Many people with high net worth and substantial art collections have long been concerned about the 40% estate tax. Some temporary relief was provided from this substantial number with the 2017 Tax Cuts and Jobs Act, meaning that it increased each taxpayer’s ability to make tax-free gifts before 2026.
The lifetime exemption was raised from $5 million to $13 million for individuals and double for couples. These lower tax rates may have eliminated alternative minimum tax or reduced the number of income tax brackets, but some of these changes will expire at the end of next year in 2025. This makes it extremely important for anyone with substantial assets, including an art collection, to work with a qualified asset protection planning and estate planning attorney.
Some art collectors may be concerned that if the exemption levels go back to 2017 numbers, then any gift taxes or penalties could apply for gifts above $5 million in value. However, keep in mind that the IRS in 2019 issued some anti-claw back rules that eliminate this possibility from affecting your individual estate plans. Artwork can appreciate much like bonds or stocks in someone’s estate portfolio.
You may wish to think about your estate plan as incorporating high value items of art. It is also valuable to work with someone who is familiar with assets and collections such as art to ensure that you have an appropriate strategy and plan for protecting these now and in the future. Our estate planning attorneys in Pasadena will help you craft your own plan based on your individual goals and any existing state or federal rules/exemptions.
