Structuring for theTransfer of Art Wealth to Family Members

Fine Art Wealth Management Limited in collaboration with Bellerive Stenham Trust Limited are pleased to announce the release of a new report entitled: Structuring for the Transfer of Art Wealth to Family Members.

Executive Summary, September 2017 - Today the private collections of ultra-high net worth families can rival those of major art institutions and private museums are being created at an astounding rate.

Wealthy famiies are moving toward an increased focus on using their collections to realise what they define as a richer life in order to achieve a greater sense of fulfilment for themselves and for their communities.  Equally important, art is increasingly becoming the investment of choice for families who are searching for alternative assets that offer risk-adjusted returns uncorrelated with other assets in their portfolio.

According to a new white paper just released by Fine Art Wealth Management in collaboration with Bellerive Stenham Trust Limited there are a number of important benefits which fiduciary structures can offer over direct ownership.

This paper outlines some key considerations for art owners, as well as some of the more appropriate structure types. The paper also examines philanthropic considerations including private museums, and the role of the family - including the importance of knowledge transfer being passed down to the next generation.

Gifting artworks to family members 
When considering gifting works of art to family members, it is important for collectors to assess all the options and calculate the most tax-efficient transfer strategy, taking income tax as well as gift and estate tax consequences into account.

Family trusts and foundations 
Trusts and foundations can play a key role in legally holding the art collection independently of the family members, whilst incorporating the requirements and views of the donor.

Other family-owned entities 
Passing on partial ownership of art pieces is often used by collectors to commence the estate-planning process and gifting of shares to loved ones using LPs or LLCs.  Such ownership is also useful for collectors unfamiliar with trust concepts, but who still wish to start the gifting process.

Creating an art management plan
Managing art professionally demands time and considerable knowledge. Curatorial and promotional strategies must  be employed to enhance the value of individual works and the portfolio overall.

Donations to charitable /philanthropic causes
It is a fine gesture for families to donate their prized art collections to charity because they have a desire to make a positive impact in their communities or support specific organisations.  But donating a family collection to a museum or creating a charitable foundation involves more than one thinks.

Private museums
While there are a number of factors driving the growth of private museums globally, a lack of public exhibition space has played a major part. For many collecting families they simply want simply want their art works to be seen and partnering with a museum early on is crucial.

Knowledge transfer when it comes to family art
For the most part, education regarding a family's art and cultural heritage is largely informal and often guided by parents and grandparents. The act of passing on high value works of art is about much more than wealth preservation, it is about creating a meaningful legacy that reflects the family's values.

The lack of preparedness around transferring a family collection can have broad implications on family relationships. Differing expectations between family members may lead to disagreements about what to do with the art, how to manage the collection, or how to preserve the art for future generations.  Misalignment of expectations can create long-term unintended consequences for collecting families.  Such occurrences can be avoided through proper discussion in advance.

To receive the full report on Structuring for the Transfer of Art Wealth to Family Members contact:

Randall Willette
Managing Director
Fine Art Wealth Management Limited 

Heath Martorella
Head of Family Office
Bellerive Stenham Trust Limited - Guernsey