A taxpayer who disagrees with the panel’s findings may request a reconsideration but must provide new information pertaining to the value of the work in question.

Insurance. Once the collector has died, the estate’s executor is responsible for providing insurance on the artwork until the heir takes possession. Generally speaking, unless the collector’s will dictates otherwise, once a beneficiary takes possession of a piece of art, he or she also assumes responsibility for its care. That may include the costs of insurance, packing and shipping, among others. "One of the most critical steps for the executor is to make certain you have adequate security and insurance coverage," Porter says.

A Legacy of Giving. Gifts from collectors who wished to leave an artistic legacy fill museums across America. If you want to donate some or all of your collection, your advisors can guide you through a variety of gifting mechanisms, including trusts and foundations. They might advise you
to give away some of your art during your lifetime for the income tax benefit (the
value of charitable gifts of art can be deducted from a collector’s gross annual income, thus reducing his or her taxable income).

To qualify for tax benefits, a gift of art must pass the "related-use" test—the gift must be related to the beneficiary’s primary function. Philip Temple, an attorney in White Plains, New York, who assists in art succession planning, says collectors should also be apprised of recent changes in federal law regarding partial-gift taxes (see Art&Antiques, November 2006) and appraisals (see Art&Antiques, September 2007).

You might envision your favorite museum putting your gift on permanent display. But if the museum decides to sell it instead, your gift may not pass the related-use test, in which case you’d lose out not only on your legacy, but on the potential tax benefits of your gift. Doug Moore, the managing director and head of estate and charitable planning for Citi Trust in New York, says collectors typically assume that a museum will welcome their gift with open arms. "That’s not correct," Moore says. "Museums will often say no thank you."
 
On the Block. Mendelsohn often advises clients to donate or sell the "bottom third" of their collections while they’re still alive. Most likely, he says, the collector assembled these pieces early on, before his or her eye was finely tuned. Those sales can help reduce the value of your estate, and thus your estate tax liability.
 
If you’re charitably inclined, you can also dispose of your artwork by placing it in a charitable remainder trust, which enables you to generate income on the sale of the art during your lifetime, defer capital gains taxes on those sales and eventually leave the assets in the trust (cash or marketable securities) to charity.