How executors can determine the value – and tax implications – of collectibles in an estate

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Executors of wills have to quantify the value of an estate. But how can they distinguish the treasure from the trash when it comes to collectibles?

Kelly Juhasz, an appraiser at Toronto-based Fine Art Appraisal and Services, advises executors to contact a qualified appraiser who can estimate the value of various items based on market data.

“Executors need to know what (the deceased) had so they can make better decisions about what to do with the items,” says Ms Juhasz.

The cost of an appraisal can range from $150 to $350 per hour, so the cost depends on the time it takes to do the appraisal, market research and analysis, and write the report, she says. The fees are not tied to the value of the properties.

For niche items such as vintage cars, an appraiser with specialist knowledge in that field is likely to be required, adds Ms Juhasz.

Heela Donsky Walker, a partner at Robins Appleby Barristers and Solicitors in Toronto, says in a best-case scenario, the deceased would have kept his or her collectibles inventory list in an estate folder or other location that is easy for the executor to find.

However, if the person died without a will and other important collectible documents cannot be found, you may have to start from scratch.

Ms. Donsky Walker advises putting aside items such as artwork, jewelry, stamp or comic book collections, watches, sports memorabilia, trading cards and coins and having them examined by a general appraiser.

Some items, such as most china and cutlery patterns, have fallen out of fashion in recent years, but she notes that other collectibles, such as ceramics, handbags and clothing from top designers, are on the rise.

“Some of these high-quality handbags come with certificates and have special packaging,” she says.

Maintain and manage a detailed list of collectibles

Tannie Ng, vice president of art, jewelry and valuable collections at Chubb Insurance Co. of Canada in Toronto, explains that creating an inventory of collectibles means maintaining and keeping a detailed list and keeping all related invoices and receipts.

Executors also need to know where all collectibles are located. When it comes to artwork, she says, it’s not uncommon for wealthy clients to display paintings not only in their homes, but also in their vacation homes, offices, or even on loan to a small museum or business.

Some items that are considered valuable and not simply personal property can trigger capital gains taxes at the time of death when the assets are considered sold, Ms. Donsky Walker says. Executors give the value of each item to an accountant, who determines whether capital gains tax is due, she adds. Selling collectibles results in a capital gain (or loss) of 50 percent for the proceeds less adjusted acquisition cost. Collectibles valued at less than $1,000 do not result in a capital gain. Capital losses related to collectibles generally cannot be claimed, Ms. Donsky Walker notes.

Valuation documents do not need to be filed with the Canada Revenue Agency, but executors should keep all returns and valuation results in case the agency needs more information, she adds.

In some cases, appraising an item may not be necessary. For example, if the deceased left a collectible to a specific person in the will and it is clear that there will be no applicable gain from it, the executor can simply pass the item on to that person, says Ms Donsky Walker. The heir can then decide whether to have everything appraised.

“If (the heir) wants to throw the item away, sell it or have it appraised, the executor does not necessarily have that responsibility,” says Ms. Donsky Walker.

However, if, for example, the will states that one person should be left half of the estate, the executor must calculate the value of all assets to determine that the heir receives 50 percent.

Protecting collectibles is another mandatory task for the executor. While most wealthy people know they need to insure their valuables, Ms Ng says they may not receive regular valuations and the items may have gained or lost significant value.

Some people also don’t have adequate insurance in case an item is stolen, lost or damaged, she adds. These additional agreements are of utmost importance when collectibles need to be transferred to heirs who may be out of province or country.

Sometimes the insurance cover is part of the building insurance, but this can be limiting.

“The insurance coverage is very limited,” she says. “There may be exclusions and deductibles. Collectibles require special treatment.”

The role of the financial advisor

Financial advisors can assist clients in this process by connecting them with appraisers and other professionals.

Juhasz says that financial advisors contacting her on behalf of a client is a relatively new development – it is usually the surviving family or the executor who calls – but she is pleased that advisors are recognizing the role of the assessors.

In addition to consultants, appraisers are often recommended by an estate attorney specializing in collectibles or an insurance company.

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