As the value of niche collections—whether they are limited-edition sneakers, rare LEGO sets, or other trendy collectibles—continue to grow, it is crucial to think about how these items will be managed in the future. Estate planning is not just about passing down wealth, but also about ensuring your prized collections are preserved and distributed according to your wishes.
If your executors are not aware of your collections and their value, they might end up being sold for much less than they are worth or even donated.
Cautionary Tale
A Goodwill in the US received a donated box of jewelry containing a 14-karat gold LEGO Bionicle mask. To the untrained eye, the one-inch tall piece looks like a small, gold pendant and Goodwill listed it for $14.95 USD.
However, in 2001, LEGO only made 30 of these masks, making them a rare collectible for Bionicle’s loyal fanbase. In 2024, the piece sold for a whopping $18,101 USD.
This example is a stark reminder of how quickly rare collectibles can appreciate in value, and how easy it is for valuable items to be lost or mismanaged without proper documentation and planning. If the person who owned that gold LEGO piece had an estate plan in place, perhaps it could have been passed down or sold in a more controlled and purposeful manner that ensured its full value was recognized.
The estate planning process can be complex, especially when it involves items that may increase in value over time. Here is a breakdown of key estate planning considerations for collectors:
Understanding the Value of Your Collection
Before diving into the intricacies of estate planning, it is essential to fully understand the value of your collection. For many collectors, items like vintage video games, rare action figures, or limited-edition vinyl records may increase in value far beyond their original purchase price.
Start by conducting a comprehensive inventory of your collection. This should include:
- Detailed Descriptions: What exactly do you own? Include make, model, and year of release (if applicable).
- Market Value: Determine the current market value. You may need to seek appraisals or use online marketplaces to track the current worth of your items.
- Condition Reports: The condition of your collection significantly impacts its value. Take note of any imperfections, wear, or damages.
With this information, you can start to think about how these items fit into your overall estate plan.
Establishing Ownership Rights and Documentation
For your collection to be passed down effectively, clear ownership documentation is essential. Try to keep any written proof of ownership for each item. Receipts, certificates of authenticity, and appraisals can help solidify the value and authenticity of the items. If these are not available, make a written record of where, when, how, and the price at which the item was obtained.
When the times comes to pass down your collection, this documentation can make a big difference in verifying authenticity and value.
Incorporating Your Collection into Your Will
Your will is the primary tool for dictating how your collection will be distributed upon your death.
Is there is a specific person that you would like to inherit a particular item or group of items? Do you prefer to leave your collection as a whole to a specific person or even a museum?
Ensuring that your collections are distributed the way you want can be tricky to handle in a will because their value and contents can fluctuate over time. That is why it is important to speak with an estate planning lawyer to ensure your intentions are properly accounted for.
Tax Implications
One of the most significant considerations for collectors is the potential tax implications on death and the sale of valuable items.
Upon your death, the Income Tax Act (“ITA”) deems a disposition of all of your capital property, unless the conditions for a rollover of the assets apply. This can attract capital gains tax depending on the value of your collection and the nature of items.
Navigating the potential tax implications and solutions can be complex, so it is important to speak with an estate planning lawyer or tax professional.
Communication Is Key
Estate planning for collections can be an emotional process, especially if family members or loved ones are involved in the decision-making. Having open conversations about your intentions ensures that your wishes are understood and reduces the potential for conflict after your passing.
Talk to your heirs about the significance of your collection. Make sure they understand what it means to you, its potential value, and how they should handle it in the future. This is especially important if your collection is to be sold or donated.
Consider Donations or Charitable Giving
Some collectors choose to donate their collections to museums or charitable organizations, which can provide benefits both to the community and the collector’s estate. Charitable donations can result in tax credits for your estate, which could offset taxes owed.
If you are interested in donating part or all of your collection, discuss this option with an estate planning lawyer or tax professional to make sure the items are properly appraised, and that the donation is structured to benefit both you and the recipient.
Review and Update Your Plan Regularly
As with any estate plan, it is important to review and update your plan regularly. The value of your collection may change, and new items might be added. Additionally, changes in tax laws, family dynamics, or your personal preferences could necessitate updates.
Estate planning for collectors is a crucial step in preserving your legacy and ensuring that your collections are passed down in the way you envision. Whether you collect Pokémon cards, Hot Wheels cars, or other appreciating assets, it is important to understand their value and take steps to protect them. By planning carefully, documenting everything, and working with an estate planning lawyer, you can rest assured that your collection will continue to bring joy and value to the next generation.
Regularly meeting with your estate planning lawyer can help ensure that your estate plan remains aligned with your goals. Contact our estate planning lawyers to schedule a personalized consultation and preserve your legacy.
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, real estate law, estate law, employment law, health law, and tax law. For over 140 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.
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