Art collection and legacy planning should begin with a current appraisal of each work of art, concluding the current Replacement Value – Comparable, for insurance purposes, or Fair Market Value, for estate, gift, and equitable distribution purposes. Value conclusions of fine art are based on relevant facts in the assignment, characteristics of quality including authenticity, subject matter, quality, condition, ranking within an artist’s oeuvre, rarity, provenance, and recent sales and current sales prices of comparable properties. The appraisal process should begin with a physical examination of the art by a qualified art appraiser, during which the characteristics of value of each piece are carefully identified, examined, and documented. Thereafter, the appraiser’s research begins. For their market research, it is important to consider the appropriate markets (level and tier) in both the auction and private gallery markets in which similar works are frequently traded. Using their property evaluation, research, and market study, the appraiser prepares an appraisal report.
Through the utilization of a certified, USPAP compliant appraisal report, a better understanding of the current taste of the market for artworks in a collection can be gleaned, making informed and strategic decisions much easier to examine with regard to honing a collection. Collection curating considerations may include:
· gift planning, including exploring federal and state tax strategy planning and seeking professional advice
· gifting, including transferring split-ownership through planned giving vehicles, some which can provide a lifetime income stream
· buying new pieces where market opportunities are revealed in the report's research
In recent years, private museums and foundations with expansive art collections have emerged as an opportunity to preserve profound collectors' legacies for generations to come.
Retaining a qualified and accredited fine art appraiser specialist, as opposed to a generalist appraiser, is paramount for credible value conclusions in an appraisal. Beginning in 2006, the IRS defined qualified appraisal and qualified appraiser for purposes of substantiating the value of non-cash charitable contributions.
An IRS qualified appraisal is “made, signed and dated by a qualified appraiser in accordance with generally accepted appraisal standards” (USPAP) and “meets the relevant requirements of Regulations section 1.170A-17”. And, “a qualified appraiser is an individual with verifiable education and experience in valuing the type of property for which the appraisal is performed”.
Qualified and Accredited Appraisers: comply with professional standards, and
1. Pass the most recent USPAP examination. The Appraisal Foundation issues an updated USPAP every two years, providing standards, rules, and guidance.
The current USPAP version in use is 2020-2021.
2. Adhere to a stringent code of professional ethics and appraisal report writing standards promulgated by The Appraisal Foundation and USPAP.
3. Are accredited members of one of three generally recognized professional appraiser organizations: American Society of Appraisers (ASA), Appraisers Association of America (AAA), and International Society of Appraisers (ISA).
4. Are objective: have no past, present or prospective interest in the appraised property and no personal interest with respect to the parties involved.
If an appraiser meets these specifications and has deep knowledge and experience in valuing the types of pieces being appraised, a collector, executor, or trustee can rest assured knowing that they are qualified and held to the highest standards of appraising and appraisal report writing. John Cahill, a NY art specialist lawyer was quoted stating, "All appraisers are not created equal, and even the good ones are not good at everything."
For the IRS, the appraiser's knowledge and competency are paramount in the consideration of their appraised values, and their conclusions must be supported by facts. With stiffer appraisal requirements, Chubb Personal Insurance recommends asking for the appraiser's curriculum vitae (CV) when hiring an appraiser to verify that the appraiser meets "The Four E's: experience, expertise, examinations, and ethics.” Be wary of the credibility of appraisals that are based on photographs not examinations of properties, as they provide very limited factual information and skirt the appraiser's first and most obvious criterion of credibility: a witness to the property at a specific point in time. For estate/probate appraisal purposes, consult your state's jurisdictional laws for any additional requirements. The Appraisal Foundation's current USPAP standards (publication dated 2020-2021) can be found at http://www.appraisalfoundation.org/TAF/Standards/Appraisal_Standards/TAF/USPAP.aspx?hkey=5a640dda-464d-4683-b4e1-190201e0eda7.
 USPAP (Uniform Standards of Professional Appraisal Practice) is written and updated by The Appraisal Foundation every 2 years, providing standards, rules, and guidance for appraisers, appraisal report users, and the public. www.appraisalfoundation.org  https://www.irs.gov/pub/irs-pdf/p561.pdf  https://www.irs.gov/pub/irs-pdf/p561.pdf  Ann Carrns, "The Specialized Art of the Appraisal," New York Times, 18 October 2011, Sec. Wealth.  https://www.chubb.com/us-en/individuals-families/products/valuables/arts.aspx