Archive for October, 2009

Advisors: Don’t Ignore “Collectibles” in Clients’ Estate Planning Process

Wednesday, October 14th, 2009

Most advisors are comfortable with equities, real estate and other traditional assets in putting together an estate plan for their clients.  However, when it comes to a client’s art collection, antiques or even a toy train collection, most advisors put such items in the personal property area or ignore it all together.

Not a good idea as a clients’ collection of fine art could be worth a sufficient portion of the entire estate.  This is especially a fact with very high net worth clients whose discretionary income more often than not may have been invested in a lifetime of collecting classic cars or an extensive accumulation of vintige wines.

The issue isfurthur compounded because the collector client usually don’t discuss their collections with their advisors and their advisors easily overlook this subject entirely.  Even though, in families with net woth in excess of $10 mllion routinely collect something of value estimated to average 10 percent of total wealth, according to Randy Fox , founding principle of inKnowVision, LLC, a national consulting and marketing firm that develops wealth management strategies for high net worth clients.

The simple answer for advisors is planning for your client’s collection of whatever is as important as planning for his or her other wealth.  In fact, all assets of wealth must be processed together in order for your client to have an orderly transition of legacy for succeeding generations.

If not, a lifetime of collecting can disappear overnight on the passing on of wealth to the next generation.  Children can fight over portions of a collection; the collection can be decimated by forced liquidations to pay estate taxes or auction fees of collectibles can take huge bites of income and fractionize value.

Not only that, the impulse to resell or claim collectibles by the next generation can lead to tax fraud.

Thus, planning  is essential to prevent the issues of collectibles from surfacing by the advisor being comfortable about talking with the client about the subject. Even putting emphasis on the client’s collection to have a distinction of becoming an art succession advisor.  There are a few of these specialist around who press the client about the importance of the collection, its history, meaning to the client personally and where the collection stands with his estate sucession plan.

Collections of a serious nature need to be catalogued, evaluated appraised , ranked and authenticated.  Furthur, discussions with client and advisor should relove around tax implications if donating or selling portions of the collection might be good strategy to avoid capital gains ( 28% for collectibles( before the client’s passing.