For multigenerational families with significant art collections, it’s not uncommon for a next-generation family member to want to transfer an inherited art collection. The individual's tastes may be different, upkeep may be a challenge, or it’s simply the family member's preference to do so. Laura Doyle, senior vice president and the fine art and valuable collections product leader at Chubb, has worked closely with ultra-high-net-worth clients on exactly that: Preparing them to transfer their collections. Doyle discusses the nuances of the process, providing clarity on the steps to execute this properly.
Families of great wealth are often holders of some of the world’s unique art collections. When it’s time to pass down collections with families, sometimes the next generation doesn’t understand the risks associated with storing and maintaining a collection. How do you work with the next gen to ensure that their collection is protected?
Regardless of whether the next generation plans to display the collection or sell or store it, fine art often needs immediate attention to preserve its value. We have the privilege of insuring some of the world’s most valuable and unique collections, and we actively consult on collections care and management. We encourage new collection-holders to talk to an insurance agent who specializes in fine art about either updating their insurance policy or purchasing a new one just for their valuables. Simply increasing the limits of their homeowners’ insurance may not be enough, especially for a large collection. Heirs to an art collection will also want to keep all documentation related to the artwork’s authenticity and ownership history, create an inventory of all the pieces in the collection, and ensure that the display or storage location has proper environmental controls before artwork is moved in. Inheritors of high-value artwork should also install multilayered security controls, fire detection and water leak detection to keep items safe.
Sometimes there is a misalignment of tastes and interests between generations. If the next gen isn’t interested in the collection, what happens next?
Collecting tastes often differ between generations. If their heirs aren’t interested in the artwork, collectors might consider selling, donating or preserving their collecting legacy by establishing a foundation or private museum.
Each of these options comes with unique risk considerations. For example, if they plan to sell the artwork, collectors should have a written consignment agreement in place outlining the sale terms, confirmation that consigned items will be insured “wall to wall” by the seller, and clarification on how the artwork will be protected during the sale period.
If they are donating the collection, they should confirm when the title will transfer and when the receiving institution will provide coverage for the collection. If they plan to establish a private museum or foundation, collectors should have a plan in place for hiring vetted administrative and security staff to oversee the collection, ensure that security and fire detection controls are instituted that align with the value of the artwork, and obtain insurance coverage for the collection and exhibition venue, as well as liability coverage for any visitors.
For those who want to move forward with transferring the art collection, what are the first several steps to take?
Before transferring a collection, you’ll want to ensure that a detailed inventory of all items and any associated documentation is in place. That could include original invoices, appraisals, exhibition history and artist fact sheets, which are all part of an item’s provenance. Determine when the title will transfer, which is when the new owner can add items to their insurance policy. It’s important to note that a standard homeowners’ policy is intended to cover the home itself and its general contents but typically would not provide adequate coverage for higher-valued artwork. Instead, collectors should have a valuable-articles policy in place — which provides all risk coverage, worldwide, with no deductible.
Once coverage is in place, the new owner should work with a professional art handler to pack, transport and install artwork in the new location. Consider obtaining condition reports of high-valued items to keep with the collection inventory and obtain updated replacement-value appraisals on a regular basis.
What are some of the risks associated with such a transfer?
Anytime art is in transit, it’s more vulnerable to loss. That makes it critical to work with experienced art handlers who are trained in specifications for installation hardware, as well as packing and crating materials that will best align with the size and fragility of an item.
If artwork will be placed in storage until transferred, look for a dedicated fine art facility with staff experienced in storing valuable and fragile items, versus a general contents storage facility.
What are some of the unique opportunities it could present to a family?
Transferring a collection allows families to pass on a collecting legacy. The artwork itself may have historical, symbolic or personal significance to family members or may evoke particular memories or cultural associations. Depending on how long the collection has been in the family, the act of passing it down through the generations may be momentous as well. As a new generation becomes the stewards of this cultural heritage, it’s critical that they understand how to best display and protect these items so they can continue to be shared with future generations.