisals. This you have to do independently as mentioned above. Be sure your executor gets a receipt for the items from the museum including a copy of the inventory. This has important tax consequences.
5. SELL IT
The most effective way of dispersing a collection is to sell it. There are numerous ways to do this. Obviously, what your family will want is the greatest income from the sale with the least effort in time and money.
Artifact dealers will buy whole collections. They often do the appraisals and generally give the estate 50%-60% of the appraised value. Then they move the collection out and sell it. The reason for the high premium is that the dealers must expend time and money to sell each piece.
Auction Houses will take collections or single items and sell them. Small items will cost your estate 25%-50% of the money generated. Large collections or expensive artifacts usually cost the estate 10%-25% to liquidate. Be sure to ask about reserves, rules, prices, payment schedules, etc. Auction houses vary. Remember, an auction house
must spend money for staff, mailings, advertisements, insurance, shipping, etc. They also charge the buyer a fee. Be sure to establish a “reserve fee,” a minimum price you will accept for the artifact. Be realistic. If you price your collection too high, no one will touch it.
Consignment shops will sell your artifacts for usually a 50% cut. They will take the collection and return some of the money it generates in sales. These shops have varied rules so check them carefully. Classified ads can generate the best return on
the sale of a collection; however, you must spend money for the ads, answering the phone, having a period of viewing, cash checks, etc. This can be done in the local newspapers (expensive) or on Internet sites such as Craigslist.com (cheap). Rarely will a customer buy artifacts unseen and you may have to take photos and list them. Sometimes inviting prospective customer-strangers
into your house has its security and convenience issues. Never do this alone.
EBAY drop off' stores present an good opportunity to sell a collection. Again, check the rules and establish a reserve (a price
level for which you will not sell). You drop off the collection and the store will write up a description, take photos, advertise
and ship the artifact to buyers. You get a check. You can sell by auction or "buy it now" classifications. eBay stores usually
take a 50% commission more or less. You can sell on eBay personally but this requires much time and energy.
Garage sales would be your last ditch effort. You get strange people coming to your "garage", you must dicker over the price, you will have to place expensive ads in the newspapers or Internet sites like "garagesales.com" or place "sale" signs around the
neighborhood. It takes a lot of time but you can eventually move the collection.
WHAT SHOULD YOU DO?
Don't do what Pete did. Be proactive. Have a well executed will. Write up instructions. Keep a detailed inventory. Save receipts. Keep a provenance of your artifacts. Let your family know of your wishes. If your collection is monetarily substantial, contact an attorney or financial planner for advice. Pregift to family members as a way of preventing gift-estate taxes (the rules and amounts may change slightly in 2016 and later). Let your spouse and children know all about your collection. Get rid of those artifacts that could be interDon't do what Pete did. Be proactive. Have a well executed will. Write up instructions. Keep a detailed inventory. Save receipts. Keep a provenance of your artifacts. Let your family know of your wishes. If your collection is monetarily substantial, contact an attorney or financial planner for advice. Pregift to family members as a way of preventing gift-estate taxes (the rules and amounts may change slightly in 2016 and later). Let your spouse and children know all about your collection. Get rid of those artifacts that could be interpreted as illegally collected. Place a "C" (copy) or "R" (reproduction) on those pieces which are modern copies
or reproductions (fakes). Check your local laws about estate taxes. Do all of this before you die. Remember: Our lives are finite. They will eventually end. Our collections, split-up or whole, will go on forever.
Ben Neiburger is an estate lawyer practicing in Elmhurst, Il. E. J. Neiburger is past curator of anthropology at the Lake County
Museum. He practices dentistry in Waukegan, Il.