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| Risk & Reward |
The Collector's Conundrum
Mary Lowengard
05/03/2004
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Value and Validity
Joanne Johnson, a wealth advisor at JP Morgan Private
Bank in New York City, recommends a practical first step: assessing the worth of
our collectibles. “If your collection comprises up to 50 percent of your overall
assets, but doesn’t dominate them, your concern should be focused on how to
divide it up among future generations,” she says. “Problems arise when your
collection is so valuable and appraises so highly that its value exceeds the
liquidity of your estate on death.” In this case, say experts, directing a sale
is the best and simplest solution.
Over time, collection expenses—and
the quality of the collectibles themselves—often spiral upward. But often, says
Ralph Lerner, an expert in art law with the firm of Sidley Austin Brown &
Wood, collectors never bother to remove older, less valuable pieces from their
collections. These pieces, advises Lerner, should be sold to build a sinking
fund to pay taxes or purchase insurance. Then we can move ahead to hire an
attorney to work out a plan.
Indeed, one of the more difficult aspects is
appraising the collectibles themselves. The key is finding a good appraiser,
because the consequences of poor appraisals can be dire: severe tax penalties or
forced liquidation of the collection. Appraisers should be experts who are not
connected to an auction house, because they might have hidden profit motives,
such as the consignment of certain pieces or even the entire collection. “Hire
appraisers with no financial interest in the material and who have expertise in
the specific area of your collection,” says Jane H. Willis, president of the
Appraisers Association of America. Besides her organization, Willis advises that
collectors consult two other nonprofit trade associations for referrals—the
American Society of Appraisers and the International Society of Appraisers.
These organizations have authoritative ethics committees to use as recourse if
problems with an appraisal arise.
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