Inheriting and bequeathing art
Someone collects for forty years. Work hangs in the house, work is stacked in the attic, and no list was ever made. Then the collector dies, and three children are left with a collection nobody has valued and on which inheritance tax falls due within months.
That is the standard situation. Art makes an estate complicated for three reasons. The value is uncertain, a collection does not divide neatly into equal parts, and rights are attached to it that do not travel with the canvas.
This page sets out the position under Dutch law.
What happens to an art collection on death
Where the deceased leaves a spouse and children and there is no will, the statutory division of article 4:13 of the Dutch Civil Code applies. The spouse acquires all assets by operation of law, the whole collection included. The children receive a monetary claim equal to their share, which only falls due when the surviving spouse dies.
That keeps a collection together. It also pushes the discussion forward to the next generation, where it is often harder.
Where there is no spouse but several heirs, the collection falls into an undivided estate. Everyone owns every work jointly until it is divided, and dividing takes everyone’s agreement. One heir who wants to sell and one who wants to keep is enough for years of standstill.
A will removes that. You can leave specific works to specific people by bequest, appoint an executor with power to sell, and set out a division that departs from equal shares. For a collector that is not a luxury.
Valuing art for Dutch inheritance tax
Article 21 of the Dutch Inheritance Tax Act is short. What is acquired is taken into account at its value in economic terms at the time of acquisition. For art that means market value at the date of death, the highest price obtainable for the work at that moment.
The Dutch tax authority points to insured value and auction catalogues as aids. Treat those with care. An insured value is often a replacement value and can sit well above market value. Copy the policy figure into the return and you may pay tax on an amount a sale will never produce.
A valuation as at the date of death, by an independent valuer, heads off that discussion. Have it done work by work rather than for the collection as a whole, because a dispute with the inspector almost always concerns a single piece.
Settling inheritance tax with an artwork
There is a scheme few people know about. Under article 67(3) of the Inheritance Tax Act, the Minister of Finance can remit inheritance tax where the heirs transfer to the State an object or collection from the estate of national cultural or art-historical importance.
The remission amounts to the assessed value of the object plus twenty per cent, and never more than the tax due. So you hand over one work and discharge more tax than that work is worth. For a collection rich in value and short of cash, that is often the only way to keep the rest together.
Watch the deadline, because that is where it goes wrong. The request is made by all acquirers jointly, through the inspector, and can be made up to eight weeks after the assessments have become final. After that the door is closed.
The advisory committee on cultural property offered from estates advises the minister, and it meets quarterly. So allow for time. If you want to know where you stand in advance, you can ask during your lifetime for a statement on a specific object. It gives no certainty, because the real assessment happens when the moment comes.
Under the statutory division there is a further possibility. Where the surviving spouse transfers the work, the remission can, on conditions, also cover the inheritance tax on the children’s claims.
What you inherit besides the painting itself
Owning a canvas and holding the copyright in the image are two different things, and they pass separately.
Inherit from the maker and the copyright comes with it. Article 2 of the Dutch Copyright Act provides that copyright passes on inheritance, and article 37 that it expires seventy years after 1 January following the year of the maker’s death. During that period you decide on reproduction, publication in print and licences. That is a source of income and a management task at once.
The resale right follows the same path. A living artist cannot transfer it; only inheritance and a bequest bring it to someone else.
Inherit from a collector and the position reverses. You get the work, but the rights stay with the artist or the artist’s heirs. You may hang it, lend it and sell it. Reproducing it in a book or on your website needs permission for as long as copyright runs.
With that copyright you also inherit the maker’s moral rights, and those govern what may be done to the work.
More about the moral rights of the artist →
Gifting art during your lifetime
Giving to your children is fiscally the same game as bequeathing, with gift tax on the market value. The advantage is that you are there for the division and can explain why you did what you did.
Giving to a museum or a cultural ANBI, a Dutch public benefit organisation, works differently. Such a gift is deductible, and for a cultural ANBI the gift may be increased by twenty-five per cent for the deduction, subject to a cap on that increase. Record it as a periodic gift in a deed, for at least five years, and the threshold falls away. For a gift in kind above ten thousand euros a year, an independent valuation or a recent invoice is required.
The tax working-out belongs with your tax adviser. We look at something else: the conditions on which you give. An obligation to exhibit, attribution beside the work, a ban on disposal, or a reversion clause if the museum closes. Those terms are valid and they bite, including years later when the museum has other plans.
More about collection management and the Heritage Act →
Leaving an art collection to the State or to a museum
The Cultural Heritage Agency names three routes: giving during your lifetime, bequeathing by will or legacy, and transferring under the remission scheme. You can approach the Agency directly, or one of the former national museums mandated to accept gifts on behalf of the State.
The test is strict. There has to be museum interest, and irreplaceability and indispensability are weighed. A museum that responds warmly to a phone call has promised nothing.
There is a fourth route if you want ownership to stay in the family: a long-term loan. The work then hangs where you want to see it hang, under an agreement covering insurance, climate and duration, while ownership stays put.
Where a work has a gap in its provenance, that belongs settled before the transfer. A museum will not accept a gift with an open question inside it.
More about provenance research and restitution →
Art in box 3
Works of art are exempt in box 3 of Dutch income tax, unless you hold them mainly as an investment. Rent out work from your collection, or buy with an eye to appreciation and resale, and that exemption comes into play with the inspector.
Where exactly the line runs between collecting and investing is a question of fact, and the answer depends on what you do and on what you have recorded about it. Discuss it with your tax adviser before the return goes in, not after.
Get in touch with Jaap Versteeg
Have you inherited a collection and are unsure where to start? Or are you thinking about what happens to your collection after your death? Get in touch with Jaap Versteeg. Call 020 675 88 21 or email him for an initial consultation.
