Estate Planning for Art

You may not think of your collection of art, antiques and collectibles in financial terms, but you should.

Michael Mendelsohn, founder and president of Briddge Art Strategies Ltd., estimates that art and collectibles represent 10% to 15% of the $41 trillion in wealth that is expected to change hands over the next 50 years as baby boomers leave their estates to their beneficiaries.

For some families, collections represent a significant portion of their net worth. Mendelsohn, whose company works with collectors and their advisers (law firms, trust departments and accounting firms) to determine strategies to manage their collections, adds, "We find that a lot of people who don't even think they collect things actually have $1 million to $1.5 million worth of collectibles."

When it comes to estate and charitable planning, your collection is a financial asset that requires careful consideration.

If you don't think proactively, your treasured collection may have to be sold to pay estate taxes.

This sale is usually at an auction house, where the collection might not bring its true value.

For instance, a major collector of folk art was recently tracked down by an artist's agent and learned that the value of his works was 30 times greater than that suggested by a reputable auction house.

"A financial-based strategy will make it possible for you and your heirs to realize the full potential of your collection, from both a philanthropic and a financial perspective," says Mendelsohn, as described in his book Life is Short, Art is Long: Maximizing Estate Planning Strategies for Collectors of Art, Antiques, and Collectibles.

The Wrong Way

Most collectors are not aware of the estate and charitable planning options open to them.