Priceless Collection at Risk of Substantial Loss
Original art, heirloom jewelry, autos from a bygone era, furniture handcrafted two centuries ago, and wine with vintages before your first adult grandchild was born; such is the nature of collecting unique and valuable items. Some collections have grown out of a passion for a certain artist or a region of the world that speaks to the heart; others are more tactically acquired as a “portfolio diversifier,” and of course let’s remember the rare and valuable items that have been passed down through generations making us the temporary caretaker of things growing more valuable with the passing of each generation.
The day-to-day presence of valuable items, each with a special story attached, creates a “Family CFO” challenge that many of our multi-generational clients have shared with us. It is hard to see past the familiar beauty and the passion a collection evokes in order to objectively assess the real financial loss that would occur should an item or dare we contemplate, an entire collection be lost to unforeseen peril. Not seeing this potential loss is what we call a “risk blind spot.”
The first time we met Virginia and Al, we learned that travel was a true passion. In particular, they love to regularly travel to the Mediterranean coast of Turkey. It was during an early conversation we learned of Virginia and Al’s passion for Persian rugs — serious passion! Inspired by her memory of the beautiful hand-woven rug in her grandmother’s dining room, Virginia has collected not just rugs, but silk wall tapestries that are so finely detailed the passing eye sees them as paintings. Our question: Was their collection properly insured?
This is where things could have gone terribly wrong for Virginia and Al. Their home was fully insured — which is nice to know if hail damages their roof, but what about coverage for the rugs, tapestries and the other beautiful antiques that they are caretaking for future generations? Due to internal policy limits, the uninsured gap was substantial — a risk blind spot no one else had seen. At this point, the Buttonwood approach was to assist Virginia and Al to document their collection, get it appraised and then make sure it was appropriately insured to their desired level of comfort.
In summary, here are a few of the steps that with our guidance Virginia and Al took to eliminate their risk blind spot:
- Assembled a team of experts — appraisers with specific expertise; insurance and loss-prevention experts; an estate planning attorney and a tax expert. Documented each item — photos and videos, purchase receipts, prior appraisals, proofs of title and provenance and records of any restoration work. We urged them to place all of these records in a fireproof safe and to provide copies to various insurance carriers.
- Reviewed all property and liability insurance coverage to verify exclusions and policy limits and to add appropriate coverage consistent with their overall risk comfort. In their case they purchased a couple of separate “floater” policies which separately insured each valuable item.
- Implemented an overall risk prevention and management plan. The team of experts recommended several changes to help reduce the possibility of losses, including an additional background check when hiring household employees, a fire suppression system, more secure storage, and backup power for heating, cooling and alarm systems.
- Developed a detailed succession plan for all of their valuables. In coordination with their estate attorney and tax expert they are now comfortable that they have a clear plan for passing their treasured collection to the next generation.
- Recommended periodic future reviews with their family and advisors to inform them of any changes in their collection—no more risk blind spots while maintaining peace of mind that their collectibles are protected from loss.
Virginia and Al have not only protected themselves from substantial financial loss, they enjoy their collection even more knowing they now have a longer-term plan for passing it on to their children and grandchildren — yes, one of their granddaughters has already posted a claim on the rug in their dining room!
If you would like to worry less about your heirloom collections, please contact Frank Drinkwine to set a strategy appointment at 816-285-9000 or by clicking HERE.