For many owners of artwork or decorative collectibles, scenario planning works well for individual or a small number of items.
Estate planning is a process, not a “one-and-done” event. Sometimes anticipating future curveballs in life may necessitate weaving scenario planning into your estate planning.
As the expression suggests, scenario planning requires thinking through “if, then” events. A recent example of such planning comes to us in the form of the Ilena Sonnabend estate and the Rauschenberg painting, “Canyon.”
If you have been following this saga in the press, then you know “Canyon” is a mixed- media work (to say the least) that features the preserved remains of a bald eagle. Before you rush out to acquire a similar piece for your own collection, be forewarned: It is only legal to own such “media” with special permission, and it is outright illegal to sell it.
Hoping to make the best of that odd twist of legal fate, estate advisors counted the work as an asset without value for estate tax purposes upon Sonnabend’s passing. Unfortunately for the estate, the Art Advisory Panel cried foul and pegged the value at $65 million, even if it couldn’t be sold in the U.S.
While a chorus of critics rose up against the heavy-handed IRS for this draconian valuation, a recent article in Forbes has a different take. Titled “'Canyon' Controversy – Blame The Advisers Not The IRS,” the author blames the estate advisors and the lack of scenario planning.
In this situation, the main contingency happened to be the very object the estate advisors were giddy to exploit. They targeted the apparent lack of resale value of the art piece. As the article notes, this case should serve as an example to estate advisors and their clients regarding the value of scenario planning, especially in the current economic, tax and political climate.
For more information and articles on estate planning and elder law issues, please visit my website and sign up for my free monthly e-newsletter.
Reference: Forbes (July 24, 2012) “"Canyon" Controversy – Blame The Advisers Not The IRS"