As I wrote in my article ‘Downton revisited – Mediating estate disputes involving art and heritage property’ [published in Taxation (Tolley) 14.12.2023]:
‘ … “The existence of a dispute over ownership raises a practical problem for anyone seeking to sell the artwork. … Unless the owner is able to successfully challenge the ownership claim, potential buyers … may well be put off
buying the artwork.” (Art Law And The Business Of Art by Martin Wilson (2022), Edward Elgar Publishing, page 361). Where an artwork appears to be an estate asset (A) and there is a dispute about the formal or substantive validity of the deceased testator’s (T’s) will, or a claim is made in equity on the grounds of proprietary estoppel, then until the dispute has been resolved, T’s executors/trustees (E/Ts) will not in practice, be able to:
● appoint A to a beneficiary under the terms of T’s will; or
● sell A to realise liquidity, eg to pay inheritance tax or convert it into cash for distribution to beneficiaries under a will/trust. …
[and a] recipient beneficiary will not be able to sell A.
This is a lose/lose outcome all around.
The financial costs of the impasse to the estate are further compounded by the costs of preservation and insurance of A throughout this time, because E/Ts are fiduciaries. …
[However] the existence of art in an estate is a tool whereby a mediator can steer the participants in dispute toward a mutually satisfactory settlement on terms which enable them to re-structure the testamentary disposition of qualifying estate assets so as to ensure the retention and preservation of A for the benefit of the nation by using a tax-incentive scheme, and thereby to expand the size of the estate pie for distribution, resulting in a win/win outcome all round. Thus, by analogy to the famous voiceover slogan for Carlsberg Lager by Orson Welles broadcast in 1983 – mediation ‘reaches the parts that’ litigation ‘cannot’, ie because the court does not have the power to order what the parties can creatively agree to engineer post T’s death. That is why mediation is ‘probably the best’ form of dispute resolution ‘in the world’ for an estate which includes art.’ The article contains a Table of Mediator Tools, including two novel tax-efficient post-death estate re-structuring ideas which occurred to me as I was researching the article.