In my opinion - for the average to very nice collection - the best thing is to have a good catalogue that identifies each item & includes a current estimate of it value, this to guide an auctioneer as much as anything. Decide if any are heirlooms - if they came to you down through the family for example - & bequeath those few items to relatives & to eventually be handed on down the line etc. Acknowledge close collecting friends with a gift or heavily discounted item also give to them all those boxes & shelves of bits & pieces & spares & books & unfinished projects that we all have & that are not worth auctioning - that way they will end up in good hands & not landfill.
As for the bulk of the collection if one is really fortunate there might be a relative who is really interested in it. Mostly however that will not be the case & best thing is to nominate an auction house to liquidate it & distribute the proceeds as per the rest of the estate.
I would forget museums. Large ones that have the facilities, salaried staff & procedures to care for the objects under their custodianship are very large & have very rigid & restrictive criteria to limit what can be given to them - as otherwise they get inundated. Small museums are usually overwhelmed with material & suffer hugely from lack of storage space & preservation is often non existent. Typically they are understaffed, rely heavily upon volunteers & are very subject to the whims of the latest volunteer committee & their particular area of interest. I have seldom witnessed more large scale damage to small arms anywhere such as I have with small museums. Stories abound, & I have seen examples myself, whereby a museum's arms are either very poorly preserved or simply slowly rusting away - as well as pilfering that varies from having parts taken and arms getting swapped out or outright stolen.
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