Estate Planning Answers for 'Hard' Assets Like Art, Heirlooms
Splitting up money is easy. Splitting up an antique car or a vacation home isn't. And unless you plan ahead by answering these three questions, your family could be in for some strife.
As the baby boomer generation approaches one of the largest transfers of wealth in U.S. history, many people are focusing on how to facilitate the flow of their assets to their children, grandchildren and great-grandchildren.
While passing along more liquid assets like stocks, bonds and cash can be straightforward, “hard” assets like property, art and jewelry are not always as simple. Since families rarely keep a comprehensive inventory of these assets, their value may be outdated or unknown, and family members may have different expectations of how to handle them. Additionally, many families don’t know how to discuss them with their heirs.
As a result, hard assets are often completely overlooked — in spite of their potential value. Like with liquid assets, illiquid assets require a formal plan that begins with conversations between the family decision-makers, financial advisers and oftentimes outside appraisers. To kick-start the illiquid assets distribution discussion, here are three key questions to answer.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
How much is it worth?
Regardless of whether you want to pass down the asset itself or any profit from the sale of that asset, you must start with its fair market value. This is the foundation for any plan, because it attaches an actual, current number to an item that has almost certainly changed in value over time.
For example, take an individual with a collection of jewelry valued around $10,000 at the time of first appraisal. Over 20 years, the value of that collection grows — putting it in the range of $40,000 — as our collector nears retirement. It’s not only critical to understand the collection’s true value to update important insurance coverages, but also to ensure estate planning decisions are made with the most accurate information.
When it comes time to get an asset appraised, find an experienced, accredited appraiser. Especially when it comes to artwork, there are many seemingly free options for valuing your collection. But the financial risk of mispricing your assets could be significant. Don’t rely on online art price guides, advice from your aunt who was once a painter, or even the original seller — who may have a conflict of interest.
Instead, find an appraiser who has been certified by one of the three main accrediting bodies: the Appraisers Association of America, the American Society of Appraisers or the International Society of Appraisers. Especially for large collections, the cost of the appraisal is worth understanding its true value, and how that value will impact your estate.
Who wants it?
Beyond actual monetary value, it’s important to consider the emotional or sentimental value of your hard assets. While your family heirlooms may carry substantial weight in your mind, your children may have stronger attachments to the family’s vacation home where memories were made.
If multiple heirs are vying for the same asset, you’ll need to figure out if and how it can be divided. If it cannot be split, you’ll need to plan for how to equitably divide other assets. If some, but not all, of your heirs want to keep the asset, it might be more effective to create an equitable buyout situation that transfers ownership to the heirs who want it.
Also remember that the market for assets like artwork is cyclical, so timing may affect the attractiveness of a sale. Take the case of an individual who inherited a collection of artwork from his parents. The artist was a family friend, and the heir knew the collection was valuable — but not sure of its exact worth. At the time, the artist was quite popular, and an appraiser found the collection to be far more valuable than expected. In this case, the heir was able to capitalize on a hot market to sell the collection and walk away with much more liquid assets.
How can it be passed on?
You have a number of options for passing on illiquid assets. In most situations, the best choice is to allow an heir to inherit the asset itself. Illiquid assets receive a step-up in cost basis that alleviates some of the capital gains tax burden even if the inheritors sell it. You can also put the asset in a trust, family partnership or LLC and formalize the transfer of ownership in a tax-efficient way, while also saving on future estate taxes. As a last resort, if you don’t feel like your heirs understand the asset enough to sell it for a fair price, you can opt to sell it yourself, pay the appropriate taxes and gift the cash.
Conversations about illiquid assets can become emotionally charged, so many families choose to push off discussions about how certain items will be handed down. But disregarding these potentially valuable assets can create both legal challenges and also family conflict in the future. Discussing these questions will put you and your family on the path toward a comprehensive plan, which financial and legal professionals can help execute.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Grant Rawdin is Founder and CEO of Wescott Financial Advisory Group LLC. He founded the firm in 1987, which grew from the tax, business and estate services he provided to clients at Duane Morris LLP, a venerable AMLaw 100 law firm. Grant is an attorney, an accountant and a Certified Financial Planner™ and has served as adviser to many businesses, providing strategic, ongoing, and M&A advice. Grant and Wescott are recognized as leading the investment and financial planning industry in innovation, growth and size.
-
How Prepaid Verizon Phone Service Works and When It's a Smart ChoiceExplore the differences between Verizon Prepaid and Verizon Postpaid plans—costs, perks, flexibility, and when going prepaid makes sense.
-
Try This One-Minute Test to Uncover Hidden Health RisksFinding out this little-known fact about your body could reveal your risk of heart disease and more. It's a simple, free check for healthy aging.
-
Social Security Wisdom From a Financial Adviser Receiving Benefits HimselfYou don't know what you don't know, and with Social Security, that can be a costly problem for retirees — one that can last a lifetime.
-
Take It From a Tax Expert: The True Measure of Your Retirement Readiness Isn't the Size of Your Nest EggA sizable nest egg is a good start, but your plan should include two to five years of basic expenses in conservative, liquid accounts as a buffer against market volatility, inflation and taxes.
-
New Opportunity Zone Rules Triple Tax Benefits for Rural Investments: Here's Your 2027 StrategyNew IRS guidance just reshaped the opportunity zone landscape for 2027. Here's what high-net-worth investors need to know about the enhanced rural benefits.
-
The OBBB Ushers in a New Era of Energy Investing: What You Need to Know About Tax Breaks and MoreThe new tax law has changed the energy investing landscape with expanded incentives and permanent tax benefits for oil and gas production.
-
Ten Ways Family Offices Can Build Resilience in a Volatile WorldFamily offices are shifting their global investment priorities and goals in the face of uncertainty, volatile markets and the influence of younger generations.
-
Should Your Brokerage Firm Be Your Bookie? A Financial Professional Weighs InSome brokerage firms are promoting 'event contracts,' which are essentially yes-or-no wagers, blurring the lines between investing and gambling.
-
Supermarkets Have Become a Pickpockets' Paradise: How to Avoid Falling VictimSome stores regularly rearrange inventory with the aim of increasing purchases, and they're creating opportunities for thieves to steal from customers.
-
I'm a Wealth Adviser: These Are the Pros and Cons of Alternative Investments in Workplace Retirement AccountsWhile alternatives offer diversification and higher potential returns, including them in your workplace retirement plan would require careful consideration.