Managing the Estate and Legacy of an Artist
A Guide to Estate Planning for Artists and their Artworks
Inheriting and managing an artist’s estate can be a complex and contentious ordeal. Effective management requires looking into several factors, including the condition of the estate, administrative structure, administrative personnel, objectives, financing and duration – on which it is advisable to seek legal advice and specialised consultation.
In this week’s newsletter, our Art Law solicitor and Head of Commercial Litigation, Margherita Barbagallo, goes through some key considerations when it comes to estate planning for artists or their executors and trustees.
How can an artist’s estate be administered?
Upon inheriting an artist’s estate there are two administrative models to consider using: (1) a private model run by the estate’s heirs, or (2) an institutionalised model through the creation of a legal entity.
Under the latter model, there are varied forms of legal entities to manage an estate, such as a foundation or other charitable organisation, or a for-profit business. Whether the organisation is formed with the intent of carrying out non-profit or for-profit activities, there are multiple structures to choose from. Seeking legal advice at the outset can help you gain a comprehensive understanding of your options, and any legal requirements thereunder, before deciding under which entity to operate.
What are the tax implications?
The event of a death gives rise to often unexpected and steep tax liabilities for personal representatives of the estate. In the UK, there is a relatively high rate of inheritance tax, and navigating the tax system is crucial for managing artists’ estates. Upon the death of a person, their estate is taxed at 40% above the £325,000 tax-free threshold, unless given to charity or to a spouse or civil partnership. For those who are UK resident or have property in the UK at the time of passing, their estate will be subject to this inheritance tax.
The value of an artist’s estate can be significant but non-liquid if largely comprised of artworks. This may require an estate to pay high taxes without having the actual cash flow to pay them. In addition, executors must also consider the market and any potential diminution of value when making decisions as to what to do with the inherited estate.
Whilst there are mechanisms for protecting the value of the estate, such as tax schemes that allow for charitable donations or acceptance in lieu arrangements, tax treatment depends on the individual circumstances and should be assessed by a specialist advisor to determine if and how an inheritance tax bill can be reduced.
What can living artists do?
For living artists, it is critical to archive one’s work and to be clear on any intentions or wishes for the art and the artist’s oeuvre generally. Other important tools for estate planning include creating an inventory for the artworks, instructions on how to preserve and safe keep the artworks and archives, and ensuring legal protections are in place to avoid any posthumous ownership or intellectual property claims with the assistance of independent expert advice. Providing certainty on these matters will assist with ensuring the artist’s estate and legacy are financially and reputationally protected.
Artists’ estate planning gives rise to challenges with which Dragon Argent is uniquely placed to assist. We offer advice and guidance to living artists or their executors on efficient estate planning and protecting the value of both the estate and the artist’s legacy.
If you would like to discuss how to manage an artist’s estate or legacy, please schedule a discovery call with our Art Law specialist, Margherita Barbagallo.
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Head of Commercial Litigation & Art Law Solicitor
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