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What’s Your Collection REALLY Worth in Virginia?

Worthless collectionIt is common for wealthy people to purchase rare and valuable collectibles, such as art, stamps or other valuable collectibles. These are often things that we do not think will decrease in value over time, but they can also create tax problems for heirs.

 If you have ever watched the TV show Pawn Stars or a similar show, then you know that it is often difficult to get the full appraisal value when attempting to sell rare items. The same process plays out on the show over and over again. Someone will bring in a rare item, the pawn store owner will call in an expert to appraise the item, the appraiser will give an approximate value, and then the store owner will offer to pay half the appraised value of the item. 

Obviously, a pawn shop is not going to pay full price for anything. However, the spiel that the store owner often gives contains lessons. He explains to the customer that the appraisal value is how much the item might get at auction, but that it has to be the right auction with the right buyer and that in this economy nothing is going at auction for the full appraisal value. 

This has implications for estate planning, too. Why? For tax purposes the IRS considers assets worth their appraisal value and not the amount they garner at auction. Thus, if you have a piece of art appraised at $5 million that your heirs can only sell for $3 million at auction, then your heirs might have to make up the difference from other assets when it comes time to pay the IRS. 

A recent Wills, Trusts & Estates Prof. Blog article, titled “Rare Collectibles May Not be the Best Estate Plan,” illustrates the point with the case of a stamp collection appraised at $20 million that sold for less than half that amount. 

Before you leave your collection to your heirs, it is important to consider how they will pay taxes on the collection. Even if the collection is sold to pay the taxes, the proceeds from the sale may not be enough to pay the tax bills. 

You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning. 

ReferenceWills, Trusts & Estates Prof. Blog (June 24, 2014) “Rare Collectibles May Not be the Best Estate Plan

 

 

 

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We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
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Thank you, Walt and the Zaremba Team

Coronavirus/Covid-19
Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.