Putting Personal Property, Artwork, and Collectibles in Your Trust

In previous blog posts, we've discussed putting assets into your trust - that is, funding your trust. We've even talked in detail on how to fund your trust with real estate and any financial accounts you might have. Today we're capping off that discussion with everything else that will be funded into your trust - your personal property, artwork and collectibles.

No funding meeting with our clients is complete without a discussion about their personal property – namely, the items they have but don't necessarily have a title to like they would with real estate and bank accounts. Your "Untitled Property". This includes just about everything you own like tools in the garage, pictures on the wall, your furniture, appliances, books, clothing, jewelry, and the list goes on.

Generally speaking, since you don't have a title to these types of assets like you do with real estate, the way we get them into the trust is by assigning your interest in the property to the trust. What does that mean? It simply means another form that is included with and made a part of your trust, wherein you are essentially saying, "my personal property is to be included as a part of my trust estate." That assignment gets signed when you sign your trust and can be updated as time goes on if you wish to keep it current with a specific list of assets. However, most of the time, a general assignment using general language, such as "all my furniture," is sufficient to show you intended to hold your personal property in your trust. These assignments can be called different things: an Assignment of Property or a Schedule of Personal Property for example, but the content will be similar.

Lastly, there are some personal items that you may wish to be more specific about when funding your trust with them: artwork and collectibles. However, the process is going to be the same as other untitled assets, assigning your interest to your trust. There are a couple reasons we might want to be more specific. The first of which is to make it clear that a collectible or appreciating asset like artwork, is included in the trust, and distributed by the trust in order to preserve a stepped-up tax basis on the sale of that asset by your heirs. As a quick refresher, a capital gains tax is a tax on the difference between what you purchased an asset for and what you sold it for: the gain in value being taxed. If you were to gift artwork for example, and the recipient turns around and sells the artwork, then they will pay taxes on the gain between what you purchased the art for and what they sold it for. However, if you kept the artwork during your lifetime and the recipient instead received it as an inheritance before selling it, then their capital gains tax is calculated based on the value of the property as of your date of death (when they inherited it) and what they sold it for. Their capital gains tax basis "stepped-up" to the date of death value rather than staying as your date of purchase value. Making sure appreciating assets like artwork is in your trust ensures the preservation of this step-up in basis without losing potential gains to probate court fees.

Additionally, another reason you may want to be more specific about artwork and collectibles is because this information is invaluable with respect to the registration of copyrights, challenging fakes, insuring their value, and reporting lost or stolen collectibles. Fake artwork and collectibles is a big problem, especially when it comes to pop-culture items so we should make sure we have an inventory of your base-set Pokémon cards with the Fossil and Jungle expansions included. We don't want that mint-condition Charizard to get lost or turn out to be a fake.

All joking aside, when it comes to specifically identifying artwork and collectibles in your documents, the more detailed the better. This includes an inventory list of each piece, the creation date, the medium, a history of where the piece came from or where it has been exhibited, and an approximate price list with a suggested retail price or appraised value. There's more that can be included here, but we'll list those in detail in a blog linked in the description below.

A more detailed list of what to include in a potential inventory is:

·         Name of each artwork piece and their creation date;

·         Details on the creation of each piece such as medium, dimensions, the technique, meaning, historical information, etc.;

·         Expenses incurred in either creating or procuring the piece;

·         Price list with suggested retail price or wholesale prices of unsold works;

·         History or details regarding the exhibition, loaning, leasing or sales history of each piece of artwork;

·         Copies of and relevant agreements, contracts, deeds of gift, copyright registrations, etc.;

·         Publicity regarding any of the pieces in general or about the artist(s) to assist with retail or appraisal values;

·         Circumstances of and perhaps police report for any lost or stolen artwork;

·         Whether any pieces are from a limited run or series, including the piece’s number and total produced; and,

·         The artists’ signature(s) on each of their works.

This is, of course, not an exhaustive list, but is intended to help with the identification and classification of any artwork or collectibles that may be included in one’s estate.

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