Estate plans often include a variety of assets. If the estate was established over a long period of time, it may contain valuable jewelry, vehicles, real estate, artwork, and other items of importance. It is the job of the personal representative, or executor, of the estate to ensure that the property contained is properly valued. This is especially true when it comes to works of art, which may be challenging to value.
Valuing Art in an Estate
Art is difficult to value due to many factors. There is a famous saying that one man’s masterpiece is another man’s trash. It means that art is relative and is in the eye of the beholder. There are various aspects that may make a piece of art more or less valuable. The rarity of a piece is one factor that could affect its value. If the artist is famous, it means that the art is likely more popular. When the artist is deceased, it may sometimes increase the value of the work. The size of the piece and condition also impact the value. Importantly, some styles of art come in and out of favor, so you need to determine the current market value of the artwork.
Documentation and Authentication
Documentation and authentication are essential in determining the value of an art collection. It is helpful to look for original receipts as well as any additional provenance regarding a piece of art. For example, having the receipt provides details about where the piece was purchased, when it was bought, and the price paid at the time. This information can be crucial in determining the authenticity of a piece of art as well as its value. If paperwork is missing, it may be necessary to submit the piece to a professional for evaluation.
Fair Market Value
It is helpful to understand the fair market value of a piece of art. Fair market value means the amount of money a piece would bring in if it were sold today. There is a difference between the fair market value and the valuation for insurance purposes. Generally, when talking about art in an estate, you will want to learn the current fair market value. Art generally increases in value over time. The price of a piece of art often fluctuates, and it may be possible that the artwork has decreased in value after it was purchased. Keep in mind that a person may put sentimental value on a piece of artwork, which is not considered in the fair market value.
Appraisals
Guessing is not really an option when it comes to valuing art in an estate. One of the best ways to determine value is by hiring a professional appraiser. Although appraisals may be somewhat costly, they are warranted in many cases, especially when the artwork is quite valuable. The cost of the appraisal should be deducted from the estate. A proper appraisal is needed to determine the value of each separate work so that it may be distributed or sold according to the wishes of the grantor or beneficiaries. An appraisal is necessary to determine the full value of the estate and for tax purposes.
Art collections can be quite complex and may create some unique challenges for an estate executor. If an estate includes art, you may want to seek valuation guidance as soon as possible. To learn more, contact us at Moen Sheehan Meyer, Ltd. at (608) 784-8310 or online.