Division of Assets

"No single event has greater potential for dividing a family than dividing an inheritance."

Inheritances bring out the best in some people and the worst in others. It's a sad fact that within even the most stable families, some members will view their relative worth only in tangible terms. In the highly charged emotional environment surrounding the loss of a loved one, any weaknesses in the relationships of those left behind are magnified. Suspicious minds are a bit more finely honed and if the estate is left to the survivors to divide, it doesn't take much of a spark to ignite a small conflagration. You can minimize the likelihood of a family meltdown by seeking sound legal advice in preparing your will and by leaving precise, written instructions dividing your assets among your heirs.

Instructions in regard to collections are particularly important because they generally involve a large number of pieces with valuations that are not obvious based on appearance alone. This can lead to conflict.

The simplest option (administratively) is to leave the collection intact to one heir. You should have the collection appraised (see Chapter 8 titled "Having Your Collection Appraised") and may, at your discretion, use that basis for dividing the balance of your estate. If your estate contains more than one collection (and an equal or structured division is part of your plan) you should have the other collections appraised as well to determine parity. Your attorney can provide the appropriate verbiage for your will. This is stated as the simplest option because there will be no question as to the physical division of the collection after your death.

If you divide one collection among your heirs, the paperwork burden increases. You must then detail what individual pieces go to whom, expand the scope of the appraisal, and more precisely define the locations of each recipient's portion. Alternatively, you may decree "equal shares." This will also require a detailed appraisal, but may create problems if two heirs want the same items, or if some heirs want to keep certain articles and others want to sell. You should objectively consider your family dynamics in making this decision.

We frequently hear the lament that nobody else in the family cares about collectibles. Perhaps it's because so many individuals get serious with their collecting after their kids are grown. We know how difficult it can be to budget for collectibles when there are dentist bills, clothing, food and tuition bills to pay. By the time the kids are grown, most of them have developed their own hobbies and interests. Be that as it may, we doubt that you would want your family to suffer financially over their choice of leisure activities. A simpler alternative here is to make a will directing that the articles be sold, with the proceeds shared equally instead of the cumbersome process of dividing a collection equally.

The question arises whether the collection should be disposed of in your lifetime. From our experience with thousands of these situations, we can affirm that it is easier to divide the proceeds of a sale than the collectibles themselves. The reasons are quite logical. Members of your family may vicariously appreciate the pleasure that your collection brought to you, but unless they are collectors themselves, they are unlikely to keep your collectibles. If you can accept that, ask yourself whether they would handle the disposition as carefully and knowledgeably as you would? If this represents a significant asset to them, are they prepared to manage it properly?

We can understand if you are simply unable to part with your treasures, particularly if working with your collection is a major activity and source of enjoyment in your life at present. If this is the case, we strongly recommend that you prepare awritten disposition plan for your heirs and keep it with your inventory. Whether you intend to collect for three years, seven or a lifetime, you need to prepare now as if you will not be available to provide guidance later. These are hard words, but we doubt that any person wants to see the family suffer a financial loss through the combination of poor planning and an untimely demise or incapacitation.

The upside of choosing disposition in your lifetime is that you retain control of the process and possibly garner some recognition of your collecting accomplishments. You also minimize the possibility of an uninformed disposition after your death. You might think that since it's harder to spend collectibles than cash, that such a gift will prevent unwise behavior, but the pawnshop story mentioned previously is just one of many that we've heard.

Another option that bears mentioning is thegift of your collection to charity. Some collectors have substantial capital gains in their collections and a charitable gift makes a great deal of sense for their particular situations. If you entertain such thoughts, we must also point out that most charities know virtually nothing about collectibles or disposing of such assets. If you wish for your donation to make a meaningful contribution, you will want to ensure that the charity receives the top dollar from your collection. In this case, unless you are donating the collection to a museum that will display it, it is probably better to sell it in your lifetime while you can see the good works that the donation can create. You should talk with the charity and your lawyer or tax adviser to determine what specific option(s) would best suit your individual situation.

If you simply cannot bear the idea of selling your collection, then you must leave detailed instructions for the disposition of your gift. Most charities will have little real knowledge, and even less affection for your collection than a family heir. They would much rather spend their efforts putting your cash to good use than converting your collection to cash. (Conversely, we just sold a $50,000+ rarity for a Michigan charitable institution that was donated as a "common" coin. In all situations, professional knowledge is the key.) We recommend that your collection be sold via auction, by an auctioneer who is knowledgeable about your collectibles—with the charity of your choice named as beneficiary. This solution ensures that you can keep your collection for your lifetime, that the collection will receive knowledgeable treatment in its disposition, and that your charity will receive the maximum return without expending its personnel resources. You can also recommend or designate a specific auctioneer to handle the disposition.

In summary, your collection is yours to enjoy now and yours to dispose of as you see fit. The 'old saw' says, "You can't take it with you." You can, however, ensure that either the collection or its proceeds provide as much positive influence for others as it has for you.

• Make an action plan for your collection, even if you anticipate many more decades of collecting. You can always update it as you go; you cannot, however, start one after you're gone.

• Read the remaining chapters in this book for options.

• Talk with your advisors and determine which recipient(s), timing and method of disposition make the most sense for you.

• If the timing is now, select the agent appropriate to the method and proceed accordingly.

• If the timing is later, prepare detailed written instructions and leave copies with both your collection and your will. If you prefer your collectibles to be distributed among family members, leave specific instructions as to how that distribution is to be accomplished. If you prefer to distribute the proceeds, make sure you leave directions for non-experts to follow in contacting a firm that is trustworthy. Your instructions should be as detailed as necessary to accomplish your wishes.

TIPS FOR HEIRS: This is another chapter which can aid you only if someone else reads and heeds it. You can, however, point it out to your loved one and discuss it with them whenever it seems appropriate. Good communication between family members often helps everyone avoid the pitfalls of estate planning and transfer. Maybe getting involved in Dad's collecting activities will create a new and lasting bond. You may even come to enjoy collecting yourself.