Shawn Anderson: 5:10 on WTOP. Collecting fine wine, valuable art, maybe rare coins; they may be your passion, but have you considered these treasures in your overall estate plan? These assets are often overlooked and they can cause issues for your estate and your heirs once you're gone.
Dimitri Sotis: Joining us live in the glass enclosed nerve center to talk about how to prepare is Dawn Doebler, Co-founder of Her Wealth and Senior Wealth Advisor at the Colony Group in Bethesda. So, nice to see you again Dawn, thanks for coming in again.
Dawn Doebler: Good to see you.
Dimitri: If someone has been collecting art, jewelry, something else that's of a pretty good value, how might he or she determine what they're actually worth?
Dawn: You know this topic fascinates me, probably because I come from a family of antique dealers and you may not have a Picasso in your home but many people do have valuable personal property. And we enjoy those items while we're living, but we often neglect to include them in the estate plan. So, you asked about valuation; one of the biggest problems, is family members often have a difference of opinion about fair market value when collectibles are left behind. And this can delay estate settlement if there's arguments or litigation, which of course increase legal costs.
So, our suggestion is while you're alive obtain appraisals for your valuables. And some attorneys also suggest you include in your estate plan names of at least two dealers and one or two auction houses who specialize in your type of collectible. This can be very helpful to whoever settles your estate. And if there's clarity about worth, you can reduce the chance that items with great value get sold at a deep discount by someone who is naive about the value. And some people think that valuation is handled if they have insurance, but valuation for insurance purposes is not the same. It's usually a higher appraised value, so you want to be careful about using that to determine fair market value; especially because a lot of millennials are not interested in these rare items.
Shawn: How do valuable items affect someone's real estate taxes or maybe the taxes their heirs would have to pay?
Dawn: Well, even if your heirs choose to hold the assets, they still need to value them to establish the total value of your estate. Tax laws say, if collectibles are not sold within a period of time you need to obtain an appraisal. And the date of death appraisal, does determine the tax basis which beneficiaries take on and that determines how much tax they pay in the future. And personal use rules can come into play, especially if you are the beneficiary of an art item and you hang it in your house.
A word of warning also, there is no statute of limitations for estate tax fraud. So, regulators can hold someone liable for tax audits or penalties indefinitely.
Dimitri: What should we do now to prepare for the distribution of this stuff when we are gone?
Dawn: We have several ideas in our article. There are eight different planning techniques we lay out; things that you can do while you're alive. And my three favorite ideas from that list, in addition to getting appraisals now, are to keep good records of the purchased date, price, appraisals, damages and any cost of improvements. And if you have a collection, make sure you note that information for each piece in the collection. Keep names of past buyers and sellers, because they could be a ready market if you pass away and leave items. Talk to your heirs and ask which items are most important to them that will give you an idea of potential disagreements and make sure you write down in your estate plan if you've promised items to someone specifically.
And thirdly, consider ways to equalize inheritance amounts, attempting to leave that to someone who is the executor of your estate but they can be compromised or biased if they're a spouse or a beneficiary.
Shawn: Alright, lots of good stuff there. Thanks Dawn. Dawn Doebler of The Colony Group in Bethesda. Read more at WTOP.com, search, Her Wealth.
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