For some, collecting art is a passion; for others it’s an investment or a combination of the two. Still others inherit their artwork and see it as a sentimental treasure or a physical asset they can’t wait to sell. However you came upon your artwork or what you plan to do with it. Understanding and maintaining its value is a key piece of your financial health.
As with all physical assets, the first step is to take stock of what artwork you have and what it’s worth. The goal is to safeguard this information on a digital tool, but you can start with a spreadsheet or handwritten binder so long as everything is legible and organized.
The file for each piece should include:
- Purchase date and seller information, as well as the current value (Artwork should be appraised every five years.)
- Title, date, artist’s name, and description of the work
- Provenance: this is a record of the piece’s previous owners
- Any identifying marks or inscriptions that will help establish provenance and may affect the value
- Condition of the work (This should be updated annually.)
- Location: Is it stored in your primary residence? Vacation home? Office?
As mentioned, once you’ve compiled this information you should add it to a digital platform, such as EstateSpace, that facilitates the management of physical assets. You can also set reminders to schedule appraisals and maintenance within the app.
Storage and Restoration.
Just as artwork can appreciate, it can also lose value if not properly cared for. For example, you want to keep paintings in a climate-controlled environment and out of direct sunlight.
No matter how careful you are, however, your artwork, particularly paintings, will likely need restoration at some point. This means engaging a painting conservator, a highly trained individual with a wealth of knowledge about art and the technical skills to repair all sorts of damage. Good conservators always have two primary goals: 1) use the treatment(s) that best preserve the work; and 2) maintain the original intent of the artist.
New to Collecting?
Collecting art is an excellent way to build wealth, much like investing in the stock market. Some pieces can yield very high returns, while other pieces are the equivalent of safe stocks that offer slow growth but never lose value.
Here are some tips for wise collecting:
- Engage a reputable art advisor (i.e. through The Association of Professional Art Advisors).
- Do your own research (online, at galleries and art fairs) regarding the artist’s history and similar works in the market.
- Add a valuables or fine arts rider to your homeowner’s policy; this will ensure that you’re not arguing over the value of the work if something should happen. Also, make sure your policy covers earthquakes and floods.
- Know the tax implications (i.e. the 28% in capital gains you’ll have to pay if you sell at a profit).
There are many reasons to invest in art. It not only adds beauty to your life; it is also an excellent way to pass wealth to your children, so long as you educate them about the care and financial responsibilities that go along with it. The key is to partner with experts, both creative and financial, that protect both the work and your interest in that physical asset.