PEER-TO-PEER INSIGHTS: Laura Doyle unveils innovations on transferring an art collection
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.
MORE INSIGHTS: Navigating wealth transfer: How to discuss family finances with your adult children
By PRATIK PATEL
The great wealth transfer has finally arrived.
With the youngest boomers now turning 60 and the oldest nearing 80, many are starting to transfer their wealth to the next generation. Globally, $84 trillion will get passed down over the next two decades, including investments, real estate, businesses and other assets.
Talking about wealth can be an uncomfortable topic for many families, but passing down assets shouldn’t be left to just happen. Recipients may not be prepared or want to take on the responsibility of managing the assets, be it a family business or property. And it is particularly important to have conversations before drafting legal documents.
With that in mind, here are ways in which we encourage families to have discussions with their adult children regarding large inheritances.
Create a script before the first family meeting.
Most parents, particularly those in ultra-high-net-worth families, tend to avoid conversations with their adult kids because they fear confrontation or a loss of privacy or worry about their children becoming entitled and losing their motivation.
One way to start the process is to meet with an adviser before any conversations and develop a script, which can be an actual document that is referenced during the family discussion.
When developing that script, think about what the key messages are. Be clear about what you see as the purpose of your wealth, and set your intentions early to ensure an open dialogue.
Set the stage for conduct at meetings.
Each family will conduct these conversations differently, but it’s a good idea to develop a code of conduct that everyone follows. The code could include how people should speak to each other — in a respectful, nonconfrontational tone, for instance — as well as the importance of confidentiality, expectations around participation and more.
Setting goals for the first meeting and subsequent discussions is also important. Set an agenda with conversation topics, outline the purpose of the meeting and talk about what you want to work through. Consider creating a schedule of future meetings, too. While frequency will vary based on family relationships, geography and the complexity of the assets, monthly, quarterly, or biannual meetings are common. If the family is big enough, an annual family retreat can be another worthwhile approach.
Words matter — choose wisely.
As anyone who has ever been in any sort of argument knows, words matter. One wrong phrase can derail a conversation and, depending on what’s said, even harm relationships. Stay positive and keep the greater good of the family in mind. Keep the language in the initial scripts neutral, avoiding any accusatory words that could hurt a relationship.
Language is important, as everyone has a different definition of certain words, and this is where an adviser can add a lot of value. They’re an objective and neutral third party who can tell parents what words to avoid in a script or help tone down any heated discussions.
Discuss philanthropy opportunities.
Conversations around charitable giving are a great entry into discussions about family finances. Philanthropy is usually something everyone can get behind, which can open the door to broader money discussions. You’ll get used to meeting together and having conversations, learning together, working out disagreements and making decisions together.
Ideally, you’ll talk about the importance of giving when the kids are young so that when they’re older, you can be open about your legacy intentions and how philanthropy might be incorporated into your plan. Children, even adults, will gain a lot of financial skills by going through this process, and the life lessons they’ll learn from a charitable-giving perspective can segue over to how they choose to manage the inherited wealth.
Educate
Another key part of a wealth transfer discussion is financial education. It’s one thing to say you’re going to receive an inheritance; it’s another to figure out what to do with that gift. While parents can set up trusts and have trustees oversee the allocation and investment of funds, you’ll still want to make sure your children understand the stock market, what it means to own real estate, the implication of taxes and so on.
Using an adviser to help educate family members on the nuts and bolts of finances is often a smart approach, especially if it’s an adviser who is already part of the process. They’ll not only be able to impart general financial knowledge but also contribute insights specific to the family’s situation. Advisers can also direct family members to other experts who can help with more pointed education.
There are a lot of moving parts to these conversations, but the key to a successful wealth transfer discussion is to be open, honest and patient. There’s no one-size-fits-all for every family. Being able to have some of these conversations can go a long way toward helping everyone come to a common understanding and see the ‘why’ behind the wealth.