Estate Planning

Facing the Grim Reaper: Disposition of A Model Railroad Estate.
By Charlie Getz, HLM, Past President, NMRA                                                                       June 27, 2018

This article is neither intended as Estate Counseling nor Legal advice.  Rather, it is based upon years of experience in assisting members with disposal of their collections.  Many of the comments and suggestions are based upon practices and benefits or services primarily available in the United States.  As always, you should consult your own legal or estate advisor before making any decision.  And please check local laws and tax codes as they vary widely from jurisdiction to jurisdiction.

That having been said, I recognize that this subject is sensitive for many and distasteful for a few.  Yet as a modeler, if you care about your loved ones and wish to reduce the inevitable burden that falls upon them after your demise, you might find value in these thoughts.  It is not just death that causes model railroad equipment to be sold.  Sometimes a change in health or status can result in the need to sell.  If you are able to assist in that effort, then of course some of the considerations in this article are not necessary.  But this article assumes that you are unable to assist your family members for health or other reasons.  Since none of us wish to leave a legacy of worries and hurt for our loved ones, a little advance planning and thought can do a world of good.

It is so important to have a plan in place for your estate, whether it is model railroad oriented or not and this is especially true for model railroad equipment.  A plan is needed because of the survivor's occasional unrealistic expectations concerning that equipment, misconceptions about its value or rank ignorance as to methods of disposal.

First, draw up a written series of instructions.  Discuss those with your significant other and family members.  What do you want to have happen to your equipment?  Secondly, if you do not have an inventory with values attached, please consider creating one.  It can be as simple as a narrated video or as complex as a spreadsheet.  But at least, it gives your loved ones a rough idea of what things are worth.  This is no time to be coy - that $25 brass engine which you may have told your spouse about when you bought it should be listed as true current value.  Your spouse will be amazed at how much the engine has appreciated over the years.  And review your values once in a while as some prices may go up while others may go down. That PFM sound system for example may not be worth as much in a digital world as it once was.  Third, have a frank and open discussion about the benefits/problems of disposing of your collection.  One of the common misconceptions we run into when discussing model railroad disposal with survivors centers on values and means of disposal.  Some survivors are completely unrealistic about value and either believe that the materials have great value because they are "old" or have little value because they are "toys".  Of course, it is sometimes difficult to explain to a grieving family member that their loved one's beloved trains are not "extraordinary" and therefore really are not worth a lot on the resale market.  Other times, it is difficult to explain that certain items have great value while other items are essentially without value.  Family members simply have a hard time grasping the difference between, for example, a painted brass locomotive and a more mundane painted plastic locomotive.

It is also difficult for survivors to understand the bewildering choices of disposal options available in most jurisdictions.  Yet they should be discussed with pros and cons addressed.  eBay is often cited as an option until you consider the effort and steps required to dispose of sometimes hundreds of items.  Who will photograph, list, pack and mail all of those items?  On the other hand, if the survivor has the skill and time to market on eBay, it can be a very useful tool to maximize the sale proceeds from a model railroad estate.

Some hobby shops buy estates outright, but the seller should be aware that they will not buy at "retail value" but only at wholesale, which can be as much is 60% below the estimated resale value.  After all, the hobby shop is spending it's hard-earned money upfront with no guarantee that all of the items will sell or sell at the desired price.  Essentially, for a substantial reduction, you shift the risk of sale and effort from yourself to the hobby shop.  For some this is a good trade.  For others, especially if money is important, it is not the most optimal method to achieve a maximum return.

Some shops will sell used equipment from an estate on a consignment basis.  This means you retain the risk of disposition, but the shop handles the mechanics of selling, generally for a percentage of the proceeds.  The advantage is the same as sale to a shop but at a potentially higher return, as the consignment net is generally higher than the purchase net.  The disadvantage is that some shops will not accept all items for consignment; only the ones they think they can sell readily.  Thus, while consignment has the advantage of maximizing the money received, it has the disadvantage of cherry picking your collection of the items the owner of the shop feels are easily sold, leaving you with the harder items to sell elsewhere.

Another option is selling at a train show.  Renting a table is generally inexpensive and again, if the used equipment is desirable, it can be sold at a fair price at train shows.  Of course, the disadvantage is that the seller must have some knowledge of the value of the materials, be prepared to label everything, staff a table and be prepared to take home the majority of the items should they not sell.  There is also the problem of "bottom feeders".  These are people looking for a "deal" and sometimes taking advantage of the seller if the seller is not a hobbyist or it is the end of the show and the seller faces a choice of a sale or taking the item home.  Still, for ease, this option in many ways is better than eBay or selling wholesale to a hobby shop outlet.  But it does not necessarily guarantee sale of all items.

In the United States, an additional option would be to donate the materials to a nonprofit model railroad organization should you not need to sell the items for income.  Many survivors really don't need the money from the sale of their model railroad estate items.  Instead, they seek a fair disposition and more importantly want to convey the items to someone who would "appreciate" their loved one's collection.  Donation, where money is not an issue, is probably the best way to maximize the estate value due to the beneficial tax consequences.  A sale for $1,000.00 is income; a donation of the same $1,000.00 is a deduction off your tax liability.

If you donate it to a 501(c)3 organization, you will accomplish two important goals.  First, you receive a tax deduction based upon the fair market value of the donated goods.  Secondly, you ensure that the organization receiving it will benefit from the collection, thus contributing to their mission.  Some of the materials may be useful to the organization.  Alternatively, the organization will sell the items donated if they have no immediate use for them, ensuring that the items are passed on to other hobbyists who appreciate them.  You have to establish the value of the materials for your deduction.  There are number of model railroad appraisers willing to assist in this effort but even a check of similar train show prices or eBay prices can assist in determining fair resale value.

Sometimes an individual, club or association will step forward and offer to buy the entire collection.  This would probably maximize the dollar amount received but a warning here.  Unfortunately, we have encountered on far too many occasions, persons who contact the survivors following the death of a hobbyist, expressing sympathy, viewing the collection, and then making a lowball offer as if they were doing a great favor for the surviving family members.  Obviously, you should take a very dim view of such tactics but there are those who unfortunately see this as a legitimate business opportunity.  After buying by your collection, they sell it at much higher price at a train shows or on eBay.  If you are approached by anyone offering to buy the estate, get a second opinion as to its value before selling.  Although it is not unfair for anyone to offer to buy at less than retail, sometimes these offers are well below wholesale.

There are companies in the business of buying estates and they often advertise in major model railroad publications.  Most of these companies are highly reputable and have good ethical practices.  When contacting any such company, ask for references.  Check them on the Internet.  I have found that these companies are generally fair, often travel to the collection and can even pay for shipping and packing costs.  However, you will receive wholesale value for the collection similar to a hobby shop sale.  Again, the convenience of this option may outweigh the lessened income received.

Finally, model railroad estates can be auctioned and there are two possible venues.  There are commercial auction houses that on occasion handle scale model railroad equipment.  But these auctions are very unusual and generally, commercial auction houses have no interest in the mundane sort of items that all of us possess and would form the bulk of most estates.  They also charge a healthy "commission" for the sale and you will be responsible for packing and delivering the items to them.  Sometimes, local divisions or regions offer auction services either through a live auction or a white elephant sale.  You would be responsible to pay a premium to the organization and prepare the entry tags for each item.  But overall, this is a fairly painless way to sell an estate not only for income but to buyers who are truly interested in obtaining those items.  Obviously, death and disposal of an estate are distasteful subjects.  We all wish we did not have to discuss them.  But as we age, it is a topic that is increasingly urgent.  More importantly, for those who survive, the best way to keep the memory of their loved one's hobby alive is to make an effort to ensure that those remaining in the hobby have an opportunity to acquire some of the equipment and enjoy it just as your loved one did.  We can think of no better tribute to a loved one than supporting organizations he or she supported and spreading the joy of a hobby that he or she enjoyed.

These are important topics you need to address with your family and a little planning now will save a lot of grief later.