Estate Planning: How to Leave Valuables to Your Heirs

Over $41 trillion in wealth will transfer between generations during the next four decades according to the Boston College Center on Wealth Philanthropy. This transfer of wealth will include things such as art, jewelry, collectibles, and other treasured family heirlooms. With new tax regulations for 2010 and uncertainty about what Congress will decide in the future, understanding the values of such assets and the tax rules surrounding them can prohibit potential headaches during the estate settlement process.

In a recent Wall Street Journal article titled Looking a Gift Horse in the Mouth author Mary Pilon explains "In most years, you simply need to determine the value of an heirloom on the owner's date of death for tax purposes. But this year, with the estate tax temporarily suspended, things are far more complex. Very wealthy families will benefit as estates pass to the next generation tax-free. But those that are merely affluent may get hammered."

Here are the key points that the article shared:

-The step up in cost basis—under which heirs inherit assets valued as of the date of death—has also been suspended this year. Under current law, heirs of 2010 estates who sell assets at any point in the future could owe capital-gains taxes measured from the original owner's purchase price.

-If you plan on leaving your heirs valuables, be warned: The tax code requires that objects worth more than $3,000 must have their value confirmed by an appraiser.

-Many planners recommend setting up separate funds in conjunction with heirlooms to cover things like auction costs, storage fees and commissions.

-Should the estate tax return in 2011 or should Congress reinstate it retroactively for this year, you may consider donating collectibles to a museum or other charity, which would allow you to deduct a portion of their value from your estate.

-An ethical Will can provide you with the opportunity to express where you would like your valuables to go.

-Many rare objects will require evidence of their provenance—how they have passed through owners and auctions, and proof that taxes were paid on previous sales.

-Heirs shouldn't neglect to insure the valuables after they have changed hands.

Have you considered your possessions and valuables in your estate plan?

Asset Archives, Inc. always recommends consulting with a qualified attorney, CPA, enrolled Agent (EA) or other professional, and reviewing the IRS website (http://www.irs.gov or call 866-699-4083) for clarification on any issue regarding estate tax planning.