Tell me again about the "public trust" (a continuing series)

Judith Dobrzynski has news of two more museums selling work, including the planned sale by the Art Institute of Chicago of a Braque, two Picassos, and a Matisse at Christie's next month. The combined high estimates come to about $15.5 million.

Here are two things we know about those five works:

1. Having fallen under the aegis of a museum, they were held in the public trust, to be accessible to present and future generations . . . or at least until February. After that: not so much. Sorry present and future generations! Don't be so touchy about it.

2. Their sale will certainly NOT send a terrible message to potential donors. Nobody will say: "Why should I give this to you? What guarantee do I have that you're not going to sell this tomorrow?"

It's almost as if this whole "public trust" business is a bunch of b.s.

As if on cue . . .

The Philadelphia Inquirer's Stephan Salisbury reports this morning that the Pennsylvania Academy of the Fine Arts has sold five works and plans to sell five more.

The five already sold are: Autumn Still Life by William Merritt Chase; Looking Over Frenchman's Bay at Green Mountain (1896) by Childe Hassam; Flowers (1893) by John H. Twachtman; Bathers in a Cove (1916) by Maurice Prendergast; and Great White Herons (1933) by Frank Weston Benson.

Hey, wait a minute! Weren't we just told that this is a terrible message to potential donors. Why wouldn't somebody say, "Why should I give this to you? What guarantee do I have that you're not going to sell this tomorrow?"

Besides, separate and apart from any impact on future donations, those works were held in the public trust, to be accessible to present and future generations. How DARE the museum sell them? It's an outrage, I tell you.

Or is it?

Janet Landay, executive director of the AAMD, says: "It's a normal part of building a collection. It shouldn't be such a touchy subject."

Yes, stop being so touchy. It's totally normal for museums to sell work. Who said anything about sending negative messages to potential donors?

Who ever said the works were held in the public trust to be accessible to present and future generations?

Where did you ever get such crazy ideas? Selling work is a totally normal non-touchy thing to do. Why is that so difficult for you to understand, Mr. Touchy?

David Brigham, president and chief executive of the Pennsylvania Academy, goes so far as to say "it's a positive story." "Collections aren't static," he said. "They aren't meant to be static."

No, they're not.

"It does no good to conserve an individual object if you put it back into the very environment that caused it to deteriorate in the first place."

NPR has a story on the recent deaccessioning at the Philadelphia History Museum. The New York Times ran a similar story last month.

I always love this move: "Russell Lewis, chief historian at the Chicago History Museum, says his institution tries to avoid deaccessioning because of the message it can send to potential donors. ... 'Why wouldn't somebody say, Why should I give this to you? What guarantee do I have that you're not going to sell this tomorrow?'"

But, on the strict anti-deaccessionist view, what guarantee does anyone ever have that work they donated won't be sold? Museums sell work constantly, and use the proceeds to buy more art. Why wouldn't somebody say, "Why should I give this to you? What guarantee do I have that you're not going to sell this tomorrow?"

Somehow sales to buy more art, no matter how routine, don't seem to discourage future donations. Sales for any other reason, however, send potential donors running for the hills.

Thanks to Mark Gold for the pointer.

I wonder what a large ad hoc committee would have looked like

Judith Dobrzynski reports that the promised small ad hoc committee of museum leaders has been established by the New York Board of Regents to help it produce an updated set of deaccessioning regulations. There are 16 members.

"Except for the super wealthy, the tax benefits of giving through an estate plan have been wiped out."

Forbes: New Estate Tax Law Could Hurt Charity. (For more on the new estate tax law, see here.)

Linkage

• Chris Marinello on who buys stolen art.
• Interview with art title insurer ARIS.
• Law School for Visual Artists.
  

"The group is hanging its admittedly slim hopes on a court challenge that West Chester Attorney Samuel Stretton said he would file within a week."

The Friends of the Barnes fight on:

"Stretton said he will ask that the original case be reopened, arguing that then-State Attorney General and now-Federal Judge Michael Fisher was too supportive of the coalition of individuals and groups that pressed for the Barnes to be moved to Philadelphia.

"As Attorney General, it was Fisher's job to represent the interests of the state's citizens, not one side or the other in the dispute, Stretton said.

"Stretton said he questioned Fisher's actions after seeing him interviewed in the 2009 documentary, The Art of the Steal, which offered a critical view of the machinations that ultimately led to the planned move of the Barnes.

"It is not the first time the Attorney General's role in the case has been challenged.

"In 2004, Montgomery County Orphans' Court Judge Stanley Ott issued a blistering critique of the Attorney General's position, making same point as Stretton.

"In response to Ott's criticism, Sean Connolly, spokesman for the Attorney General's Office, agreed that 'the attorney general represents the public, not one side or another in charitable matters.'

"'In this case,' he said, 'we supported the petition because, in our view, it was in the best interest of the public.'

"Despite his unhappiness with the Attorney General's office, Ott ultimately approved the plan to move the Barnes, which would not seem to bode well for Stretton's attempt to raise the issue now.

"In his ruling, Ott acknowledged that Barnes' will stipulated that his collection never be moved, but determined nonetheless that the Barnes Foundation was in financial trouble and the move to Philadelphia was in the best interest of the collection."

Estate Tax Changes

Welcome back, and Happy New Year everybody! To kick things off, I thought I'd share an advisory we sent to our clients regarding the tax legislation passed by Congress just before the holidays:

The just-enacted Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”) favorably addresses uncertainties lingering in our federal estate, gift and generation-skipping transfer tax regimes since 2001. Absent Congressional intervention, the Act expires at the end of 2012. In the interim, however, the Act may produce planning opportunities for certain individuals.

Here is a summary of the most significant changes to the federal gift, estate and generation-skipping taxes for 2011 and 2012:

• The rate for the estate, gift and generation skipping transfer taxes is 35%.
• The estate and gift tax regimes are “reunified,” with a combined tax-free allowance of $5 million ($10 million for a married couple). This means that there will be an increase from $1 million to $5 million in the tax-free amount for lifetime gifts. This will create enhanced planning opportunities in states such as New York which have no gift tax.
• The Act affords “portability” of a deceased spouse’s unused tax-free amount to the surviving spouse. If a spouse does not use some or all of his or her tax-free amount of $5 million, the surviving spouse may use the remainder, ensuring that $10 million per couple will be exempt from the unified gift and estate tax during the period covered by the Act.
• The generation-skipping transfer tax exemption is also set at $5 million.
• The $5 million tax-free amounts will be indexed for inflation after 2011.

The Tax Act resolves uncertainties in the federal gift, estate and generation-skipping tax regimes in effect in 2010 as follows:

• The estate tax for 2010 decedents is restored, with a tax-free amount of $5 million and a 35% tax rate. Importantly, however, 2010 estates may elect out of the estate tax regime entirely and into an income tax regime of modified “carryover” basis.
• The generation-skipping transfer tax administrative rules are applicable to 2010 generation-skipping transfers, but no GST tax is payable on 2010 transfers.
• The lifetime gift tax exemption remains $1 million in 2010, with a 35% tax rate for gifts in excess of that amount.

Lastly, for those concerned about changes to the law for grantor retained annuity trusts (“GRATs”), we can report that the Tax Act left this valuable estate planning strategy unscathed.