Mastering the Art of Estate Administration in the USA: Navigating Large Collections

In the wake of the death of an artist or a serious art collector, there is much to be done. The representative of the decedent's estate must identify the assets, gain control, value, pay tax, and ultimately transfer the assets to the intended beneficiaries.

Though it may seem daunting, the administration of an estate involving a sizeable art collection can be more easily managed if methodically approached. This is especially true if the decedent had largely managed the art collection on his own during his lifetime and had not been forthcoming with his heirs about the management of the collection after his death. There may be significant assets of the estate other than the artwork, but this discussion will focus specifically on navigating the administration of an estate's art collection. Many of the important considerations are the same for both artists and collectors, and are further discussed below.

Ascertaining the scope of the collection

It may seem obvious, but the first crucial task in the administration process is to develop an up-to-date inventory of the artworks in the collection. Assembling this current inventory can be relatively simple if the decedent was a fastidious record-keeper and kept his heirs informed of how they might access this information in the wake of his death. However, gathering this information can be a cumbersome task for the estate's representative if the decedent's records were not current or if the decedent had not been the most forthcoming about his affairs during his lifetime.

In cataloguing the art collection, the estate representative will need to determine not only which works are in the collection, but also the ownership of each work. For example, was the decedent the sole owner of a painting, or were he and his spouse joint owners? Was the decedent a member of an LLC that owned the painting? Had the painting been contributed to a trust? And if so, is the trust revocable or irrevocable? As above, this information may be readily available to the representative, or the representative may need to look to insurance policies, storage contracts or exhibition literature to make this determination.

Once the representative has ascertained which works in the collection belonged to the decedent, the representative will need to determine where the artworks are located. For example, are works displayed at the decedent's residence? Hanging on the walls of a vacation home in another state or country? On consignment to a gallery or on loan to a museum? Entrusted to a storage facility? An accurate understanding of the location of each artwork will inform the representative as to the steps necessary to take control of the collection in his or her fiduciary capacity.

Obtaining legal authority over the collection

As indicated above, the steps that a proposed representative needs to take to become the legal representative of the estate and assert control over the works will depend on how the artwork is titled and where it is located. For example, assets held jointly with the decedent's spouse will pass automatically by operation of law to the surviving spouse. If the decedent lived in a community property state such as California, the decedent's share of community property will pass automatically to the spouse. The decedent's estate plan will also dictate how assets pass and the steps necessary to assert legal control over the collection. Did the decedent execute a last will and testament (the “Will”)? Did he transfer his collection into a trust that governs disposition of the works?

Generally, artwork held in the decedent's individual name will pass according to the terms of his Will, which will need to be “probated” in the surrogate's court in the decedent's place of domicile. By admitting a Will to probate, the court signals it is satisfied that this was indeed the last will and testament of the decedent, and that the representative has the requisite authority to administer the estate as provided in the Will. The representative will need such authority not only in the state of the decedent's residence, but also in each jurisdiction in which a work of the collection is located (depending on the local laws of the respective jurisdiction).

The information required to admit a Will to probate may vary by jurisdiction and it may be necessary to involve local counsel. Accordingly, it may be months or longer before the representative has the requisite authority to act on behalf of the estate as needed.

If the decedent did not execute a Will or other testamentary instrument (eg, a revocable trust), his assets will pass according to the laws of intestacy in his state of domicile. In most states in the United States, the laws of intestacy provide that some portion of a decedent's assets should pass to the surviving spouse and the balance should pass to his children. If an estate passes by intestacy, a proposed representative must petition the surrogate's court to be appointed as the legal representative, often called an Administrator, which is also a long and costly process.

By contrast, artwork in the decedent's collection that is held by a trust should be much more easily accessible following the decedent's death. If the decedent was the trustee, a successor can likely be appointed expeditiously and without court involvement. If the decedent was not the trustee, the serving trustee would likely continue in such role upon the decedent's death, depending on the terms of the governing trust agreement. Similarly, if the collection is held in a multi-member LLC, the remaining members/managers of the LLC or the successor(s) would continue operations in the wake of the decedent's passing.

While a revocable trust is often used to avoid probate court delays, an artist may prefer to leave artwork and copyright interests under his Will in order to cut off his heirs' “copyright termination rights”. If an artist transfers his copyright interests during his lifetime to a trust or any entity (including a public charity or private foundation), the artist will no longer own those rights directly and thus will not be able to transfer them to his beneficiary of choice (eg, his private foundation) at his death without the potential interference of his heirs. Only transfer by Will can extinguish the right of his heirs to claim the copyright interests after the artist's death and thus prevent the heirs from terminating any other bequest the artist had made.

Safeguarding and marshalling the assets

Once the Will is admitted to probate in all necessary jurisdictions, it is up to the representative, as the official fiduciary of the estate, to ensure the artwork is properly maintained while in his or her care. It is imperative that insurance policies and storage contracts are kept up to date, and that each work in the collection is accounted for. With a handle on the care and keeping of the collection, the representative can now work through the tax obligations of the estate.

Estate tax obligation

The US federal government assesses a 40% estate tax on the worldwide assets of US persons (ie, citizens and residents) valued in excess of the estate tax exemption amount (USD13,990,000 in 2025), and on the US-situated assets of non-US persons, including artwork and other tangible personal property, valued in excess of USD60,000. In addition, many states in the United States impose estate tax on tangible personal property (and real property) located in that state. For example, artwork hanging in a New York apartment valued in excess of USD7,160,000 in 2025 would be subject to New York estate tax.

Assets bequeathed to qualified charitable organisations and US citizen spouses are exempted from estate tax if the amount left to a spouse or charity is ascertainable at the time of death. For example, a bequest to charity in an amount to be determined after death by the heir or representative will not qualify for a charitable deduction. The decedent must specify in his Will or testamentary instrument the amount or percentage of his estate that he intends to leave to charity in order for this bequest to qualify for the charitable deduction.

The federal estate tax return (Form 706) and any estate tax owed are due nine months after the decedent's death. It is possible to obtain a six-month extension of time to file Form 706; although a separate extension of time to pay estate tax may be granted, the estate will owe interest in addition to the tax. The penalties incurred for filing a Form 706 beyond the final deadline are significant. Attention must also be paid to the filing and payment deadlines for state-level and foreign estate and inheritance taxes, which will vary by jurisdiction.

Valuation of assets

It is important to emphasise that the estate has 15 months at most to file its federal return and nine months to pay federal estate tax. It is therefore essential for the representative to hire a qualified art appraiser as soon as possible following the decedent's death, to ensure ample time to appraise the art collection.

The valuation of an artwork or an art collection is subjective, and a qualified appraiser will need to assess not only the reputation of the artist and the physical condition of the works, but also the circumstances in which the works exist (such as the cultural significance of the artist or work, provenance, comparable sales data and current economic climate). Although the appraiser will conduct his or her own research, the representative can also provide information they may have from the sales or exhibition history of the works to aid in the analysis. Regardless of whether or not the decedent assembled such information about the works in the collection, it is important for the heirs to remember that current research or other developments in the art world may result in an appraisal that differs from what they expect (eg, a work that was once considered to be that of a certain artist is now attributed to the studio of that artist instead).

The above-listed considerations factor into the appraised value of an artwork. However, the United States Tax Court has noted that “no evidence is more probative of [an artwork]'s fair market value than its direct sales price” (Est. of Newberger v Comm'r of Internal Revenue, 110 T.C.M. (CCH) 615 (T.C. 2015)). In fact, the Court has emphasised that the “experts' failure to consider the sale” of an artwork in appraising its value “renders their valuation wholly unreliable”. So while a representative may need to sell artworks of the estate to pay debts, expenses or taxes owed, as discussed further below, he or she must be aware that the sale of a work of art near in time to the decedent's death can be indicative of its fair market value at death, and may also be indicative of the fair market value of similar works in the collection.

For estates of artists (and collectors with large collections by a single artist), the appraiser should consider whether a “blockage discount” would apply. The application of a blockage discount takes into account the fact that a large number of works by a single artist cannot be sold into the market at one time without a severe negative affect on the market. No buyer would be willing to purchase a large number of one artist's works at once without such a discount because it could take years to resell the works, and the appraised value of the works for the purposes of the estate tax return should reflect this reality.

Consider also the characteristics of certain artistic assets that might warrant special attention in valuation. For example, did the decedent transfer both the copyright and the underlying work of art to a specific beneficiary, and if not, what are the implications for licensing rights and charitable donations related thereto? Does the object carry with it a specific historical designation or cultural significance that will need to be addressed (eg, any work containing ivory or other artifacts on which transfer restrictions are imposed)? If the artist left instructions for the creation of posthumous works, who holds those rights, and how should they be valued?

The appraisers will need time to inspect, photograph and research the works of the collection and write the formal appraisal report. Because the appraisal may require travel to other states or countries where works of the collection are stored or displayed, an up-to-date inventory of the collection and related provenance information will ensure the appraisal process is as smooth and efficient as possible. The estate representative should expect the appraisal process to take months to complete and should plan accordingly.

The appraisal report represents the estate's good-faith position as to the value of the works in the art collection. However, despite their diligent efforts as fiduciary, the representative overseeing the administration of a significant art collection can expect that much of the artwork will be referred to the Art Appraisal Services of the US Internal Revenue Service (IRS) for review. Certain artworks (generally those individually valued at USD150,000 or more) are from there escalated to the Commissioner's Art Advisory Panel for further evaluation. If the IRS and the estate cannot agree upon the valuation, the case may be taken to tax court.

Paying the tax

As the appraisers work on the appraisal report, the representative will need to ensure the estate has enough funds to pay the estate tax obligations due at the filing of the Form 706 (or perhaps on extension, with interest). An art collection is an illiquid asset that could take years to sell, and one to which the heirs may have an emotional attachment that makes the sale of certain works even more difficult.

It may be possible to obtain from the IRS an extension of time to pay estate tax (generally, for one-year periods of time that are not automatically renewed). However, even if the extension of time to pay is granted, the taxpayer will owe interest in addition to principal, and will incur draconian penalties for late payments beyond its granted extension(s).

The estates of many artists and collectors find the options to raise funds in this situation are limited: the estate can rush to sell certain works, which could flood the market and depress sale conditions, or it can borrow the money (eg, from the gallery representing the artist or a commercial bank), which would result in additional interest being due to the lender. Note that for certain loans (known as Graegin loans), the estate may deduct interest expense against estate tax, but must comply with stringent requirements. The representative should discuss their options with their adviser as soon as possible to determine the best approach in the circumstances of the specific estate, to allow plenty of time for the sale of the required work(s) or to secure the necessary loan(s).

Bequests and distributions

Protracted administration timeframe

The representative should be aware that estate assets should not be distributed to beneficiaries until any estate tax issues have been resolved. As noted above, a difference in opinion as to the value of the art collection between the estate and the IRS could take years to settle.

In some instances, it is not until the final values of the assets are agreed upon that the amounts to be distributed to beneficiaries can even be determined. Think, for example, of an instance in which a decedent has left 75% of his collection to his children, and 25% to a charitable organisation. The local Attorney General will require an accounting of the estate administration to protect the interests of the named charitable beneficiary (ie, to ensure the named charity is indeed receiving 25% of the remainder of the collection). The representative will need to ensure that the Attorney General agrees with its administration of the estate before distributing assets per the terms of the testamentary instrument, but should note that the Attorney General's review is in itself a lengthy process.

The representative will need to determine not only when to make distributions from the estate, but also what to distribute, and to whom. For example, has the decedent bequeathed specific works to specific beneficiaries or instructed that the works be divided equally among the beneficiaries at the discretion of the representative? Have the assets appreciated or depreciated in the many months or years since the decedent's death? How will the representative account for these fluctuations in value of estate assets in his or her distribution? Can the distributions be made in kind? The representative should weigh these considerations with his or her advisers while the estate tax issues are being resolved, to allow for timely distributions to the beneficiaries once possible.

Certain beneficiaries will be particularly sensitive to the timing of the distributions from the estate. For example, a foundation's governing document may provide for its wrap up within a certain amount of time after the decedent's death (eg, ten years). With the above-described delays in estate administration now being so common, this sort of deadline imposed on the foundation to achieve its goals can exert undue pressure on the operations of the foundation. If the foundation is expected to wind down within ten years of the decedent's death but does not receive the distribution of artistic property from the decedent's estate until four years after the decedent's death, the foundation now has only six years within which to meet its goal, rather than the intended decade. It may take the foundation even longer still to sell any works that it receives to meet its cash requirements for operation.

The artist or collector should consider life insurance to fund the immediate cash needs of the estate after his passing. If he intends to leave assets to charitable organisations, he should strongly consider designating such organisations as the beneficiary of pension accounts (eg, IRAs) to ensure not only that the charity receives funds swiftly but also that it does so in the most tax-efficient manner. This is a particularly important consideration for an artist wishing to fund a foundation at his death who might not otherwise have the liquid assets to do so.

Navigating beneficiaries

In addition to issues of liquidity, the representative may also have to navigate any existing relationship the artist or collector had with museums or foundations the decedent may have formed in his lifetime. In some instances, the decedent may have bequeathed a specific work to a museum, perhaps on certain conditions such as the continued display of the work, or instead has left this decision to the discretion of his representative. Perhaps the decedent planned never to break his collection apart at all, but wanted it to remain intact at a certain institution. The decedent would have done well to investigate the practicalities of such a bequest during his lifetime, as the intended museum may not have the capability or the desire to become the custodian of an entire collection. It is possible a museum may only agree to accept such a bequest if it is accompanied by substantial funds.

Maybe the decedent hoped that his children would act as custodians of his prized art collection. In some cases, the children share a lifelong passion for art with the deceased, but in other cases the children may have no interest in taking the reins to manage a collection of considerable size. These conversations are best had during the decedent's lifetime, but it may be up to the representative to help the heirs navigate the realities of their inheritance, and the representative should be prepared for the emotional considerations that may underly this wealth transfer.

Artists who wish to preserve their legacy may have bequeathed a portion of their collection to a foundation and a portion to their children. This division of the collection may create conflicts of interest that need to be carefully navigated. For example, a foundation should be careful about selling or organising exhibitions of the artist's works if such activities benefit family members engaging in sales of the artist's works.

Planning ahead

In many ways, the representative of an estate is picking up where a decedent has left off. That is to say, the most important thing an artist or collector can do to make the administration of his estate as smooth as possible upon his death is to get his affairs in order during his life. Suggestions to this end include the following.

• Make an estate plan – do not leave the distribution of a significant art collection to the laws of intestacy in a given jurisdiction, especially when assets are located in multiple states or countries.
• Keep the estate plan up to date – to keep the peace between heirs at the death of the artist or collector, revisit any planned disposition in the estate plan with frequency. For example, if works were divided among children based on value, have works appreciated at the same pace? Consider also if certain heirs prioritise emotional attachment to a work over its monetary value.
• Nominate a representative who is equipped to handle the intricacies involved in administering an estate with a significant art collection, as discussed above. Consider, for example, that a spouse who was uninterested or uninvolved with the artwork during the decedent's lifetime may not be as capable of or as interested in serving as a trusted adviser or an adult child who took more of an interest over the years.
• Stay current on documentation, including inventories, storage contracts, insurance policies and bills of sale, and ensure that the representative or heirs know where to find this information upon the death of the artist or collector.
• Anticipate the estate's likely cash needs, as well as those of beneficiaries, keeping in mind the highly illiquid nature of a sizeable art collection and the likely protracted period of the estate administration. Remember the estate will need liquidity not only to pay estate tax but also to pay appraisal fees, attorneys and accountants fees, and other expenses of administration. Certain beneficiaries (eg, charitable foundations) may have immediate funding needs.
• Remember that, although the administration of an estate may seem like a linear progression, there are many moving parts that will require the representative's attention in this often years-long process. Expect and plan for delays.