This is part 2 of 2 by Teri Frank, founder of FineArtRegistry.com. To read Part 1 of Teri’s article, Creating a Permanent Record of Your Work, be sure to pick up the October 2008 issue of Art Calendar. The article will teach you the importance of maintaining records of your work and tracking your sales, teach you about the artist’s resale royalty right droit de suite, and provide you with an Object Identification Checklist that you need to use for every piece you create.
Someone said the only sure things in life are death and taxes. Artists rarely plan for the ultimate disposition or settlement of their personal property. After all, it’s not the most pleasant thought to consider — leaving your work behind. Nonetheless, artists who are serious about their work cannot afford to neglect tax and estate planning. You don’t have to spend a lot of money to get the job done. Embrace estate planning as a way of maintaining control of your work even beyond the grave.
1. Know what you want
Before an artist can begin thinking seriously about tax and estate planning, he must envisage his body of work in the future and well beyond his lifetime.
For example, what happens to the artist’s studio? The artwork left behind — finished work, unfinished work? What about commissions? What about the artwork that was delivered by the artist to be photographed for print publishing? What happens to it? What about the images for that artwork? Who owns the copyrights? Then comes the moment where someone must assess what to do when the artist is no longer able to communicate his wishes. Did the artist want to donate his work to a museum? Perhaps the artist would have preferred the artwork sold at auction so that the proceeds could be donated to the artist’s favorite charity. As you can see, there are a million questions to be answered. There are also unique considerations that visual artists must consider in their estate planning, so it is important to reflect on every possible scenario. Ultimately, an artist must consider who to appoint control over their body of work and what type of control (a trust, a foundation, etc). Who will your steward be?
It is important that an artist have some idea of the value of his entire body of work, whether it still sits in the studio or has been sold. Market conditions for art can fluctuate, and so can the prices of an artist’s work. Values depend on the unique qualities inherent in a work of art, fluctuations in art market trends, the number of works on the market, etc. Because there are so many factors that go into valuing an artist’s body of work, keeping detailed records from the moment the artwork is created to the time it is sold or exchanged on the secondary market is critical. Again, it’s all about maintaining control. Many believe the value of an artist’s work increases once they are gone. Statistics show this is not the case. In most cases, the artist’s work decreases in value because the artist is no longer around to promote it, sell it or interact with his collectors.
In order to value an artist’s estate, it is necessary to retain the services of an appraiser. The appraiser should be chosen carefully. It should be someone familiar with the market for a particular artist. When an estate is sizable, it is recommended that two independent appraisers be utilized. It is important to make certain that the appraiser adequately documents the estate. Again, records kept by the artist will be very helpful in this valuation.
3. Charitable Transfers
There are many artists who would love nothing better than to donate at least some of their work to a museum. It only serves to heighten the reputation of the artist and at the same time increase the perceived value of the works of art that are exchanged on the open market. It is, however, rare for an artist to leave his estate or personal property to charitable organizations.
4. Non-Charitable Transfers
Artists who maintain strict control over their body of work for a lifetime have better success at estate planning as a means of providing for their families after they are gone than those who don’t. After all, the bulk of an artist’s estate consists of the assets he created over a lifetime, including intellectual property assets. Artists may give their work to family members or friends while still living in order to remove the work from the estate at a low value and avoid the tax in appreciation of value over the years. When making such a gift to family members or others, it is important that fact be adequately documented with factors such as changing the physical location of the work, filing the appropriate tax documents, utilizing a deed signed by all parties, procuring new insurance (if needed) and so on. AC
Teri Franks is the Founder and CEO of Fine Art Registry, a web-based company that provides a system of tagging and registering art and other valuables in order to establish its authenticity and provenance and to help artists showcase and market their work. Further information is available at www.fineartregistry.com.