Legacy management for living artists is a significant challenge and wealthy individuals - and their advisors - need to be aware of how this matter is addressed. Experts from the world of art investment consider the issues.
Legacy management is not an abstract concept and planning an artistic afterlife is a serious business concern for living artists. In today’s global art market, the significance of securing an artist’s estate while he or she is still living seems obvious and yet very few living artists engage in such advanced planning.
In the following article, which is published in two parts – the first part today – authors Randall Willette, Nicolas de Oliveira and Miriam La Rosa explain the terrain. Willette is founder and managing director of Fine Art Wealth Management and a regular commenter around the issues of art and wealth management; de Oliveira is director of research and curatorial projects, Montabel & Partners; La Rosa is senior researcher, artists estates, with Montabonal & partners. (More detail on these organisations is below.)
The editors of this news service are pleased to share these insights with readers and invite responses. They can contact us via email@example.com
A typical working artist produces a significant body of work during the course of his or her lifetime. At some point, hopefully sooner rather than later, they must begin thinking about their legacy as an artist, and even more importantly what will ultimately happen with their art. Although an artist’s estate may contain other assets, it is the art which concerns an artist the most. Planning for the care, storage, possible sale, or other disposition of an entire body of work after the artist’s death is a large part of an artist’s estate planning. Avoiding difficult and expensive infighting between heirs and trustees is also paramount. While this paper covers all facets of estate planning and the important highlights of legacy management, it is not intended as a substitute for competent legal advice.
Any successful artist who waits until near the time of his or her death to do something about estate planning has waited too long. Estate planning should begin as soon as possible, especially if the artist is accumulating increasing amounts of their own work. In the process of designing an estate plan, a great deal of factual information must be gathered. In addition to creating an inventory of the art and archival material, the artist will need to collect and provide detailed and accurate financial information to create an effective plan for administration of the estate. By organizing and documenting the career of an artist, one increases the depth of understanding and appreciation that others will have in the future of how the creative process for that artist works. In so doing, one will also increase the art's impact, desirability and even likely monetary value. This white paper is published with the understanding that Fine Art Wealth Management and Montabonel & Partners are not engaged in rendering legal or accounting services. If legal or tax planning advice is required, the services of a competent professional adviser should be sought.
Key determinants of success for an artist’s
Traditionally, estates were seen to chiefly administer the post-mortem inventory of an artist’s work and deal with issues of authenticity, often directed by the artist’s family or heirs. The numerous examples of bad practice through incompetent management or indeed fraudulent activity highlighted in areas such as authenticity, editioning and reproduction, has led to a re-evaluation of the competences and functioning of estates. Today their remit is expanded by working with living artists, shaping their careers in the present with a view to cementing the future through the implementation of inheritance procedures. The success of the estate is primarily determined by an effective transfer of assets to the next generation, the artist’s family or heirs, as well as by its sustainability, meaning the degree of financial autonomy and growth that is attained over time. In this process, it is essential to follow and respect the artist’s vision, which successful estate management is capable to implement and maintain.
With this in mind, the development of the artistic legacy ought to be a bespoke service centred on the artist’s personal needs, circumstances and aspirations. It should aim to secure the continuity and permanence of creative endeavour of artists by setting an organisational structure, whilst generating connections with professional experts concerning all aspects of their work, including conservation, collection, archive, due diligence, exhibition, research and public relations. The primary benefit of an estate is the enhanced public perception of the artist’s work and the professionalisation of his/her career, promoted by an active dialogue with museums, collectors and commercial galleries. In addition, the estate works in collaboration with a team of dedicated specialists, who offer advice and who are able to effectively negotiate on the artist’s part. This approach safeguards the stability of the artist’s reputation over time, while providing the likelihood of future markets for his/her work.
Estate planning for living artists
No two artists’ estates are alike, and no two estate plans will be the same. A carefully planned estate can help ensure that an artist’s work and ideas will continue to be presented as they wish. If the artist leaves no instructions about what to do with their work, it could not receive the recognition it would otherwise. Moreover, it might place a huge time and financial burden on surviving family and friends.
Often, the family’s overall financial needs may help to determine the specific vehicle chosen to manage the estate. Questions concerning whether children will have the organizational and financial resources to care for the artist’s work and whether there will be sufficient wealth to bequeath an inheritance outside of the art itself may also have to be worked out. In addition to the normal costs involved in estate planning —an artist’s estate faces further costs for the storage, insurance, and appraisal of art works which can be substantial.
An artist must also consider how they want their work to be preserved and presented. Is continued exhibition a top priority or do they want their work to be distributed to family and friends? Do they want their work to be donated to a public, non-profit organization such as museum or do they want the art to be sold or reproduced to provide income?
Finally, the artist must decide how to address what they want done with their artworks and the intangible intellectual property rights of their works which can be transferred separately. An important asset of an artistic estate may be the potential of these intellectual property rights, particularly the copyright interests, in the work. Should the estate manage the copyright, or should it be transferred with the work? Disposition of and control of copyright raises issues of tax, artistic control, and valuation. If the artist does not specify what they want done, those who inherit the work will make those decisions for them.
Tax planning for artist’s estates is a relatively complex field. The value of an artist’s estate is determined by the fair market value of all the assets at the time of death, including the art works. The appraisal of art is an inexact and sometimes contested process. Consulting a professional art appraiser is highly advisable. If the number and value of the art works comprise a significant portion of an artist’s estate, there are various ways an artist can decrease the potential tax burden incurred by their body of work. One possibility is to create a trust which divides the management of assets and the benefit derived from those assets. It is important to remember that control of the art will rest with the trustees. Trusts can have either charitable or non-charitable purposes, and consequently may or may not qualify for tax-exempt status. Another possibility is to create a foundation. A foundation is a non-profit corporation or trust governed by a board of trustees which may qualify for tax-exempt status and may qualify to receive tax-deductible donations.