The Art of Legacy Planning
April 25, 2023
Summary of the Article
From the rise of NFTs and more people bidding on art without ever having seen it in person (thanks to online auctions) to art being considered a global currency, many factors are contributing to the strong growth of today’s art market.
But purchasing high-value fine art is not a straightforward transaction. Managing a portfolio including a multi-million dollar fine art collection extends far beyond estate planning and into the realm of legacy planning. Claire Marmion, fine art consultant, says collectors must actively preserve the legacy of their works of art as soon as they acquire each piece, not after their collecting journey comes to an end.
Legacy planning is about how you protect the physical condition of the artwork, how you promote the artist and how you share the art and its story—acting as the loyal custodian of each piece–and of course, enjoying the art each day.
Legacy planning also accounts for how the art (and its inherent value) will be distributed evenly among the next generation to inherit it. For example, one of our members is a young collector and a father of two. His natural concern is sibling feuds. With two major pieces in his collection, how can he ensure that if he gives one to his daughter and one to his son that the value of one piece won't be significantly higher than the other in the years to come?
"This is when it may make sense to buy the art in a trust, which can be owned by both beneficiaries and allows them both to benefit from the collection. It really gives a fair ownership structure. So, while the Lichtenstein hangs in one person’s home and the Matisse hangs in the other, they both own the art collectively," says Daffan Nettle, Managing Director at UBS Private Wealth Management.
High-value fine art is also a different kind of asset class that carries unique, and sometimes overlooked exposures. Members will often ask us about theft, but statistically, art is much more likely to sustain water damage or fall off a wall than it is to be stolen. In fact, water damage represents the most common type of art insurance claim among our membership. The second most common is damage caused during transit. One in four of these claims is caused during shipping, handling or transportation. Following these types of loss is everyday damage caused by children, pets or delivery people, for example.
Collectors must create environments that reduce these risks and even consider exposures that are not covered by insurance, like fading attributed to sunlight and other physical risks that can impact a work’s financial value.