When Your Treasures Have More Than Sentimental Value

What would you bring to Antiques Road Show? It’s a popular show combining history and treasure hunts. And who wouldn’t want to stumble upon a treasure? You’ve heard the stories of the family who had a garage sale “ugly” bowl perched on their mantle for years – sold for $2.2 million at Sotheby’s, or the person who bought an old folded manuscript at a Pennsylvania flea market for $4 –it went for auction for $2.4 million as one of the 25 or so remaining official copies of the Declaration of Independence (500 were printed).

The host, Mark I. Walberg, not to be confused with the actor with ripped abs, talks about appraising art, antiques and collectibles – Note: The values on the show are “estimates,” not appraised values. What generally enhances an item’s value is its authenticity, rarity, condition and providence – it must be true, one of a kind, rich with TLC, and have a story. The item retains sentimental value; however, if lacking any of these criteria, the item’s economic value diminishes. And appraisal is an art unto itself requiring knowledge and experience that goes way beyond a weekend certification program. Many of the nation’s best appraisers are second and third generation.

Valuation of personal property occurs in many aspects of personal finance. Say for example, you’re the trustee of your parents’ estate. They recently passed and you’ve got the Sisyphean task of managing their estate, keeping the beneficiaries outside the fence as you clear the barn and prepare for distribution, and adhere to the legal and accounting requirements. Joy Berus, of the Berus Law Group of Newport Beach, CA, presented “Art Law – Everything You Have Ever Wanted to Know” to the Estate Planning Council of Northern Nevada. I’ll share several areas involving valuation that may trigger some ideas for you, including hustling up your team of experts.

1. Why get you “stuff” valued? Valuations are needed in instances of division or selling, or insuring property. These include estate tax and equitable distribution, divorce, donation or gifting, insurance, or outright selling.

2. I don’t have anything of significant value, so why worry? You may be surprised how quickly an estate value grows as you inventory assets, or the non-descript porcelain has something in addition to sentimental value. Joy shared a helpful “checklist” of personal property. For example, here are three “P’s” – paintings, pottery, porcelain, three “S’s” – sculptures, sports memorabilia, silver, and three “Collections” – coin, stamp, wine, to name a few. You want to successfully survive an estate tax return audit, especially when there is art, antiques and collectibles. And an appraisal may be required to be filed with your return – articles with artistic or intrinsic value in total in excess of $3,000 (e.g. jewelry, furs, silverware, paintings, antiques, oriental rugs, coin or stamp collections, etc.), or a collection of similar items valued in excess of $10,000. The Art Advisory Panel assists the IRS in reviewing taxpayer submitted appraisals. Per the Panel’s 2013 report, they reviewed 291 items; their total value was very close to that submitted by taxpayers; however, they recommended adjustments (up or down) for roughly half.

3. I’m not going to report (aka the “empty jewelry box”). Joy gives many public talks, and the audiences’ attention may drift. However, they tend to wake up when she mentions ‘stepped-up basis.’ Generally, this means estate assets may be eligible for a step up in basis to the fair market value at time of death (there are exceptions, e.g. irrevocable trusts). This means the beneficiary may have little to no capital gains tax liability when he or she subsequently sells the inherited asset.  Here’s an example… you inherit your father’s ’57 T-bird. His original cost may have been $4,000 (about the current price to replace the car’s front fender), and it’s worth $20,000 to $90,000 today. You list the qualified valued on the estate tax return, there’s no estate tax because the estate is under the $5.45 million exclusion for 2015, and you may have little capital gains tax to report.

4. Where to find a qualified appraiser? Avoid being the $4 seller of that 1776 document. First, he or she should be a disinterested party (i.e. not be involved in selling your items) and certify as such. Second, they must be qualified and competent. Your attorney, accountant or advisor may have recommendations for you. And Joy recommends researching appraisal websites, including the ASA (appraisers.org), AAA (appraisersassociation.org) and ISA (isa-appraisers.org). The ASA has all types of appraisers and searchable categories, AAA is limited to fine art, and ISA is limited to personal property only.

Valuations of art, antiques and collectibles are tricky. There’s no on-line quote system such as that for Apple stock, no Kelly Blue Book-like reference, and how valid are the listings on eBay or Craigslist compared to your item? As trustee, you have a fiduciary duty. I wish you the best in being a good steward.

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