Quantifying Touchable Assets

At an auction in mid-November, a poster for the movie Bride of Frankenstein, starring Boris Karloff, fetched $334,600. That's right a movie poster. Granted it was and considered to be in condition, according to a report in The New York Times. By some measures, it's even old (it's from 1935). But, still, it's a movie poster. (The seller bought it for $0.50 from a movie theater owner in the 1960s. Talk

At an auction in mid-November, a poster for the movie “Bride of Frankenstein,” starring Boris Karloff, fetched $334,600. That's right — a movie poster. Granted it was “rare,” and considered to be in “pristine” condition, according to a report in The New York Times. By some measures, it's even old (it's from 1935). But, still, it's a movie poster. (The seller bought it for $0.50 from a movie theater owner in the 1960s. Talk about a capital gain.)

The point is: Your clients may collect stuff like this. A client may have a hobby collecting some trinkets that are worth more than you would expect. Indeed, Americans collect all kinds of stuff, also known as touchable assets — perhaps on the order of $4 billion to $6 billion in touchable assets. These types of assets include: fine art and antiques (of course), wine collections, modern furniture, coins, stamps and baseball cards — you name it.

Michael Mendelsohn, a former Drexel dealmaker from back in the day, collects folk art. Today he runs a financial advisory firm, helping financial advisors quantify the value of their clients' collections. His point: A valuable collection can be used to do just about anything, including fund a retirement or create a philanthropic legacy. But too often individuals don't inventory their collections, much less plan for distribution to their heirs. What happens in the case of premature death if the artwork (or collection) is included in the estate? Massive tax bills frequently force the heirs to dump the collection on an auction house (which takes its big fees) for a fire sale. “If not planned for in life, you can lose 70 percent of the value to taxes and auction house fees,” Mendelsohn told me recently.

Mendelsohn, president of Briddge Art Strategies in Purchase, N.Y., estimates that “touchable” assets, as he likes to call them, may represent as much as 15 percent of the estimated $41 trillion in wealth that baby boomers are forecasted to pass down over the next few decades. (That is, if long lives and health care costs don't eat through most of it first.) His basic point is pretty simple: Most financial advisors simply don't ask their clients about their collections, and they are left out of any planning. Just think of the good you could do your clients and their families (and/or their charities) if you could bring financial-planning logic to their collections — whatever these may be.

There are a number of strategies for keeping a cherished collection intact, but the first thing you have to do is ask your clients about it. For more, please turn to Senior Editor John Churchill's story on page 26. Besides being fiscally prudent, including collections in estate planning can prevent heirs from feuding over highly appreciated pieces. Your clients will thank you.

We thank you for your support. Drop us a line with your comments at: 249 W. 17th St., New York, N.Y. 10011-5300. Or email us at [email protected]. Publisher Rich Santos can be reached at [email protected].

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