It is important for anyone in Georgia or throughout the country to engage in estate planning. However, it may be even more important to do so for those who own collectibles. This is because collectibles have a higher capital gains tax rate compared to other assets like a house or car. The rate is 28 percent if the item is sold after being held for a year.
If an individual sells a collectible for a profit less than a year after acquiring it, the gains are taxed at his or her personal tax rate. Whether an asset is sold at a profit or not depends on what its value was when acquired. Ideally, an object will be appraised while its original owner is still alive. However, an appraisal done at the time of a person’s death may provide the most accurate step-up basis for whoever receives it.
Understanding the value of a collectible makes it possible to determine how much the estate is worth. In some cases, failing to list the value of a collectible could trigger an audit of an estate’s tax return. The IRS lists art collections and cars among items that could be considered collectibles. It also states that any object could be considered a collectible under IRC Section 408(m).
Working with a probate & estate planning attorney may make it easier for an individual to account for collectibles within an estate plan. An attorney may be able to work with professionals to appraise an item either before or after a person passes. If a collectible is left in an estate, legal counsel may assist in determining how it should be passed down to a beneficiary. This may allow for assets to be transferred while keeping family infighting to a minimum.