Artnet News is reporting that a recent Fifth Circuit opinion is being viewed as a victory for art collectors looking to dodge or minimize estate taxes. In that opinion, a US Appeals court agreed that shared ownership of a multi-million dollar blue chip art collection—also known as a “fractional interest”—entitled a Texas family to a substantial tax break when it came to settling an estate. The article notes the following:
The value of the collection is immense. Over the course of nearly three decades (1970–99), Houston-based James Elkins and his wife Margaret collected 64 works by artists including Pablo Picasso, Jackson Pollock, Paul Cézanne, Jasper Johns, Ellsworth Kelly, Cy Twombly and Robert Motherwell, among others. Mrs. Elkins died in May 1999 and Mr. Elkins died in March 2006. Prior to their deaths, they arranged a grantor-retained income trust (or GRIT) by which partial ownership of the art passed to each of their three children.
Though the terms of this particular estate planning vehicle are complex, the basic principle is that the shared ownership interests inhibit a sale or transfer of the works, since the divided ownership means there would have to be unanimous agreement on any proposed sale. Further, the children had publicly stated that they have no interest in selling the works and are in a solid enough financial position that they have no need to.
See also Wills Trusts Estates Prof Blog post re this case.