Estate Planning for Your Tool Collection
Finnegan, Robert W., The Chronicle of the Early American Industries Association, Inc.
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C O L U M N
[This article was originally printed in the Gristmill, June 2001, No. 103 and is reprinted by permission of the author and The Gristmill, a publication of the Mid-West Tool Collectors Association.]
During the past twenty years, tools have moved from a 'fringe' collecting area into the mainstream. Many top collections have been and are continuing to be built. Prices for the most desirable items continue to rise dramatically. In our lifetime, we will probably see a $1 million-plus tool collection come to auction.
It takes significant time, money, and commitment to build a collection. It is relatively rare for children to develop an interest in a parent's collection. This article discusses ways to plan for the disposition of your collection.
Estate Planning Basics
Estate planning is the process of planning for the disposition of your estate upon your death. Simply put, your estate includes everything you own -cash, stocks, bonds, mutual funds, life insurance, annuities, IRAs, profit sharing plans, 401(k) plans, real estate, business interests, and, of course, tools. Your estate plan determines who gets what, and when they get it. A well-designed estate plan protects, preserves, and enhances family wealth.
Most individuals are unaware of the number of options that are available. Each estate plan is as personal and unique as an individual's collecting taste. Estate planning ensures your property is disposed of according to your wishes, promotes family harmony, and minimizes and eliminates unnecessary taxes.
To start with, everyone should have a will. A will is a legal document that describes how, when, and to whom your estate will be disposed. A will can be changed as often as you like. If you don't execute a will, the state where you live will determine how and to whom your property is distributed.
Your executor is appointed by your will. Your executor (or executrix) is the individual responsible for winding up your final affairs, paying all outstanding bills and debts, and distributing your property according to the instructions in your will. Your executor is a fiduciary. That is, he or she is in a position of responsibility, trust, and confidence. Typically, a surviving spouse, responsible adult child, trusted friend or advisor is selected. The executor role should not be chosen or accepted lightly since the executor may be personally liable for a breach of the fiduciary duties owed to beneficiaries.
Trusts are very powerful and flexible planning tools that hold and manage property for the benefit of another individual or individuals (the beneficiaries). Trusts allow you to provide for the control of your property during and long after your lifetime. A trust may be created during your lifetime or at death, it may be revocable or irrevocable, and it may last for a short time, or theoretically, forever. Trusts are not just for the super wealthy.
The grantor is the creator of the trust. The trustee is an individual or corporation that manages and distributes the property in the trust according to terms provided by the grantor in the trust document. Like the executor, the trustee owes a fiduciary duty of care to the trust beneficiaries.
A revocable living trust is the most commonly used trust. It is used with a pour-over will where it is desirable to avoid the cost, delay, or publicity of probate, or if you own property in different states and it is desirable to avoid multiple probate hearings. The living trust owns most of your property. You create the trust and serve as trustee, effectively controlling and managing your property.
Gift and estate taxes are a major factor in estate planning. Whether you transfer property by gift during your lifetime or upon death, transfer taxes (gift, estate and generation skipping transfer taxes) come into play. …