A collection of baseball cards, Birkin handbags, or aged Bordeaux may bring hours of joy. It’s also a nightmare for real estate planners.
While these stamps, coins and bobbleheads may bring you now, your collection is also an asset.
Accurate value on collections is a difficult business, according to accountants and lawyers who deal with real estate planning.
And what about those paintings and vintage guitars when you die? Dividing a collection seems to defeat that purpose. And some of your heirs may not share your enthusiasm for comic books from the Eisenhower era.
“Imagine you have no will,” said Wayne Hassay, lawyer and managing partner at the Legalshield Provider of Maguire Schneider Hassay in Ohio. “How do you distribute 10,000 baseball cards or 500 bottles of wine between six intestinal heirs?”
Here are five expert tips for dealing with collections in real estate planning.
Document your collection
If you have a collection of financial or sentimental value, a real estate planner should consider recording what you have and what it is worth.
“At least, a self-document of the collection,” said Sarah Gaymon, CPA at Berkowitz Pollack Brant in Florida. Your own documentation is “reliable and it gives you a baseline of what the value is.”
Ideally, you would enter it in a spreadsheet or enter a description of all items in the collection into the Files folder.
Do you have time for a spreadsheet? Take photos and videos of your collection. Make a visual record of your other things while you’re in it.
“At the time they were saying, ‘Walking around your house and taking videos of every room in your house,” said Elizabeth Buffaldi, a CPA-certified financial planner in the Chicago area. “That way, if there’s a natural disaster, you can say, ‘Look, insurance company, there’s everything that was in my home.’ ”
Consider insuring your collection
If you have a collection that is quite worth it, experts should consider getting insurance. And don’t assume it’s already insured.
“There’s an assumption: ‘Well, I have homeowner insurance, I have to count,” Hassey said.
Probably not. Homeowner policies vary widely depending on whether or not you cover your collection and how you cover it.
Consider considering a valuable item policy that is usually designed to cover jewelry, musical instruments and other collectibles.
In the process, the insurance company will probably ask you to document your collection. They may ask you to get a reputation.
However, first we decide whether it costs money to guarantee the collection. Insurance costs are rising.
“How sad would I be if it was lost, stolen and damaged?” Buffaldy said. “How hard have you been hit by that?”
Rate the most valuable items
Formal ratings can be expensive. And you may not want to hire an appraiser to lock the price into your Beanie Baby Collection.
However, when it comes to high value artwork, jewelry, and so on, evaluation is important.
“If you start broaching more than five numbers or more, it’s probably not a bad idea to do that,” said Michael Chua, chief lawyer for Paxla Law in Los Angeles.
The assessment can help you with insurance coverage and real estate planning. They also show potential heirs that strange and spotted paintings above the fireplace should not go to the trash can.
Tell someone you love what you have
The last thing you want is that after your death, your valuable collection of baseball cards will land in a recycle bin.
You know why your collection is important. Your loved one may not be. Consider taking your time to get through them.
“A lot of times people will save something because they think it’s worth it, and the younger generations will say, ‘Omigod, that’s the first thing I’m throwing away,'” Buffaldi said.
Too many elderly Americans are embarrassed to discuss valuables with their loved ones, Hassay said.
“The gut instinct of many clients I’ve seen over the years was, ‘It’s about money. It’s private. I’m not going to talk about money,” he said.
Tell your loved ones about your collection, where you hold it, where you find documentation about what it is worth and what it is worth and where you can find documentation about its value and source.
If they don’t plan on keeping it, tell them how to find a dealer or auction house that will get a good price for them.
“If you’re a collector, you know what you have,” Gaymon said. “I know where to sell it.”
Write a plan for distributing your collection
Splitting your collection in an estate plan can be difficult. Who will get a picture worth five digits? Some loved ones may be more concerned about your great wine or vintage LPS than others.
“If you leave your child at $100,000, it’s cash. They can easily use it,” Gaymon said. “You leave your kids $40,000 worth of vinyl, how do they sell it? Who will buy it?”
It is important to include valuable collections in your will and trust.
Trusts are generally more complicated, but Chua said it is an ideal way to pass collections to heirs.
The trust “can have a very specific direction from a beneficiary perspective as to where this item goes,” he said.
The more careful you become in your real estate planning, the more likely you will be able to avoid conflicts between loved ones after you die, Chua said. And Chua has seen his share of dust up, especially when it comes to gems.
“We’ve seen our families fight over jade,” he said. “Mom promised me that.” “No, Mom promised it first.”
