MUSEUMS MAY OR MAY NOT WISH TO DISPLAY YOUR COLLECTION
From The Collector’s Handbook
THE NOTION OF preserving one’s legacy for future generations, alongside other treasures of the world, in the protected confines of museums, libraries and archives is a nice altruistic concept. Unfortunately, the reality of what actually may happen to your beloved collection upon donation could be far afield from your intent and expectations.
TRUSTS & ESTATES
Museums and non-profit institutions may or may not have the need or desire to display or care for your beloved collection. In order for the collector to receive the maximum tax benefits of a donation, the receiving entity must have “related and like use” of the items. Even if accepted for donation, the item may find its way to the storage racks, never to see the glory of public display. A collector’s perception of the importance of his or her works of art or collectibles may not be shared by the current or future curator. The mission and direction of a museum can change over the years and see once displayed items again gathering dust in the storage stacks.
Also, the financial needs of the institution may often require that items be deaccessioned and sold. Museums are a consistent source of material in the auction market. Whether sold to assist with the wider capital campaigns, supporting the fiscal plant or to fund future acquisitions, institutions generally have a more pressing need for liquid funds rather than amassing objects. In many cases, it is much preferred for an institution to receive a cash donation over someone’s collection. Selling items or a collection through auction with the specific catalog notation that the proceeds benefit a certain charitable entity holds the added possible benefits of tax exemptions for the buyer, which will generate more interest from bidders and higher sale prices.
In addition, donating the proceeds of the sale of an item doesn’t carry the same concerns of IRS scrutiny as does an appraised valuation. In many, if not most instances, auction sale is the very definition of fair market value – which is what charitable donation valuation must reflect. Past abuses, including outright fraud and tax evasion, have led to very strict requirements for acceptable charitable donations and donation appraisals.
Many institutions will not accept donations that are bound by stipulations of permanent holding or display. In the end, most non-profit institutions have more use for monetary gifts than tangible assets. Only a very small percentage of donated items actually get displayed. Furthermore, when a particular painting or artifact becomes especially valuable in the market, the decision may be made to sell it in order to obtain the monetary funds which could support much more important endeavors than filling up part of a wall in a museum. Quite often, museums, finding themselves in desperate need of funds, end up in court disputing the very agreements they signed with long-deceased donors decades earlier.
If the institution is requesting the gift or donation from you, it probably has a much better chance of regular exhibition – though there is never a long-term guarantee. If the donated item is in fact something of enough importance and interest to be regularly displayed, it will usually have acknowledgement of the source of the donation on the wall plaque and in any published literature. You can receive the same recognition, which also benefits the item, by loaning items for periods of time or considering a fractional gift. Including art or collectibles as part of a museum exhibition adds to the provenance or history of a piece, which will make it that much more desirable and valuable to the market.
The thought of parting with a beloved collection may seem initially unwelcome and unthinkable, but “letting go” is an inevitable part of a collector’s life. The question is how and when. With proper planning, making a wise decision about your sale, gift or donation can lead to greater after-tax monetary reward, family harmony and fulfilling charitable objectives.
A lengthier version of this article appears in The Collector’s Handbook: Tax Planning, Strategy and Estate Advice for Collectors and their Heirs. Copies of the handbook are available on Amazon.com or HA.com/Handbook.