The Art of Wealth
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Volatile financial markets have affected us all in one way or another this year. Our stock portfolios, mutual funds, retirement accounts have seen changes and drops. Our homes are not worth what they were a year ago. So, is there anything out there, any purchase at all, that has seen gains—better yet significant gains in value over the last few years? To my surprise the answer was yes—and the gains are pretty significant.
Highly sought-after art pieces, from artists such as Andy Warhol, Damian Hirst, Jasper Johns and Jeff Koons have seen gains in value of 100% to more than 500% in last few years.
The recent Forbes article online (and see the hard copy Special Issue of the Forbes 400 Richest People in America dated October 6, 2008 detailing the gains of several artists) also highlights a purchase made by Eli Broad of the 41-inch stainless steel "Rabbit" by Jeff Koons. The piece was worth $12 million in 2005 and a similar piece sold for $80 million earlier this year (a whopping 567% gain in 3 years!).
For Eli Broad, his extensive art collection provided an unexpected cushion as his stock portfolio was severely bruised by the AIG stock collapse. The article cites that his 2,000 piece collection was recently appraised at $1.9 billion, up 72% in one year, which helped offset his stock losses. The article states that his personal balance sheet lost $2 billion, but because of the art hedge, “Broad’s net worth fell only $300 million.”
And of course there are some signs that the art market might be slowing down, but art collections still prove to be a very valuable and highly-appreciating asset. Something to consider when looking at any art pieces you might have in your house, pieces you purchased or inherited from your grandparents, aunt, or other distant relative.
On October 29, 2008 the recently expanded and remodeled J. Willott Gallery on El Paseo hosted an Art Appraisal Seminar to discuss some of the ins and outs of art appraising. The speaker, Ed Okil, a member of the National Institute of Appraisers provided a great overview of what the Appraisers can do to assess the value of your art collection, and when an appraiser might be needed.
For example, an appraisal may be requested for a variety of reasons—insurance, divorces, bankruptcy, estate & probate matters, charitable donations (as required by the IRS), litigation, and pre-sales. Generally, the IRS gets serious about art pieces at the $5,000 price range for needing an appraisal, in the estate and probate valuing contexts. What that really means is that an appraisal becomes necessary at the death of the owner, if the value is $5,000 and over.
Amazingly, in most cases people just don't think of their art as an asset. For that reason, they might go through the entire estate planning process, by drawing up a living trust and all the ancillary documents, but never once think to include their art pieces as an asset on their inventory documents.
A good attorney will probe the client to disclose material personal property items (like an expensive painting, antique, or collectible) at the establishment of a trust—so the proper planning strategies are employed and ensure that a client's collection doesn't end up in probate. The more information and knowledge you have regarding your art pieces, the better.
"Our desire is to continue to provide local residents with valuable programs and free seminars related to the ownership and purchase of fine art" said Joshua Paquette, one of the owners of the J. Willott gallery. Find out more about J. Willott gallery on their website.
(Pictured at the top is Silvercreek Horses by Theodore Waddell--the gallery will have a show for him on February 12, 2009.)
