Beyond the Canvas: Finding the Next Home for Your Fine Art
- Selling art can be significantly more complicated than purchasing it. Consider engaging an independent art specialist to help navigate the process.
- Finding a charitable recipient for artwork is not a simple process and tax considerations can be complex depending on the jurisdiction and donation method.
- Before leaving art to loved ones, confirm they want to accept stewardship and maintenance responsibilities. Be open to and aware of other alternatives in the event they do not want the collection.
Fine art can hold deep personal meaning for the collector, their loved ones, and the broader public.
As such, art collectors are stewards of the pieces they own. The same careful and future-minded approach used for other legacy assets could be applied to art collections.
Selling Artwork
A collector’s reasons for selling a piece may be personal (e.g., changing artistic tastes, streamlining a collection’s focus, down-sizing a main residence) or financial (e.g., capitalizing on appreciated value, funding other purchases, or estate planning ).
Selling art can be a complex and nuanced process. The best approach depends on a wide variety of factors, including the type and magnitude of the collection.
Best practices and considerations
- Consider engaging an art advisor and/or transactional art attorney experienced in sales transactions. They can help you consider the right sales method for you (e.g., a private sale or public auction), negotiate favorable terms, and develop the most appropriate marketing strategy. When projecting net sales proceeds, keep in mind that the commissions on art sales are higher than those for other assets and can easily be upwards of 20%.
- Understand the potential tax implications. Depending on the jurisdiction, the sale may be subject to capital gains and other taxes, with rates varying based on factors like ownership length and structure.
- Explore strategies to mitigate any capital gains tax liabilities. Consult tax advisors about potential deferral techniques and whether charitable gifts can be used to offset gains. Consider other options such as borrowing against the piece to unlock liquidity without triggering tax liabilities.
Using Art for Philanthropy
Art collectors may earmark certain pieces or whole collections for philanthropic endeavours. Tax benefits may apply depending on the jurisdiction and donation method.
Best practices and considerations
- Familiarize yourself with the potential options. Typically, collectors will donate art directly to a charitable organization (e.g., a public museum, university, library or hospital) or donate the proceeds from a sale of artwork directly to the charity. In rare cases, collectors may opt to create a private museum, but this is the most complex and costly alternative.
- Review options with tax and legal counsel. Tax and legal implications will depend on timing, the recipient, the structure of the donation, and a variety of other factors, so assessing your specific situation is essential.
Leaving Art to Family Members
If you intend to give a piece or collection to loved ones, ascertain in advance whether they share your passion for the artwork and understand their future stewardship responsibilities.
Discussing your plans with your family and intended recipients can help avoid potential friction in the future. For example, being transparent about intentions can head off a poorly planned fire sale or battle between two children expecting to inherit the same piece.
Best practices and considerations
- Have an honest conversation with the intended recipient. Are they as passionate about this piece as you are? Do they share your desire to keep it in the family? Ensure you understand each other’s intentions and agree on the path forward. If interests don’t align, be open to exploring alternatives.
- Consider the logistics. Is the recipient’s home or storage unit suitable for housing artwork and are they willing to pay the required insurance premiums? If pieces will be held in trust for an extended period of time, do the trustees have the know-how to properly manage and care for the artwork? It may be beneficial to engage an art professional to oversee the collection.
- Review estate planning techniques with tax and legal advisors. Common strategies include lifetime gifts, bequests through a will, and gifting through trusts or other business entities. Understand the implications of each of these options.
Resources
The Goldman Sachs Family Office Art & Collectibles Strategy Group provides objective guidance and education around acquisitions, sales, collections management, and art-nuanced tax, philanthropic, and succession planning—and can make referrals to appropriate art-specialized professionals, including strategic lending resources or trust and estate services, as needed.
The Goldman Sachs Family Office does not advocate aquiring art and collectibles for investment purposes.
This material is intended for educational purposes only and is provided solely on the basis that it will not constitute investment advice and will not form a primary basis for any personal or plan's investment decisions. While it is based on information believed to be reliable, no warranty is given as to its accuracy or completeness and it should not be relied upon as such. Information and opinions provided herein are as of the date of this material only and are subject to change without notice. Goldman Sachs is no a fiduciary with respect to any person or plan by reason of providing the material herein. Information and opinions expressed by individuals other than Goldman Sachs employees do not necessarily reflect the view of Goldman Sachs. Information and opinions are as of the date of the event and are subject to change without notice.
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