Financial & Wealth Advisory
The Scope of American Collecting
It is said that at least one in three Americans collects something, from art and classic cars to antiques and estate jewelry. Merrill Lynch’s 2011 World Wealth Report specifically addresses the role of these “passion investments” in the portfolios of today’s high net worth individuals:
In 2009, the total value of collectible investments was estimated at roughly $4.3 trillion, putting collectible assets on par with the $1.9 trillion invested in hedge funds and the $2.5 trillion invested in private equity funds.
Those numbers are stunning, but what’s even more surprising is that the great majority of these collectors haven’t given a thought to the process of that succession. These collections are not all Rembrandts, Monets and Picassos. A collection could consist of antique firearms, Western American art, African ritual masks, textiles, folk art, stamps and coins, classic cars, or just about anything else people accumulate during their lifetime.
A Special Asset Class
Like every other valuable asset a collector owns, art, antiques, and collectibles should be addressed within his or her comprehensive estate plan. These plans are traditionally developed by an advisory team that may include attorneys, CPAs, investment advisors, financial planners and insurance specialists. However, art and collectibles comprise a special asset class – there may be issues of title, valuation, provenance and restoration that affect the collection and likely fall outside of these advisory experts’ areas of expertise.
Traditional financial and estate planners often have little understanding of the nuances that affect the value of these specialized collections. For this reason, a collectible succession planning professional is also an essential player in the collector’s estate planning team. The collectible succession planner works on behalf of the collector and sometimes functions as a special trustee. He or she coordinates with appraisers, dealers and museum representatives as needed to create a successful plan to either distribute these assets to heirs or utilize them within the structures of estate planning to realize the collector’s specific goals.
Achieving Collectors’ Goals in a Succession Plan
Virtually every collector would like to maintain or increase the value of his or her collection. Most would agree that the collection should be protected from loss, damage, the claims of creditors, and unnecessary taxation. Beyond these basic priorities, collectors may utilize their art and collectibles to achieve a number of goals, including:
- Providing funds to maintain the collection in the collector’s absence
- Transferring the collection to their heirs
- Using the value of the collection to benefit a favorite philanthropy
- Generating an income stream
- Creating a legacy for the family name or even for the collection itself
The Phases of Succession Planning
Art Resource Group offers a specialized art and collectible succession planning service, which is divided into three phases:
- Appraise: reveal the past and the present of a collection
We develop a history of the collection, including appraisals and provenance research, and build an electronic inventory including photos and artist information. If this documentation has recently been prepared, we will review it. This document may be shared with beneficiaries and advisory team members and adds significantly to the impact and value of the collection
- Assess: uncover risks and possibilities
Through in-depth and query-driven discussions, we work with clients to ascertain and fully understand their goals for the collection. In this phase, we begin to address the planning required to take advantage of the opportunities we’ve presented, and the pitfalls that result from a lack of planning.
- Achieve: construct a comprehensive collectible and art succession plan
We develop a strategic plan to help clients realize the goals we’ve discussed. This plan will explore all of the methods of achieving these objectives and present techniques to minimize estate and capital gains taxes and maximize the value of all collectible assets.
For further information, contact Miriam Smith: firstname.lastname@example.org