Planning strategies of antique collection

Recently, the art collection of Dubai based firm Abraaj Group was sold for £5million where the auction included 200 pieces of art. The firm was defaulting more than £1million and had filed for liquidation in June this year. Bonhams’ said the quality of art is exceptional where pictures by Indian artist Manjit Bawa (of the woman surrounded by dogs) were able to get £500,000, twice the estimate price. Most collectors’ strategies involve a long -term outlook where the selection of each individual piece e.g. wine or art involves long procedures of assessments and analysis.  Procedure to move (or exit) the piece and assessment of the market influence on sale price should be carefully conducted before buying.

Donations and tax exemption for collectibles

Collectors are unable to identify the risk factors and the costs (e.g. tax up to 28 per cent on capital gains on sale of art). Such taxes can be avoided by using methods such as selling the art to grantor trust or swapping the art work.  The antique can be donated to charities that can be instructed to sell it.  If the art is donated, one can chose to donate it during life or after death.

There are various aspects related to donation agreement which should be evaluated e.g. who will be the owner after death? Where it will be kept and where it will be displayed?

The artifacts can be gifted, which allows the owner to seek exemption in tax, but even such conditions involves the regulations related to how the piece will be used.  A married collector can give the luxury item or jewelry or art to wife or husband, to get unlimited marital exemption.

Auction risks and terms

If the art piece is sold or auctioned, or if it involves loan to buy, the seller needs to make sure the price points are carefully examined during auctions, where the terms of auctions should be pre-defined and accepted by the buyer. There are various ways the items can be auctioned; it can be a large auction, a smaller one or online sale. Each option has diffident types of advantages over other. Also, the price the item gets depends on the type of property and the type of client the auction media attracts.  One should not sell such objects in a hurry at a lower than anticipated rate.

Inheriting antiques

If the item is given to family members after the death of collector, the way the items are used by the descendent - different methods of valuations and appraisals should be considered. The descendents need to identify the risk tolerance and market appraisal strategies to benefit from it. Such properties may have highly volatile price in market. Selling at the wrong time or judging its value incorrectly can lead to huge losses.  

Some successors are passionate about such items and may not be interested in identifying the value in market or but, even in, such conditions, one should keep the documents related to the items (e.g. agreements, invoices, bills and other papers) carefully.

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