Industry studies show a significant increase of the artistic heritage, especially in countries where there is a deep-rooted collecting history as Italy. The topic of generation transfer involves not only collectors but also wealth managers, business men, lawyers, accountants etc. We approach the topic from different perspectives to give a synthetic and comprehensive overview.
The generation transfer is a key moment in the “life” of the collection: it marks the transition from hobby or interest to real assets. If the first collector buys for passion and personal involvement, usually the heir has to manage the heritage and then it’s necessary to develop a structured process that considers different aspects. First, it’s recommended the planning of the transition happens when the collector is in life so that he can express their will: must the collection stay united, or can it be divided among several heirs? Can it be public or does he prefer to keep private? Would he like to expose it? And if so, in what ways? Through a donation? Thanks to a museum or nonprofit organization or with the establishment of a foundation? These are just some of the topics that wealth managers have to deal with the strategic planning of assets management.
How can a private bank answer to these needs? Artistic assets complete the management of financial assets, private bank’s core business, always ensuring absolute privacy. The customer has evolved in recent years, there is a greater awareness of assets’ value coming at par with financial one, and therefore, like other assets, they are managed and protected. But cases of transmission to manage as private banks are multiple and different.
An example is that of the planning transfer when the client is fully aware of the necessary to bring order to the collection that has created over time, and thus create an archive of information about collected artworks: to create an inventory, to look for the provenance, to check if there are certificates of authenticity, to complete description sheets of the artworks and ensure the truth of the data and related documents, to give an estimate and to define the destination of the collection. But before defining what the end of the collection will be, it’s essential to know exactly what you have.
In other cases, the private banker speaks already with the heirs who have not participated in the collection, they don’t know how many pieces are in the collection and the value of the same, often leading to its division and liquidation.
During the generation transfer, there are various opportunities for the collector that on the one side guarantee the protection of the heirs’ rights and on the other side try to solve the needs of public visibility.
In summary, typical attitudes of the collector are two: the first might be called defeatist, the collector doesn’t have particular desire to know or to prepare what will happen after to the collection. This attitude can cause difficulties; for example, the collection is exposed to a greater level of instability and therefore the risk is the collection doesn’t stay as it was before and it’s often divided. Furthermore, in this case, there is a certain freedom of action in compliance with the rules, with a very high cogency level. The Italian Civil Code provides, in the case of division, each heir is entitled to his share in kind of movable and immovable goods, so they can’t simply monetize but the heirs are entitled to have a physical part of the collection. In addition, in the process of division of the collection and estimation of hereditary lots, it’s necessary to remember that the law says the portions need to be formed from the estimate of the assets including an amount of movable and immovable goods and credits of the same nature and identity. So it is difficult to think that, in the context of a division, just one heir has the collection and the another one the liquidity. In addition, the Code states you have to avoid as far as possible the division of libraries, galleries and collections that have a historical-scientific or artistic importance, not specifying what is the meaning and it’s therefore remitted to the judge. It is obvious that also involved the protection rules and also take over the dynamics that often scare collectors: the application of the notification to the collections and therefore the obligation of inseparability, the heirs can not proceed to divide it.
The other attitude is a collector who wants the survival of his collection by a sort of “transmigration” in it. The tools that our legal system provides are basically three: the establishment of a foundation, a trust or a benefit company. In the first two cases, the assets are seceded from the collector and is assigned to a different legal entity, the institution must have a purpose and, in both, they are pursuing their activities according to the present people. The third case is the benefits company, recently introduced with the 2016 Stability Law in Italy.
Regarding the insurance field, it’s essential look the aspect of protection, considering that an insurance cover works in the first place in this direction. It is important to adopt a specific cover and not generalist because all those characteristics that determine the protection of heritage are insite. The insurance guarantee is to artworks, therefore, the moment of generation transfer, happens nothing: the guarantee is operational, it is to the object and stays continuously active. It means an opportunity during the moving the artwork that will always be covered.
The article was produced according to the topics discussed during the round table “The generation transfer of artworks and collections” held Thursday, May 12th, 2016 at Frigoriferi Milanesi in Milan from Open Care – Art Services in collaboration with AIPB – Italian Private Banking Association. The event was created by the publication of the book “The Art Advisory in Private Banking. Opportunities and risks of investing in art” producted by AIPB – Italian Private Banking Association in order to illustrate the topic of the all-round extrafinancial services aimed at helping the client to manage the artistic component of their assets.
MyTemplArt® Communication Manager
Cover Image: Frame di La Migliore Offerta di Giuseppe Tornatore, 2013
This post is also available in: Italian