Leveraging Your Art Collection
Updated: May 8, 2020
The global art market is growing steadily, and is now worth a nearly $70 billion a year. Much more than a decoration to adorn the wall or reflect personal taste, artwork has become an investment or source of wealth. Those whose collections have grown slowly over the years and those who have recently acquired an inheritance of artwork may not know the value-creating potential of the artwork on their walls.
I have recently worked with Guy Asadorian, Senior Vice President and Private Client Advisor at U.S. Trust, Bank of America Private Wealth Management and with Meri Beth Giewat, Vice President and Fiduciary Specialist at BNY Mellon Wealth Management. Through my interactions with these two individuals, I have learned more about two great wealth management strategies for fine art collectors and would like to share them with my clients.
1. Utilize private art collections as collateral to gain liquidity for other financial purposes while maintaining ownership of the collateralized artwork. By borrowing against owned artwork, you can invest that capital into
opportunities that they anticipate will generate a higher return than the interest paid on the loan.
2. Incorporate art loans in your legacy planning by setting up an art loan to pay prospective estate taxes. This can provide heirs flexibility to sell the art at an opportune time when the art has increased in value, instead of immediately following the art collector's death.
A majority of collectors do not incorporate their artwork in wealth planning, which may result in higher taxes when the art is given to the next generation.
In order to leverage artwork, purchase additional art, fund new investments, or diversify a portfolio using art, you must know the current market value of your collection. Having a current art appraisal prepared by a qualified, art-specialized appraiser is a great way to examine the current market value of your fine art assets, which will allow you to unlock the potential leveraging opportunities available through wealth management banking specialists. Further, once you have an appraisal with current fair market values for your art, estate planning for your art can be carefully examined and early planning can take place to ensure your goals are fulfilled.
Painting by Hugh Henry Breckenridge (1870-1937)-Boats in Harbor-Gloucester Massachusetts. Oil on canvas 24 x 21-3.75 inches