Editor's Note: While artists may select an attorney as their executor or trustee of their posthumous trust, in many cases artists select people from their inner circle -- studio managers, family members, and other professional associates -- to play this role. Such individuals, acting as executors/trustees, should of course be advised by knowledgeable counsel as they implement their roles. But it is important also that they be sufficiently informed prior to the artist's death as to their fiduciary obligations to proactively prepare for these responsibilities.
A challenge facing many artist-endowed foundations is that the artists and such individuals as they have chosen to serve as their executor/trustee fail to prepare adequately for the orderly implementation of the artist's bequest, a process in which the artist's executor or trustee(s) oversees the estate administration process, including the move of the artist's bequeathed assets from ownership by the artist's estate or trust to ownership by the foundation as its charitable beneficiary. The purpose of an artist-endowed foundation is to benefit the public (thus meriting nonprofit status) by owning and deploying the artist's creative works, intellectual property, archive, etc. in charitable programs that serve to increase the public's access to and knowledge about the artist's oeuvre. Having no concrete plan of action in place for the transition when an artist passes away, however, can lead to numerous complications. See the Aspen Institute Artist-Endowed Foundations Initiative | AEFI for a discussion of these matters at www.aspeninstitute.org/aefi.
Beginning the Transition Process
An artist-endowed foundation (AEF) can be created during the artist's lifetime, or its creation can be arranged posthumously as specified in the artist's estate plan. In either case, as an aspect of formation, the artist should clearly articulate their intentions for the foundation's mission and its charitable programs, as well as engage in the necessary planning for its future in concert with the individuals who will serve as members of its governing body. It is highly advisable, that the artist's executor or trustee, given their role in the administration of the estate, be part of this process, or at very least be well informed about these intentions and plans. While the artist may have had numerous professional advisors throughout their career, the executor/trustee has the ultimate fiduciary responsibility for protecting these important assets and guiding them through estate administration for distribution to the foundation.
A Necessary Successor in the Know
This transition is vital in protecting the artworks and other assets that embody the legacy of the artist, heightening the need for the executor/trustee to execute the artist’s intentions with the utmost care and due diligence. The executor/trustee’s total control of this process makes it imperative that they have knowledge of the artist’s works and posthumous intentions. Equally important, this also requires an understanding of what is considered by the artist to be a part of their oeuvre and what is and is not meant for public viewing or private study. Having these conversations as early as possible will allow a smooth transition for the executor/trustee when they fulfill the estate's obligations and are able to release its assets to the foundation.
Keeping Asset Inventory
Throughout an artist’s career, there is virtually no limit to the locations where their work may be dispersed, be it at museums on loan, at art galleries on consignment, in storage at various warehouse facilities, or in the artist's studio or personal living spaces. And lest we forget, these locations may not all be in the same country. Wherever located, however, it is critical to keep a record of every work owned by the artist, and its location, in preparation for the transition.
One sensible preparatory approach is to tighten, as much as possible, access to the artist’s artworks and secure them by moving pieces to a fine art storage facility with a solid inventory system in place. This will make the obligatory appraisal process following an artist’s death smoother and can limit the administrative fees for the appraisal itself.
As the foundation prepares for the transition, a secure inventory of all assets will also benefit condition reporting and plans for conservation.
Outsourcing Inventory Specialists
Working with a professional registrar or collection specialist can assist in the inventory process. They provide expertise on options for securing assets. This makes the estate appraisal process less expensive and cuts down on the time it takes. It also offers a benefit for insurance purposes.
It is possible to obtain insurance to secure an artist’s estate while it is in administration without having a full inventory of the assets. However, the client would have to prove their loss by providing documentation that the work existed, what it was, and a post-loss appraisal. Having a full inventory of all assets mitigates this risk.
Having Proper Insurance in Place
During their lifetimes, artists often do not insure their artworks that they still own. That situation must change immediately upon the artist's death when the executor/trustee's fiduciary duty for artworks designated as a bequest to a tax-exempt charitable organization comes into play. In preparation, artists and their intended executors/trustees should work with well-informed fine art specialist brokers to secure necessary insurance coverage in anticipation of the transition.
While some foundation leaders may use the excuse that, due to art being irreplaceable, they see no value in insurance in cases of total damage from floods, fires, or the like. It takes a shift in perspective to see that the value of insurance is in partial damage, preserving the legacy of the artist through conservation of the artwork.
Insurance of an estate's/trust's holdings can also be viewed with an eye to the beneficiary foundation's ultimate needs. Questions should be prepared for the broker in advance to identify specific issues, such as refabrication for destroyed artwork, instructions on when a piece is considered a total loss, what a future foundation would do with insurance proceeds, considerations for the artist’s studio and its staffing, etc. The many different policies that will be pertinent to the foundation should be vetted – Directors & Officers for organization administration; Employment Practices Liability for foundation employees and third parties; Cyber Liability in the event of being hacked; Errors & Omissions/Professional Liability if a Catalogue Raisonné will be created. All applicable insurance coverages are worth exploring to successfully prepare for the transition.
Advance planning by the artist, their intended executor/trustee, and the members of the foundation's governing body will help ensure a smooth transition and prepare for the long-term stewardship of the artist's oeuvre. Beginning these hard conversations early can mitigate risk and make a challenging time easier to process.
Want to learn more?
Find me on LinkedIn, here.
Connect with the Risk Strategies Fine Art team at fineart@risk‐strategies.com.
Email me directly at mpontillo@risk-strategies.com.
