Image Credit: Nicole McDaniel
There are times when being an art collector is about giving. Times, for instance, when the public gets to see a piece of art they never would have witnessed had you not lent it to a museum. Lending your art to a museum or gallery has many positives. You get to share your passion and art collection with the community, increase your contacts in the art world, and may even be eligible for a tax break. It’s also a great way to keep your art safe and cared for, if you no longer have room on your walls. Like most things, there are also risks involved. Your art will be travelling and could be damaged in transit, and is entering the hands of another, outside of your protection. Understanding the benefits and risks of lending your art will help you make an informed decision on whether it’s the right move for you and your art collection.
Here are 9 points to consider when lending your art to a museum or gallery:
1. Prepare a Comprehensive Loan Agreement
The loan agreement is your contract, naming you the owner of the art and specifying the details of the loan. This is where you can outline the dates you agree to loan out the work, the location (i.e. the borrower), the title(s), and the specific exhibit, if relevant.
You’ll also want the most recent appraisal values and condition reports in the loan agreement. This will ensure you are compensated in the case of damage or theft. If you have any display requirements, make sure these are in ink as well. The loan insurance, usually provided by the museum, will also be outlined in the loan agreement. Store this agreement along with any appraisal value documents and condition reports alongside your piece(s) in your Artwork Archive account so they don’t get lost.
2. Secure the Right Insurance
In addition to your personal fine art insurance, the museum should also provide a specific insurance plan. This should be door-to-door, also known as “wall-to-wall,” coverage. Meaning the artwork is covered for any restorations or the most recent appraisal value from the moment it leaves your house until the time it’s safely back in your home..
Art insurance specialist Victoria Edwards of Wasserman & Associates Insurance Agency, LLC gave us her input on securing coverage when lending your art. “You want to make sure there is door-to-door coverage,” Edwards advised “so when they pick the painting up at your house it is covered in transit, at the museum, and back home.” You should also make sure that you are named as the loss payee in any sort of damage.
3. Do Your Due Diligence Before You Ship Your Art
As discussed above, any shipping damage should be covered in your insurance policy. However, a condition report of each piece is a must before any of your art goes into transit. This way you are protected upon any new damage. Although that means you will be reimbursed for any accidents, we have tips on how to avoid this situation altogether. Also be warned that UPS and FedEx insurance policies specifically exclude artwork in the fine print. Even if you purchase insurance through them, it will not cover fine art.
We learned this from Derek Smith, President of AXIS Fine Art Installation, also an expert in shipping and storage. Consult a conservator for packing and shipping protocols for your specific type of artwork. “It helps to know every good conservator in a market,” Smith continues. They have experience in shipping and restoration, meaning they know how to prevent the damage of a piece. “It can’t be brought back to it’s former glory,” Smith admits, so you must do your best to protect your collection.
4. Use It as a Way to Save on Storage
Lending your art to a museum is usually free. If your art collection is becoming larger than you can display, lending your artwork is an option before outfitting an at-home storage space or paying a monthly storage unit bill. If you do need to store artwork at home, learn more about that here.
5. Consider It a Charitable Contribution and a Learning Opportunity
Image Credit: Nicole McDaniel
Although you’re not donating your collection for good, remember that you’re contributing to an exhibit that benefits the community. By lending your art to a museum, you are sharing your passion for art with the public. Additionally, this can be a wonderful opportunity to learn more about your piece, because the museum will provide scholarly details. By being a part of a specific exhibit or museum collection, the community can learn more about an artist you love, and you might learn something too.
6. Research Possible Tax Benefits
You might be asking: “If it’s a charitable contribution, is there a tax benefit involved?” Specific to each state, it’s worth consulting a tax attorney on any possible tax benefits for lending your art to a gallery. The New York Times reported on an art sale, made by a woman in Nevada, who recently purchased Francis Bacon’s triptych “Three Studies of Lucian Freud,” for a hefty $142 million. Incurring a cost of almost $11 million in taxes, the buyer will have the opportunity to avoid this tax cost because she lent the artwork to a museum in Oregon, a state with no sales or use tax. Use tax will be explained in the next section.
As the lender, you should be informed of any tax breaks that you may want to utilize and address in the loan agreement.
7. Understand You May Owe Taxes
Varying state by state, some fine art may be subject to a “use tax” when lent to a gallery or used in any other way. For example, if the Washington state use tax is not paid upon the purchase of goods then the use tax is due when the goods are brought to Washington. Washington’s use tax is the same rate as their sales tax, 6.5 percent, and is calculated via the value of the goods when they enter the state. This would be relevant if you purchased fine art in California and wanted to lend it to a museum or gallery in Washington.
Anything tax related is going to be state specific. Generally, you should be aware that your art insurance representatives, attorneys, and the museum or borrower are responsible for notifying you of all possible tax breaks or bills.
8. Protect Yourself from Seizure
You want to make sure that your art cannot be brought to the court of law for any reason. This could happen for something as simple as an ownership dispute, when the bill of sale is not accessible. The United States’ Statute 22 protects objects that are culturally significant or of national interest from governmental seizure. Any non-profit museum, cultural, or educational institution may apply to the U.S. Department of state to determine if the artwork or object is protected under Statute 22. This will immunize the object from the judicial process.
If you are loaning your artwork abroad, be sure it is protected under a similar clause. That way it cannot be seized regarding any confusion over its authenticity, owner, or other concerns.
9. Stipulate Your Requirements
It is your responsibility and prerogative to outline any specific requests and requirements in the loan agreement. For instance, whether you want your name to be displayed with the piece or where you would like to see it in the museum. Although contracts can be tedious, operate with a fierce attention to detail when putting together your loan agreement. We would recommend starting with a list of wants and fears, and then consulting with your insurance agent or estate planning attorney to help you confirm that these are all addressed in the loan agreement, as well as the points discussed in this post.
Loaning parts of your art collection is a great way to give back to the community and share your love of art. Getting involved with the museums will also connect you with their resources, conservators, and curators who are a wealth of information when it comes to further defining and developing your art collection.