Q: What are some initial considerations facing an executor or trustee after a client passes away?
A: In an ideal world, the decedent has a complete inventory or appraisal of artwork and tangible property before death. This may be located among the decedent’s files or documents. Information can also be obtained by reviewing the decedent’s homeowner’s insurance policy if specific items of tangible personal property are scheduled. However, we don’t live in an ideal world, and very often, there’s little or no documentation regarding tangible personal property.
In this case, the fiduciary can obtain information from family members, friends or advisors who may have worked with the decedent. It’s also essential for the fiduciary to access the decedent’s home(s) to take an initial inventory of the contents. Reviewing the decedent’s bank or credit card statements may also reveal charges for storage unit(s) where tangible personal property may be located. For a decedent residing in a condominium or cooperative apartment, it’s best practice to connect with the building management/superintendent to confirm whether the decedent had storage space in the building. A common scenario facing many fiduciaries is when a decedent downsizes their residence and places items in storage years before death.
The fiduciary is responsible for inventorying, valuing and carrying out the decedent’s wishes for all assets of an estate, including the art and tangible personal property. Therefore, securing and safeguarding the tangible property as soon as possible after death is imperative. For example, a storage unit may not be temperature-controlled and have other environmental issues that may threaten the integrity of the contents. Another danger is theft. The fiduciary may need to change the locks or alarm system passcode on an unoccupied apartment, home or storage unit, especially when family members or others may have had access during the decedent’s life.
It’s imperative to ensure insurance coverage for tangible personal property and to inform the insurance agent as soon as possible that the client has passed away. Homeowners’ insurance in the context of estates can be challenging since unoccupied homes pose a higher risk, and some insurance companies may choose to terminate coverage.
Q: Now that we’ve discussed the initial steps of locating and securing the tangible property and related issues, what next steps should a fiduciary take?
A: The fiduciary is responsible for valuing all estate assets, including tangible personal property, art and jewelry. There are Uniform Standards of Professional Appraisal Practice- qualified appraisers capable of providing fair market value appraisals for all types of tangible property. In most situations, a generalist appraiser is a good starting point. If there are unique items, like fine art, jewelry or other collectibles, the fiduciary will most likely have to employ a specialist in that area of expertise. Not only does the fiduciary want a qualified appraiser, especially if an estate tax return is necessary, but an independent appraisal will bring value during the disposition process.
If there’s any fine art, the fiduciary should locate documentation regarding the artwork’s provenance. This may include purchase invoices, records regarding restoration, exhibition history, literary references, essentially, anything that may provide history concerning the artwork. In some cases, the fiduciary may need to search through the decedent’s office, safe deposit box, desk drawers or even kitchen cabinets to locate the information if it’s not readily available.
Q: What about selling the art and tangibles?
A: The value and nature of the tangible personal property will dictate the options available to the fiduciary in connection with the sale or disposal of the items. In many cases, the fiduciary will need to engage in a tiered disposition process.
In situations where there are items of blue-chip fine art, the considerations include whether to sell in the primary market (galleries or art dealers) or the secondary market (global auction houses). Where the composition leans more towards furnishings, decorative arts, silver and jewelry, the fiduciary may want to engage with a national, regional or local auction house that focuses on those items. However, in nearly all cases, whether the collection contains blue-chip art or valuable furnishings, there will be items of little to no monetary value that the fiduciary must dispose of during the administration of the estate. For those items, the fiduciary can contract with a vendor specializing in estate cleanouts. In some cases, the fiduciary may realize proceeds for the estate that exceed the cleanout cost, while in other cases, the cleanout cost will exceed the value of the items remaining. It’s important to solicit proposals from multiple vendors at each tier to properly maximize value for the beneficiaries and limit fiduciary liability.
As most fiduciaries can attest, tangible personal property, regardless of its value, is one of the most challenging asset classes, given the highly sentimental attachments families have to the property. Because of this, the points relayed above only begin to scratch the surface of the intricacies involved in this process.
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