Decoding the Law on Art Estate Planning
In this new regular segment, Guest Work Agency’s Director and Founder, Alana Kushnir and Paralegal, Mia Schaumann demystify a specific area of art law, with a glossary translating legal speak into people speak. This glossary focuses on the estate planning lingo that artists, galleries and collectors need to know.
Please keep in mind that laws around estate planning are highly variable from jurisdiction to jurisdiction (and in Australia, from State to State) and are updated from time to time, so the terminology and concepts we refer to below may be different, depending on the location of you and your assets, as well as your personal circumstances.
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An art estate plan is generally understood to refer to the art-related aspects of an artist’s or collector’s estate. In the case of an artist, it should cover how their consigned artworks, artworks located in the studio, studio equipment and ephemera and copyright are to be dealt with after their death. In the case of a collector, it should cover how artworks in their collection are to be dealt with after their death, including whether they should be donated to a non-profit institution or sold. An art estate plan should include an inventory of artworks and related ephemera.
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An artist estate is generally understood to refer to the art-related aspects of a deceased artist’s estate. This will include physical artworks consigned to a gallery or located in the studio at the time of the artist’s death, studio equipment and ephemera, as well as intangible property such as the artist’s website, inventory records and copyright. The Legal Personal Representative (LPR) of the artist estate may also receive resale royalties on behalf of the estate.
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A beneficiary is a person named under a will who will receive a benefit from the estate after the testator dies, such an asset.
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Digital and intangible assets can hold considerable financial and sentimental value. These assets can include anything from artwork inventory information stored in a digital format, to photos and other types of documentation, websites, NFTs and cryptocurrency…the list of what is considered a digital asset will evolve as technologies evolves. To ensure that intangible assets are correctly handled upon a person’s death, it is essential to include them in a will.
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An estate is made up of the assets that an individual owns at the time of their death, otherwise known as a ‘deceased estate’. An estate may include real and personal property (like land, cars, artworks, money in a personal bank account, intellectual property) as well as liabilities (like money owed to the tax office).
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An estate plan is a plan which outlines how estate assets should be handled upon death or incapacitation.
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An executor is the person appointed under the will by the testator to collect the assets of the estate and pay the debts of the estate.
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A testamentary trust is a type of trust structure established under a will, which comes into operation upon the testator’s death. These types of trusts are commonly used when the beneficiaries of the assets in a will are under the age of 18 or where the testator wishes to maintain a business after their death, for the benefit of beneficiaries, such as an art practice.
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A testator is the person who has written the will.
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A trustee is the person or entity who holds the estate assets on trust until they are distributed to the beneficiaries or transferred to any testamentary trusts created under the will.
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Intestacy is where someone has died without leaving a valid will. Where a person dies intestate, their estate will be dealt with according to intestate succession law, which varies from jurisdiction to jurisdiction.
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Inventory of assets and liabilities generally refers to the list of assets and liabilities held by an estate at the time of a person’s death. This makes up the gross value of the deceased estate. An inventory of assets and liabilities is required for the purposes of applying for probate.
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An LPR or administrator is the person appointed under a will to administer the testator’s estate. It is usually the same person as the executor and trustee under a will. If the will does not appoint an LPR, a relevant court will appoint an LPR at its discretion.
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Letters of administration is the person appointed by the court as the LPR to administer the estate if there is no valid will in place, or if the will did not specify an executor.
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A letter or statement of wishes is an informal, non-binding document that accompanies a will. It is primarily used to provide additional guidance to the executor so that they can administer the testator’s estate to the best of their ability.
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A power of attorney is a binding legal document that provides a person with the authorisation to make decisions regarding financial, personal or legal affairs on an incapacitated individual’s behalf. The scope of a power of attorney can vary. For example, it may only apply to financial matters where the individual is overseas.
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Probate is the process where the probate office of a relevant court determines whether a will is valid, and if valid, probate facilitates the administration of the estate according to the will. Unless the estate is a small estate, the assets of an estate cannot be administered in accordance with the will until probate has been granted to the LPR. In Victoria for example, a small estate is when a person’s assets at their date of death are below the value set by government, which is currently $125,080.
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A will is a binding legal document which sets out how an estate is to be administered after their death.
The information contained in this GWA Go-To Glossary does not constitute legal advice. If you are an artist or art collector and require assistance with your estate planning needs, we would love to assist you. Please contact us at info@guestworkagency.art.