The Challenges of Managing Collections

Collections, whether fine artwork, rare automobiles, historical relics, or anything else, may be one of the most valuable assets in a client’s estate. If you are an Advisor to a collector, you likely already know the myriad of issues that arise in connection with the preservation, purchase, or sale of the collection. Advisors must understand the investment considerations and estate planning techniques, including the practical considerations associated with purchase, sale, transfer, preservation, and donation of a collection. 

In the family office space, some, namely those with specialists on hand to manage the collection, may direct every aspect. However, if an advisor is not well-versed on the range of risks and responsibilities associated with managing a high-end collection, they would be well-advised to consider involving outside expertise. As just one example, in the case of fine artwork, responsibilities may include due diligence and review of provenance, inventory, appraisals, insurance, storage facility, negotiation of terms, crating, delivery and installation, transit protocol guidelines, and minimizing sales and use taxes in connection with art purchases or relocations. Very few people have an appreciation for the full array of required knowledge to skillfully navigate these needs.

Changing perspective, collector’s motivations vary greatly, but it’s usually more than just a desire to acquire.

“Tell me what you collect, tell me how you collect, and I will tell you who you are.”

-Jean Willy Mestach

Serious collectors assemble collections in the pursuit of their passions, and they want the legacy of their time on earth to be shaped by meaningful things. That includes the collections they so cherish. Collectors know the joy that comes from being surrounded by wonderful objects, and the richness that their collections add to their lives. Collections are also intensely personal and infrequently shared with others. Your clients know their collections intimately; however, their heirs do not.

What motivates and excites collectors? Is it the thrill of the hunt for a rare Basquiat painting or a 1973 Porsche 911 RS?  Whatever it is that thrills collectors, there are some housekeeping issues that must be attended to in order to assure clients get the most benefit from their collections. Whether that means helping minimize their tax burden, ensuring that their objects are safe from theft or the elements, or maximizing their collection’s value for heirs, a little attention now can save a massive headache later.  Understanding a client’s purpose in developing and maintaining their collection, their dispositive wishes, the cost basis in the collection, and the anticipated value of the client’s taxable estate, will guide you in formulating an effective financial and estate plan. Serious collectors of fine art and rare objects will often find that, over time, they have created substantial wealth.

On Fine Art

Collecting art can be a rewarding and enriching experience but it also requires careful consideration to ensure that making informed and thoughtful decisions. Here are some of the most important considerations to keep in mind when collecting fine art:

  1. Your budget. Before you start collecting art, it’s important to establish a reasonable budget. Art can range from very affordable to extremely expensive so it’s important to be realistic about what you can afford to spend.
  2. Your personal taste. Collecting art should be a reflection of your personal taste and aesthetic preferences. It’s important to chose art that you love and that resonates with you on a personal level. 
  3. The artist’s reputation. Research the artist whose artwork you’re considering purchasing. Look into their background, education, and exhibition history. This can help you assess the quality of their artworks and the likelihood it will appreciate it in value.
  4. The condition of the artwork. When purchasing art, be sure to inspect the artwork for any damage or wear, look for any cracks, tears, or discoloration that could affect the value of the artwork. 
  5. Provenance. Provenance refers to the history of ownership of artwork. It’s important to know where the artwork has been and who has owned it in the past. This information can affect the value of the artwork and help you determine whether it’s a worthwhile investment.
  6. Authentication. Make sure the artwork is authentic and comes with proper documentation. If you have any doubts about the authenticity of the artwork, consult an expert. 
  7. Storage and Maintenance. Once you’ve acquired a new piece, it’s important to properly store and maintain it to ensure longevity. Be sure to follow any instructions and recommendations from the artist or dealer to preserve the artwork.
  8. Insurance. Properly insuring an art collection can be a daunting experience. However, it’s critically important to have a specific art policy for your collection to mitigate against a myriad of risks – both foreseen and unforeseen.

Overall, collecting art and managing any collection requires a combination of passion, research, and careful consideration. And by keeping these important considerations in mind, you can make prudent and thoughtful decisions.

If you would like to connect with a Cerity Partners Advisor that specializes in the management of high-end collections, please contact us.

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