Emily Thompson is an art adviser and valuation consultant. She is a faculty member at the Ultra High Net Worth Institute and Sotheby’s Institute of Art, as well as an appraiser for the Internal Revenue Service and owner of her own firm, Thompson Art Advisory. Before that, she was a specialist in fine art at Emigrant Bank.
What are the fundamentals of art collecting that families need to be aware of?
First is due diligence. I’m talking about authenticity, provenance research, forensic analysis and all the elements that go into that. Then there’s documenting and maintaining up-to-date valuations for your collection.
Cultural repatriation and sanctions are another area — traditionally with Greece and Italy but also now with Iran, parts of the Middle East — and how those laws and sanctions impact the ownership of art, the transactions, all sales and acquisition of art, and things like that. 
Is there an aspect of due diligence that tends to get overlooked?
The transaction itself. Is the purchase price reasonable, or is it, for some reason, too high or too low? Are there any instructions with that transaction that would give pause? Does the seller request that the artwork be paid for in cash? Are there multiple parties involved or an intermediary, so it’s unclear who is actually receiving the funds or giving the funds?
What are the issues that come up with passing art from one generation to the next?
When it comes to the generational shift of wealth that’s happening in the next five to 10 years, when it comes to art, the information and knowledge about the collection, and sometimes the enthusiasm, doesn’t always transfer from one generation to the next. So by the time there is a liquidity need or an opportunity for sale, that could cause major problems for a family.
When generations differ in their emotional attachment to the art collection, what’s the practical impact?
To give an example, let’s say you have a collecting couple who amasses a significant collection, perhaps in a very specialized collecting category that requires a lot of research and confirmation of provenance. The father or mother passes away, and then their adult child becomes the steward of that artwork. It was the passion project of the senior generation, but the younger generation may be interested in a sale and does not have the same kind of emotional attachment to it.
In a family-office scenario, the art collection is never going to be the largest line item on a family balance sheet, but it will be the one that has the most emotion around it. People will have different feelings and connections to the artwork, which is very different than cash as an asset or real estate as an asset, so it has the most potential for emotional uncertainty. And it usually, but not always, ends up being one of the last things that’s planned for.
There are lots of inheriting generations of a family that are very involved in a collection, but then there are families where there just isn’t enough interest [from the younger generation] to put in that work. If they’re pursuing a sale without proper cataloging ahead of time, it becomes a fire-sale scenario, and they could face a potential loss.
Interview conducted by Steven I. Weiss