A United States estate tax return is due nine months after death, and so is the tax.

The tax is due on the filing date, whatever extension of time to file the estate obtains (s. 6151(a), Internal Revenue Code). The Form 4768 instructions confirm that more time to file does not mean more time to pay. The United Kingdom is quicker still: inheritance tax is due at the end of the sixth month after death, and interest runs from then.

Published by ArtisDomus, written by Polina Surina.

Nine months is too short to sell a collection well, and six is shorter. Most of what goes wrong comes from that mismatch.

Advisers reach first for section 6166. It lets estate tax be paid in up to ten instalments, after an initial period of up to five years. But it requires an interest in a closely held business worth more than 35 per cent of the adjusted gross estate. Section 6166(b)(9) also removes passive assets, meaning any asset other than one used in carrying on a trade or business. A collection held for pleasure or for growth in value is passive by that definition. A dealer’s stock is the opposite case, and would qualify.

That leaves section 6161(a)(2), which allows an extension of up to ten years for reasonable cause. It is granted twelve months at a time and must be renewed. The regulation gives four examples of reasonable cause, and a shortage of cash is not one of them. The closest is an estate made up of rights to future payments, and art does not fit it.

The separate undue hardship test does cover assets that can only be sold at a sacrifice price or in a depressed market. But the regulation adds that selling at current fair market value, where a market exists, is not ordinarily undue hardship.

That sentence is the obstacle. If a major auction house will take the work and sell it at the appraised figure, the Revenue treats selling as an inconvenience, short of hardship. The United Kingdom offers less: inheritance tax can be paid in instalments on land and buildings, business-relief shares, business interests and timber. Chattels, meaning movable possessions such as paintings, are not on the list, so a painting has no instalment route.

Collectors put off the conversation, and the delay compounds. In Deloitte’s 2025 survey of the art and finance market, 61 per cent of collectors had not discussed the collection with their heirs at all. The share of heirs described as fully prepared fell from 31 per cent in 2021 to 18 per cent in 2025. The share of collectors intending to have the conversation held steady near 52 per cent. Intention is stable; completion is falling.

Some families think they can protect themselves by leaving the collection uncatalogued and unvalued, since heirs cannot argue about numbers they cannot see. In the United States the law defeats that idea. Section 6035 obliges the executor to give every beneficiary a statement of the value of the property they receive, within thirty days of the return. Section 1014(f) then caps that beneficiary’s basis at the reported figure. The basis is the cost figure used to work out the gain on a later sale. So the statute makes the values visible, to each heir individually.

The reporting duties are wider than most people expect. Treasury Regulation 20.2031-6(b) applies where household and personal effects include articles of marked artistic or intrinsic value totalling more than $3,000. A sworn appraisal by one or more experts must then be filed with the return. The executor must also declare, under penalty of perjury, that the appraiser was disinterested and qualified. The $3,000 figure dates from the 1950s and has never been indexed, so every collection of any size crosses it.

The United Kingdom is stricter than its guidance suggests. Form IHT407 sets a £1,500 threshold for listing pieces of jewellery one by one. For antiques, works of art or collections it sets no threshold, so every work is listed. HMRC’s notes then recommend a professional valuation where an item may be worth more than £1,500, without requiring one.

Probate adds another check, separate from tax. California requires an inventory and appraisal within four months of letters, the court document that appoints the personal representative. Under section 8902(b) of its Probate Code, the probate referee appraises all property other than that appraised by the personal representative. So a court-appointed valuer sees the collection whether or not any tax is due.

Most of the collections we assess have no current valuation and no single record of where each work is. That is normal, and it is where the nine-month clock starts.

What a large holding of one artist is worth depends on which side of the Atlantic you ask. United States courts allow a blockage discount. The reasoning is that a hypothetical buyer would pay less than full retail for hundreds of works that cannot all reach the market at once. The discounts are large, and the reasoning is specific to each estate.

In Estate of David Smith, 57 T.C. 650 (1972), affirmed at 510 F.2d 479, the estate held 425 unsold sculptures. The return valued them at $714,000. The Revenue eventually argued for $4,284,000, and the estate sought a 75 per cent discount. The court set $2,700,000, a discount of about 37 per cent.

In Estate of O’Keeffe, T.C. Memo 1992-210, the parties agreed that roughly 400 works were worth $72,759,000 valued one by one. The court then split the inventory by quality, uniqueness and ease of sale. It allowed 25 per cent on works that could sell in the short term and 75 per cent on works that would take years. The overall discount came to about half.

In In re Warhol Estate, 629 N.Y.S.2d 621 (Sur. Ct. 1994), Christie’s proposed discounts averaging 60 per cent. The court applied 25, because Warhol was better known than Smith or O’Keeffe. The estate of Lisa de Kooning applied roughly 60 per cent to paintings and 85 per cent to most sculptures. That cut a $231.4 million Christie’s valuation to about $100 million.

In the de Kooning case, the Revenue rejected blockage entirely and issued a Statement of Value near $255 million, with a bill of $92 million. The case settled in September 2019 at $34.7 million. The argument about the discount was worth some $57 million.

The United Kingdom takes the opposite view, in statute. Section 160 of the Inheritance Tax Act 1984 defines value as the open market price. It then adds that this price shall not be assumed to be reduced because the whole property is to be placed on the market at one and the same time. So the law rules out the blockage discount.

The same four hundred canvases, in the same market and the same week, can therefore carry a very different tax depending on where the owner was resident. A plan has to start from which regime applies.

One more case turns the usual view of family attachment around. In Estate of Elkins v. Commissioner, 767 F.3d 443 (5th Cir. 2014), the decedent held fractional interests in 64 works with his three children. Their agreement barred any co-owner from selling without everyone’s consent. The estate claimed a discount of 44.75 per cent, and the Revenue allowed none.

The Tax Court substituted a nominal 10 per cent. The Fifth Circuit found that figure rested on no supporting evidence, and gave judgment for the estate with a refund of $14,359,508.21. The children’s stated refusal ever to sell counted as a reason a hypothetical buyer would demand a deeper discount. Family attachment, properly evidenced, was worth money.

Selling during life

This is the simplest route and the least discussed. Selling during life removes the deadline. Works can be released over several seasons, and the collector sees what the collection really fetches. Deloitte’s tax practice adds three points. The collector can make sure every piece is accounted for. There is no need for appraisals after death, or the audit risk that comes with them. And it can prevent disputes among heirs if the estate plan is unclear.

Costs have changed recently and are now the same at both major houses. Christie’s and Sotheby’s each charge a buyer’s premium of 28 per cent up to $2 million. It is 22 per cent from $2 million to $8 million, and 15 per cent above that. Neither publishes a seller’s commission. Christie’s does publish a 2 per cent performance commission, charged to the seller when a lot beats the agreed high estimate. So it applies exactly when the sale goes well. The seller is paid about thirty-five days after the auction, and only if the buyer has paid.

Guarantees matter here, because they are sold to exactly this audience. Christie’s says the demand comes from trustees, private clients, foundations and charitable institutions seeking certainty. It works simply: if the lot falls short, the house pays the difference. If it sells above the guaranteed sum, Christie’s takes a share of the excess. The seller buys protection on the downside with part of the upside. Guarantees covered 60.9 per cent of evening sale value in 2024 and 70.5 per cent in the first half of 2025, mostly between $500,000 and $10 million.

Giving to a public collection

In the United States, the deduction depends on what the recipient does with the work. If the recipient’s use is unrelated to the purpose or function behind its tax exemption, the deduction falls to cost basis under section 170(e)(1)(B). A museum that adds a painting to its collection and shows it is making a related use. A hospital that hangs the same painting in its lobby is not. For a picture bought for $50,000 and now worth $5 million, that is a $5 million deduction against a $50,000 one. What counts is how the recipient uses the work.

The trap that costs family offices most comes one clause later. Section 170(e)(1)(B)(ii) applies the same cut to a gift of appreciated art to, or for the use of, a private foundation. So a family that gives its own pictures to its own family foundation deducts only cost basis. The exception is a private operating foundation under section 4942(j)(3); the rule is in section 170(b)(1)(F). A family that endows and runs a real museum keeps the full deduction. A family that parks the collection in an ordinary grant-making foundation loses it.

Two more conditions apply. A related-use gift still drops to basis if the recipient sells the work before the end of the donor’s tax year without certification. And if the recipient disposes of the work within three years, the donor must include the excess in income (s. 170(e)(7)). That applies unless the recipient certifies, under penalty of perjury, that the use was substantial and related, or that the intended use became impossible.

Fractional giving once let a donor give a tenth each year at a rising value while keeping the picture at home. The Pension Protection Act of 2006 closed that route. Section 170(o) now fixes the value at the lower of the initial and current values. All remaining shares must pass within ten years or at death, whichever comes first. The recipient must have had substantial physical possession and related use throughout. If these conditions fail, the deduction is clawed back with interest, plus 10 per cent.

The United Kingdom’s heritage regime

Three schemes sit side by side and are often confused. Conditional exemption defers inheritance tax on objects that the Board finds pre-eminent for national, scientific, historic or artistic interest (ss. 30 to 35A, Inheritance Tax Act 1984). It also covers a collection that is pre-eminent taken as a whole. In return, the owner undertakes to keep the property in the United Kingdom, to preserve it, and to give the public reasonable access.

Since the Finance Act 1998, access cannot be limited to viewing by prior appointment (s. 31(4FA)). This applies to undertakings given on or after 31 July 1998. So appointment-only viewing has failed the rule for more than a quarter of a century, though many in the market still think it passes. An older undertaking stands on the terms it was given on.

The law sets no number of days, but HMRC’s practice is about 28 days a year for a smaller building and up to 156 for a larger one. A day means at least four hours between 10am and 5pm. On top of open days come viewing by appointment, willingness to lend to public exhibitions, and images for curators.

The clawback deserves more attention than it gets. When a chargeable event occurs, the tax is worked out on the value of the property at the time of that event (s. 33(1)(a)). So every year of growth in value is caught. The Board may look back thirty years to a conditionally exempt transfer and, if there were several, choose which transferor’s rates apply (s. 33(5)). An exemption a grandparent claimed can become a bill on a grandchild’s sale, at today’s prices.

Acceptance in Lieu settles tax by handing the object to the nation. The sums follow principles the Waverley Committee set in 1952. The acquiring institution pays market value minus the tax the seller would have paid, plus a fixed share of that tax back to the seller. That share, called the douceur, is 25 per cent for objects, 32.5 per cent where the reduced 36 per cent rate applies, and 10 per cent for land.

In HMRC’s worked example, a picture has a market value of £300,000 and notional tax of £166,200. A douceur of £41,550 is added, giving a special price of £175,350. The institution acquires the picture £124,650 below market. The seller nets more than a taxed open-market sale would have left.

The Cultural Gifts Scheme works during life (Schedule 14, Finance Act 2012). It gives individuals a tax reduction of 30 per cent of the agreed value, spread over up to five tax years. The two schemes share an annual ceiling of £40 million, counted in tax settled or reduced. The value of the objects does not count towards it. In the year to March 2025 the two schemes brought £59.7 million of objects into public collections, across 32 cases.

A private treaty sale to a Schedule 3 body, one of the public institutions listed in Schedule 3 to the 1984 Act, has a quieter advantage. The conditional exemption becomes absolute, and there is no capital gains tax. The proceeds are also left out of the transferor’s cumulative total, which reduces inheritance tax on their later transfers.

Germany, briefly, because the structure is unusual

In Germany, section 13(1)(2) of the Erbschaftsteuergesetz exempts 60 per cent of the value of art from inheritance tax when three conditions are all met. Preserving the works must be in the public interest for art, history or science. Annual costs must, as a rule, exceed income. And the works must be made available for research or public education to an appropriate extent.

The exemption rises to 100 per cent if two more conditions are met. The owner must be willing to put the works under monument-preservation rules. And either the family has held them for at least twenty years, or they are on the register of nationally valuable cultural property. A sale within ten years removes the exemption retroactively.

The second condition stands out: Germany gives the relief expressly because the collection loses money. A collection that pays its way does not qualify.

The United Arab Emirates levies no inheritance tax, estate tax, gift tax or capital gains tax on individuals. A private collector holding works for personal benefit is also outside corporate tax. Cabinet Resolution 49 of 2023 excludes personal investment income from the charge, however much revenue it generates. The question in the Gulf is whether the collection passes to the people the owner intended.

First, a correction that matters and is widely missed. Federal Decree by Law No. 25 of 2025 replaced Federal Law No. 5 of 1985, and has been in force since 1 June 2026. Article 17 kept its number and substance, which is why the error is easy to make and hard to spot.

Under Article 17(1), succession follows the law of the deceased’s nationality. Article 17(5) applies Emirati law to a foreigner’s will only for their immovable property in the State, meaning land and buildings. Under Article 18(3), the law of the place where property is located decides whether it is movable or immovable. A collection in the Emirates is movable under Emirati law. So Article 17(5) does not reach it, and the owner’s national law governs.

A second provision is easy to miss and costly to miss. Any heir of a foreigner may apply the law that the Civil Code points to, unless a registered will says otherwise (Article 11(3), Federal Decree-Law No. 41 of 2022). Registering the will is the one step that stops an heir reopening the choice of law after death. Without a will, the default under Article 11(2) gives half to the spouse and splits the rest equally among the children, sons and daughters alike.

For a collection meant to outlive the owner, the strongest tool in the region is the DIFC Foundations Law of 2018, from the Dubai International Financial Centre. Under Article 15, an heirship right given by foreign law does not affect movable property, wherever it is, and a collection is movable property. Article 14 goes further: the gift to the foundation stands even where foreign law does not recognise foundations at all. Article 16 refuses to enforce a foreign judgment that conflicts with either article.

Two limits apply. Article 15 is written around the property of a living person, so it protects gifts made during life and does not cover a last-minute move. And Article 13(2) keeps the law of the testator’s last domicile for gifts made by will. An onshore alternative now exists: under Article 3(2) of Federal Decree by Law No. 31 of 2023, trust property does not enter the settlor’s or trustee’s estate on death.

The Abu Dhabi Global Market equivalent has one provision that does more for a collection than protection against forced heirship. Under section 34 of its Foundations Regulations 2017, no beneficiary has any right to the foundation’s assets in kind. A beneficiary cannot demand the painting, only what the by-laws give them. For a family trying to stop one dissenting heir breaking up a collection, that is the key sentence.

The most common error in this area concerns VAT. The DIFC and the ADGM are financial free zones, a different status with different consequences. Neither is a designated zone for value added tax purposes. So a foundation in either holds its collection inside UAE VAT territory. The foundation deals with succession, forced heirship and creditors. Indirect tax needs a separate arrangement entirely. Also, the free zone area in Al Quoz, Dubai’s gallery and storage district, stopped being a designated zone on 1 July 2021.

Timing is stricter than it looks. Articles 538 to 541 of the 2025 code bring back the classical rule on transfers made in a final illness. A sale at an undervalue by a person in their final illness binds the heirs only if the undervalue is no more than one third of the estate. Beyond that, the heirs may cancel it, unless they ratify it or the buyer makes up two thirds of value. So a restructuring done once the owner is unwell can be undone by the heirs. It has to be done while the owner is well.

Another myth is that everything freezes automatically on death, which is wrong for physical objects. Article 379(4) of Federal Decree by Law No. 50 of 2022 suspends joint bank accounts, and only for the deceased’s share. The law has no such freeze for physical objects. The limit on a collection comes from procedure: title cannot move until the estate is administered.

The antiquities law reaches less far than people often think. Article 16 of Federal Law No. 11 of 2017 requires a licence to export an antiquity and, unusually, to import one. But Article 3 limits the whole law to national antiquities. It does not apply to foreign antiquities, except where it says so expressly. Article 1 defines an antiquity as an object produced in the territory of the State more than a hundred years ago. So a collection of modern, contemporary or foreign work falls outside it.

What does reach a contemporary collection is more mundane. Artworks and collectors’ pieces need a permit to be imported into Dubai, under the media regulator. That means content review, and heritage control plays no part.

Lenders should know one imbalance. Federal Decree by Law No. 2 of 2017 protects foreign cultural objects brought in for temporary display from seizure. That applies only where the borrower is a federal or local government museum and the lender is a foreign museum or exhibition. A private collector lending to a commercial gallery or an art fair has no statutory immunity at all.

Finally, the Emirates have no equivalent of Acceptance in Lieu, and cannot have one. That scheme pays a tax bill with an object. Where there is no inheritance tax, there is no bill to pay.

The first task is a record, because every later option depends on one. Revenue Procedure 96-15 sets out what an art record should contain. It lists artist or culture, title or subject, medium, date and size. Then marks and labels, including those on the back and on the frame. Then provenance with proof of authenticity, exhibition history, references, physical condition and a professional photograph. Two items on that list are missing from most private inventories: provenance and condition.

Provenance has a written convention, more precise than most collectors realise. The American Alliance of Museums guide sets it out, and museums including LACMA and the Nelson-Atkins use it with local variations. It runs in date order from the earliest known owner. Owners’ life dates go in round brackets. Dealers, auction houses and agents go in square brackets.

The punctuation carries meaning: a semicolon means the work passed directly between the two parties either side of it. A full stop means it did not, or that nobody knows. Uncertain entries begin with possibly or probably, and footnotes carry the evidence.

That semicolon is the most important mark in the discipline. A chain written with commas throughout looks tidier and says nothing, because it hides exactly where the gaps are. A good provenance records what is known, punctuated so a reader can see what is missing. Object ID, the standard people most often reach for, was designed to help recover stolen works. It leaves out provenance, valuation and ownership history entirely, so it cannot serve as an estate record.

In a Merrill Lynch and Age Wave study of more than 3,000 American adults, nine in ten said they were open to discussing end-of-life wishes. Of those aged 55 and over, 87 per cent said a parent should start the conversation. Yet only 18 per cent of that group had a will, a healthcare directive and a durable power of attorney together.

Among Americans with at least $3 million in investable assets, Bank of America found that only 52 per cent included hard assets in their estate plan at all. Among those holding more than $100,000 of art, 78 per cent said passing the collection on mattered to them.

So the gap between what people intend for their objects and what they have written down about them is roughly half. An adviser alone cannot close it, yet it lies behind most of the failures that follow a collector’s death.