Bar News - March 19, 2014
Elder, Estate Planning & Probate Law: Don’t Paint Yourself Into a Corner: An Artist’s Estate Requires Special Care
By: Amanda Nelson
Attorneys know that handling estates can cause acrimony among the heirs, but special care must be taken with an artist’s estate to ensure that works of art aren’t devalued and intellectual property rights aren’t forgotten.
for Artists’ Estates
• Make sure the appointed executor is capable of handling the artwork
• Always create an inventory and have the artwork appraised by a specialist
• Create a plan to dispose of the artwork which will maximize its value
• Do not forget that all artists’ collections come with two sets of rights — rights over the physical property and rights over the intellectual property
Before I attended law school, I worked as a museum consultant with a specialty in collections care and management. One of the more interesting projects I worked on involved the estate of an artist – I had been brought in by the law firm representing the estate to inventory the collection. I had the perfect fly-on-the-wall perspective of how failure to recognize the unique needs of an artist’s estate in estate planning can lead not only to litigation worthy of Charles Dickens’ imagination, but also a malpractice claim against the estate planner.
The estate consisted of more than 1,500 paintings, which the artist left to his nieces and nephews, with one niece as executor. Each was to have an equal share of the estate. The first problem was the executor – she was completely incompetent for the job. She was removed by the court and replaced with a court-appointed executor, who had then hired the law firm.
The initial executor admitted she was selling the work, but she had no accounting of what she sold or for how much. She had entered into several contracts with galleries that were so biased in favor of the galleries that it was costing the estate tens of thousands of dollars instead of bringing in income. Furthermore, she admitted that she was forging signatures on the unsigned pieces, because, in her words, “signed pieces are worth more.” I was part of a contingent who arrived with a court order to remove all of the works from her possession.
The second problem was that there was no official inventory or appraisal of the artist’s work done at the time he executed his will. Such an inventory is critical, yet is rarely done. I was brought in to make an inventory, but I was brought in too late. The lack of an inventory meant that the former executor could do whatever she wanted with the collection, and no one would be the wiser. There was no way to know what she had sold or how much she had pocketed, to the detriment of the other heirs. The lack of a professional appraisal meant that there was no sense of the value of the collection, and as a result, the heirs all had wildly differing notions (some clearly unreasonable) of how much money they were going to inherit.
The third problem was that there was no plan in place to dispose of the estate. There were no instructions as to whether the estate should be sold all at once at auction (which would seriously depress the value by flooding the market), or more slowly and deliberately to various galleries to maximize the value. There were no instructions as to whether heirs could choose particular pieces and how that would count against their overall share of the estate. And the will only referenced the physical property. There was no mention of the intellectual property rights. To make matters worse, the only stipulation in the will was that all of the heirs had to agree to the method of disposal.
The fourth problem exacerbated the third. The heirs loathed each other, even those who were siblings. They refused to sit in the same room together, and I often wondered how much billable time was attributed to all of the lawyers going back and forth in meetings and conference calls (everyone had their own lawyer; I counted seven different firms). The law firm acting as executor had found several gallery owners willing to purchase the collection, but invariably one of the heirs would turn down the offer, merely to spite the others. And such offers were habitually refused by the heir who was convinced that the estate was worth in excess of $60 million and that anything less was robbing him of his proper inheritance. He was able to maintain his belief because the estate was never appraised at the time the will was drawn up.
The heirs never reached a unanimous decision and, eventually, the court ordered a sale by auction. By this point, many galleries and auction houses were familiar with this estate and kept their distance. The entire estate was sold over two days in a “fire sale” by a small auction company that did not specialize in art. I was able to obtain a final sale list via the auction company’s website and determined that by the time all the court and lawyers’ fees were paid, there was nothing left to go to the heirs.
Proper Planning for an Artist’s Estate
So, what should the estate planner have done differently? The former executor might have been competent to deal with the more normal aspects of the estate – the artist’s home and other assets. However, a quick conversation between the estate planner and the executor would have shown that she was not qualified to handle the art and that a special executor should have been appointed to deal exclusively with the artwork.
An inventory and appraisal should have been done at the time the will was drawn up. Inventories are not usually necessary for the typical estate, but when the estate belongs to an artist or serious art collector, a good inventory deters theft or alteration of the estate.
The will should have contained a detailed description of how the estate was going to be disposed of – auction, sale to galleries, etc. – and included the intellectual property rights. Intellectual property rights in an artist’s estate are frequently overlooked by estate planners. If the artist wished that his heirs be able to have the income from licensing the copyright, he could have put the intellectual property rights in a trust. Or, he could have stipulated that the rights follow the physical works themselves. Because the intellectual property rights were not addressed, it is most likely that each heir inherited a one-sixth, undivided interest in each and every one of the 1,500 works.
Finally, because the artist left so much of the decision-making up to his heirs, the estate planner should have had a frank conversation about the personalities involved to determine whether it would be wise to give so much control to the heirs. Estates can cause family strife, but artist estates, and their attorneys, are particularly vulnerable to litigation and malpractice claims when these issues are not dealt with in the estate plan.
Amanda Nelson is the principal of Artium Amore, a law firm dedicated to the unique legal needs of museums and the artistic community. Visit our website.