Collections and Estate Planning, Part 1: How Collectibles Affect Your Estate Plan
Every year since his son Matthew was born, Pete Robinson would buy a bottle of fine Scotch as a little celebration.
The New York Post reported that Matthew had inherited 18 consecutive years of Macallan whisky—a “vertical,” as it’s called in the spirits world. What cost $6,600 to accumulate had appreciated to more than $50,000 over that time.1
The Robinsons are a perfect example of why it’s critical to understand how your collections affect your estate plan. Porcelain. Coins. Whisky. Art. Cars. The types of things people collect and the reasons they collect them can vary wildly. If you’re a collector, we believe it’s important to understand how your collection may have appreciated in value and whether the valuation could affect your taxes and estate plan.
We have clients with a variety of collections. Some are passionate collectors who spend a great deal of time learning about their collectibles and sometimes a great deal of money finding the next item to purchase. Others may have inherited a collection without truly understanding what they have and what it’s worth. And others don’t see themselves as collectors, even when they hold substantial and valuable collections. As one wine aficionado said to me, “I’m not a collector; I drink all of my wine!”
Regardless of your specific situation, many collections can have significant financial and even family implications. If you own a collection that has value, we believe it should be viewed as an important piece of your overall financial picture.
Getting started
In our experience, the first step to understanding your collection and any impact it might have on your financial situation is to seek professional assistance. Discuss your collection with your team of legal, tax and financial advisors to determine how much impact your possessions might have on your tax situation or estate plan.
When you speak to your advisors, be prepared to answer some important questions. Here are six common questions to consider:
- Do you have an inventory of the collection?
- What is the collection’s approximate value?
- Has the collection been recently appraised by an appropriate expert?
- Where are the objects physically kept or stored?
- Is the collection insured?
- Are there certain trusted professionals who can provide guidance to your heirs?
If the collection has monetary value and has not been appraised recently—or at all—it may be a good idea to consult a professional appraiser. That way, you will have a good understanding of your collection’s value, which will be important if you plan to pass it on to a family member or donate it to an organization. That information may also affect decisions about where you keep the collection and whether it’s properly insured.
Collections – A family affair
Collections may have important family implications as well. The beloved porcelain pieces that dotted a family home may have deep sentimental value to your children, for example, whether or not they carry notable monetary value. They may see these collected pieces as part of a family tradition. If you plan on giving the collection to a family member and they are happy to receive it, the transfer should be relatively easy.
However, let’s say your child doesn’t want the collection. Then you have a decision to make: should you dispose of the collection during your lifetime or keep it until you die? If the latter, will the collection go to your heirs anyway, who may not appreciate it? Or are there other (and more suitable) options for its transfer?
Of course, each family dynamic is unique. If, for any reason, your family cannot or should not be involved in your decision-making process, another option is to make arrangements for someone you trust to handle the transfer.
Collections can be passion projects or serious investment opportunities. If you’re a collector, your Corient Wealth Advisor can be an important resource. While we may not be experts in your collection category, we can help guide you in accurately evaluating your possessions, understanding their potential impact and making important decisions about them in the framework of your overall finances and estate plan.
Other articles in this series:
- Part 2: The Division of Assets
- Part 3: Potential Tax Concerns for Collectors and Collection Owners
- Part 4: What You Need to Know about Charitable Gifts
1 https://nypost.com/2020/08/26/man-auctions-his-50k-whisky-collection-to-buy-house/
ABOUT THE AUTHOR
Matt Mignon
Matt is a Wealth Advisor in our Morristown, NJ, office. He is responsible for managing client relationships and advising families and individuals on financial planning, tax planning and investment management. Matt is a CERTIFIED FINANCIAL PLANNER™ professional and Certified Investment Management Analyst (CIMA). He served on legacy firm RegentAtlantic’s Financial Planning Committee and Neighborhood Nonprofits Group. He also serves on the Morris Museum Board of Trustees.
Matt has developed a specialty service to support all aspects of our clients’ collections—from building and cataloging to estate planning and inheriting.
Matt graduated from Colby College with a BA in Economics and a concentration in financial markets. Matt also holds a certificate in Financial Planning from Northwestern University.
CONTENT DISCLOSURE
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
Advisory services are offered through Corient Private Wealth LLC and its affiliates, each being a registered investment adviser (“RIA”) regulated by the U.S. Securities and Exchange Commission (“SEC”). The advisory services are only offered in jurisdictions where the RIA is appropriately registered. The use of the term “registered” does not imply any particular level of skill or training and does not imply any approval by the SEC. For a complete discussion of the scope of advisory services offered, fees, and other disclosures, please review the RIA’s Disclosure Brochure (Form ADV Part 2A) and Form CRS, available upon request from the RIA and online at https://adviserinfo.sec.gov/. We also encourage you to review the RIA’s Privacy Policy and Code of Ethics, which are available upon request.
Our clients must, in writing, advise us of personal, financial, or investment objective changes and any restrictions desired on our services so that we may re-evaluate any previous recommendations and adjust our advisory services as needed. For current clients, please advise us immediately if you are not receiving monthly account statements from your custodian. We encourage you to compare your custodial statements to any information we provide to you.
