NOTE! This is general advice only. Laws regarding estates vary widely from country to country, and even from state to state. While much of the advice here has good general application, if in doubt, you should seek professional advice from a lawyer or financial professional.
While it isn't anything we enjoy thinking about, we all make plans for the inevitable. However, no matter how well you've briefed your lawyer or accountant, many of us forget the disposition of our stamp collection at times like these. We often don't think it's worth worrying about, or we think we have plans for it. However, whether your collection is "just for fun", or is worth a fortune, a little planning can save your executor and heirs a lot of extra grief when the time comes.
So, other than you, who else in your family knows what your collection is worth? If you're keeping the information a secret, that's a bad idea. Who knows how many collections were thrown out with the "rest of the junk". Or maybe your spouse is planning to retire on the proceeds (are they in for a disappointment!). Its also information your lawyer and accountant had better know as well!
Most places have tax laws that kick in on death. Its clear that most of us would not think twice as the time gets close to buffer the tax blow, but stamps are a special case. No matter how you treat your collection, your government wants to treat it like any other asset, as something that can be taxed! If your collection is substantial, your estate could take a big hit on it. Depending on the laws of your place of residence, there are two ways to tax your stamp collection:
1. On its market value - This is the method used in the U.S. No matter what you paid for your collection, if it's still worth money at the time of your death, Uncle Sam will want his share.
2. On its capital gain - This is the method we use up in Canada. If your collection is worth more than you paid for it, then you pay the usual amount of tax on the gain. For most collectors, this isn't a problem, provided you can prove what you paid for your collection (do you keep track? will your heirs know where to find this information?). However, if you bought your China collection at the bottom of the market, your estate is up for a big hit, and all at once too!
Note that the law doesn't care what your will says about your collection as far as taxes go. As long as it belongs to you at your death, it attracts tax consequences, which have to be paid by your estate. A real disaster is when you leave the collection to a specific heir, but the estate has to pay the taxes on it! Therefore, make sure your accountant and lawyer know about the collection, and what its worth! They can often prevent your collection from destroying the rest of your estate, or the government from taking the collection to pay the taxes.
The best way to pass your collection on is while you're still alive. Whether you give it to someone or take it to the auction house, it is a lot easier on everyone. Remember though that many gifts have tax consequences as well, as might the sale of your collection. Once again, check with your accountant to avoid some nasty surprises. Sometimes, you might have to do this over several years, so start planning ahead.
BAD IDEA 1 - Unless you don't mind them selling it off to raise funds, don't leave your stamps to a charity or non-profit organization. A lot of good collections have virtually disappeared that way. Most organizations don't have the resources, or the interest, to keep up a stamp collection. While it may make good sense for tax purposes, don't think it will somehow help the hobby. On the other hand, many stamp organizations and museums will give a good home to certain parts of your collection.
BAD IDEA 2 - By far the worst idea I ever heard is to lie about the value of the collection for the purposes of probating the estate. Even if your heirs do get away with it, I have seen such tactics cause nothing but trouble down the road. Just how does your kid say he got a $10,000 stamp collection when the probate form doesn't mention it at all. What if your heirs start fighting over the collection? Do yourself a favour and "bite the bullet". Your collection should be valued at fair market value.
Having worked for lawyers for a few years, I have my share of estates stories. Luckily, my former employers often know about my hobby, and ask my advice. Luckily, these are all happy endings.
- A son who took possession of his father's collection. The son didn't know its value, and it easily turned out to be worth a few hundred dollars.
- A couple of packets of stamps found in personal belongings? They turned out to be very nice, easily worth a hundred dollars to the estate.
- A lawyer pointed me to a box of stamps she had no idea what to do with. An auction house sold it for close to a thousand dollars, which was a nice boost for the estate.
The common thread? Neither the heirs nor the lawyer had any idea what the stamps were worth. Is that how you want your stamps treated?
Help your executor deal with your stamp collection. They should know:
- Where it all is. Got a safety deposit box? You do know your executor can't get into it until the will is probated don't you?
- Who you trust with it. List a few dealers and auctioneers you're comfortable with. Your estate may also require the collection to be appraised, so find a good appraiser in advance (or even two!)
- Who your friends are. The APS has a free estate service for deceased members. They give out free stickers to put on your albums to let everyone know who to call. Most local stamp clubs are also eager to help heirs of their deceased members.
No one wants to think about the worst that can happen. However, often that isn't death, but what happens after you die that can make your loved ones lives even more difficult. A little planning, a little honesty, and your collection can be treated after death as well as you treated it while you were alive.
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