Wealthy collectors should treat their collections as serious legacy assets – and start planning accordingly – says a new report by HSBC Private Bank.
With an estimated $992 billion in art and collectibles expected to change hands over the next decade, the report identifies the ‘Great Stuff Transfer’ as a significant but largely overlooked planning risk, and warns that families that delay conversations or rely on verbal arrangements rather than formalised plans are leaving themselves exposed financially, legally and emotionally.
‘Where valuable collections are concerned, the need for conversations, let alone concrete decisions, is sometimes not recognised as readily as it is for other types of assets and may therefore not be considered at all,’ Aik-Ping Ng, the bank’s Asia Pacific regional head of family and philanthropy advisory, wrote in the report.
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Part of the problem is that collections sit awkwardly between the personal and the financial, the report notes. Unlike a business or investment portfolio, where the need for succession planning is broadly understood, valuable collections can slip through the cracks entirely.
‘It’s an emotional minefield,’ said Russell Prior OBE, HSBC’s regional head of family governance, family office advisory and philanthropy for EMEA. ‘What if one child says they’d rather have the money and their sibling says they’d love to inherit the collection their parents have spent a lifetime amassing? Does this mean that one child loves the parents more or less than the other?’
Not only that, but dividing collectibles between multiple heirs is particularly fraught. Unlike liquid assets, collections rarely split cleanly, and breaking them up can destroy value. ‘What if you want to give a piece of art to each of your four children but together they are worth 10 times more than individually,’ said Olga Kucherenko, a senior adviser at HSBC. ‘Are the children ready and willing to take a more demanding route of shared ownership for a greater, but perhaps more distant, return?’
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Fairness is another flashpoint, with heirs often focused less on monetary value than on whether their emotional connection to specific pieces has been recognised.
‘I always suggest the owner of the collection asks members of the family if there is anything they would like and make a record of this,’ leading antiques dealer Lennox Cato told Spear’s.
‘It’s all about planning,’ he added. ‘If the will or changes in the family trust need to be looked at, your accountant and solicitor would point you in the right direction first – and they should encourage you to instruct a professional valuer to evaluate the collection. This holds up transparency for all.’
For collectors who want to avoid leaving heirs in a difficult position, Cato’s advice is straightforward: document everything, and do it regularly. ‘I recommend that collections should be recorded – a list of all items along with photographs, and who they should be left to,’ he said.
‘Have the items reappraised by an independent valuer (not the seller), perhaps [even] two valuers. This should be carried out periodically, no less than every five years, for peace of mind for the collector and family members alike, as some values change for better and some for worse.’
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The HSBC report echoes this, finding that the most effective families are those that bring discussions about passion assets into the broader framework of estate planning, treating them with the same rigour applied to financial holdings.
The report noted that one principle stands out above the rest: collectors should be able to articulate clearly why their collection exists. Once that question is answered, longer-term decisions about its future become easier to navigate, and the short-term sensitivities about who gets what and when become easier to manage.
‘Communication is the best skill we have – that and sharing information,’ said Cato.
