Nothing is ever simple. Not even receiving a gift. Inheriting art is awesome, but it, too, comes with a few surprises.
Here’s what to expect.
•Art can be fickle: “The market for a particular artist or style can fluctuate often, and quickly. An artist who was commanding six figures at auction can bring half as much only a few years later, and vice versa,” says Emma vanBree, a marketing associate for Grogan & Co. Fine Art and Jewelry Auctioneers in Boston.
•Don’t forget the IRS: Any asset inherited receives a "stepped-up basis" for capital gains tax reporting. In other words, the recipient of the art has a tax cost basis equal to the fair market value of the art as of the date of death of the decedent.
“Get an art appraisal performed as of the date of death to substantiate the stepped-up cost basis. The higher the stepped-up basis appraisal value, the lower the taxable capital gain" if you sell the piece, says attorney Parag Patel of Clark, New Jersey. “There is no favorable stepped-up basis if the art is received as a gift. This creates a valuable important incentive to receive an art inheritance at time of death instead of as a gift during life.”
•Keep the legacy alive: Get a fine-art insurance policy to insure against damage and loss. Says Diana Wierbicki, leader of the global art practice at Withers Bergman in Manhattan, “If you’re not an avid collector, get advice from an art adviser, gallery or auction house about caring for the art and your sale options.”