By Amanda DunnFor many collectors, their interest in acquiring art is a passion. People spend their entire lifetime building their collection, and it can make up a substantial part of their net worth. But, unlike the thoughtful planning that is often intrinsic to other assets, the majority of collectors have not crafted a plan of action for their art collections.
Should the unlikely happen, what would become of your collection? Have you communicated with your family and friends about your works and their value? Have you laid out a comprehensive plan so your collection can go from one generation to the next or to the greater community to enjoy?
So how do you prepare for the inevitable?
First, take the time to inventory your collection by listing each piece along with the provenance, bill of sale, condition report, authentication, photos, artistic biography, insured value, and location. There are great inexpensive online collection management tools such as Artwork Archive that can help you to document this information for future use. We’d recommend that you update your inventory every time you make a new purchase to ensure you have the most accurate records.
What is your ultimate objective?
Ask yourself, is your collection your legacy? What are your objectives? Do you want your family to retain your collection or own it? Do you have an execution strategy, such as an auction house, in place?
Formulating a comprehensive succession plan for a collection is significant, important, and challenging. No plan is static as your philosophy and the laws change. Consider building a professional team to facilitate the planning strategies that include an attorney, art appraiser, insurance advisor, and possibly an art advisor.
What is the value of your collection?
It’s important to establish the value of your collection and to keep it up to date. In most cases, what you paid for it then is not what it is worth now. There are many amazing art appraisers out there, but make sure you select one that specializes in your genre of work and has been accredited by a governing body such as the Appraisers Association of America.
Have you protected your collection against taxation?
Understanding elements of estate or income taxation is key. In the US, every asset you have is subject to estate tax, but every jurisdiction is different. You could be putting a big burden on your successors that you may have never considered. Your tax lawyer can help you minimize taxes when passing on your collection to the next generation, so be sure to seek advice, the sooner the better.
Do you have insurance?
Make sure your collection is also being protected to preserve its value from physical damage and financial loss by seeking the advice of an insurance expert. A standard homeowners policy won’t do the trick in most cases, so best to consider a fine arts insurance policy that provides broader coverage customized for your collection.
What about your intentions for the future?
Next your intentions and requirements need to be discussed in order for future generations to continue appreciating your works. Whether its family or an institution that will be taking over your collection, communication is key in protecting your legacy. You need to communicate your plan clearly. Otherwise your successors won’t know what your goals are.
And finally, spend time grooming the next person for your collection. Make sure they actually want your work. You might find that your family members might have no interest or competency when it comes to your collection and will simply sell your works for a quick buck. You also don’t want your collection going to an institution that will file your works away in a dingy basement where no one else can enjoy what you have created.
If you would like more information on how to create a successful succession plan for your collection, One Art Nation brings together prominent art experts from across the globe to address topics that range from building, maintaining and protecting a collection, to tax and financial aspects of owning art. This is the type of content that matters most to art collectors and professionals, both experienced and new. Visit www.oneartnation.com.
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Amanda Dunn co-created One Art Nation to empower and captivate art collectors and professionals by bringing together prominent art experts from across the globe to address topics that range from building, maintaining and protecting a collection, to tax and financial aspects of owning art. Amanda has worked in North America, Europe, and the Middle East within respected organizations including Christie’s Auction House. Her passion lies in art and her goal is to demystify the process of buying art from start to finish.
Click to view an interview with the author!