Avoiding the Chaos
WHETHER YOU INTEND TO COLLECT TO THE VERY END OR SELL NEXT MONTH, IT’S CRUCIAL TO KEEP YOUR HEIRS INFORMED
By James L. Halperin and Gregory J. Rohan with Mark Prendergast ● Illustrations by Michael Jantze
Every day, there is a story on some website, magazine or cable news network that illustrates the importance of having a will. Recently, pop star Prince died without a will, according to court documents – potentially causing big complications for the singer’s sprawling financial estate and musical legacy. Picasso was revered as a business genius during his lifetime, but when he died in 1973 without a will, his heirs were thrust into chaos. It took six years and a reported $30 million in expenses to divide up his estate.
One recent survey found that half of Americans with children do not have a will. This is insane. Most people try to avoid contemplating their own demise, and many collectors are equally reluctant to consider the sale of their treasures. As Woody Allen once told his physician: “Doctor, I’m not afraid of dying, I just don’t want to be there when it happens.”
Whether you intend to collect to the end of your life or sell next month, much of the same advice applies. Heritage Auctions has assisted thousands of people in disposing of their collections, and more than 20 percent were heirs who possessed little knowledge of art and collectibles. That is one statistic that we would like to change; uninformed heirs — who are grappling with grief and an enormous number of administrative challenges — are easy prey for unscrupulous opportunists. Our goal at Heritage has always been to ensure that the fruits of a collector’s pursuits accrue to his or her rightful heirs.
INVOLVE YOUR FAMILY
Many collectors keep their families in the dark as to the scale and nature of their collecting; there are many reasons for this, but consider taking a longer view. Have you thought about the effect that your sudden death or incapacitation might have on your collection? What would your heirs’ expectations be? What should be done with it? Should it be sold? Distributed among family members? Some combination? What will remain after taxes?
One call from a widow took us to a house where we found a dining room table covered with three-foot tall stacks of boxed world coins. From a distance, it was one of the most impressive collections we had ever inspected: all matching coin boxes, all neatly labeled with the countries of origin. The widow told us that her husband had been a serious collector for more than three decades, visiting his local coin shop nearly every Saturday. He then came home and meticulously prepared his purchases, spending hour upon happy hour at the table in his little study.
We opened the first box, and couldn’t help but notice the neat and orderly presentation: cardboard 2 x 2s, neatly stapled, crisp printing of country name, year of issue, Yeoman number, date purchased and amount paid. We also couldn’t help but notice that 90 percent of the coins had been purchased for less than 50 cents and the balance for less than one dollar each. The collection contained box after box of post-1940 minors: all impeccably presented and all essentially worthless.
QUESTIONS TO BE DISCUSSED
- Are there heirs who will want the collection from a collector’s standpoint?
- Where are the objects kept?
- Where is the inventory of the collectibles kept?
- What is the approximate value of the collection?
- Has the collection been appraised or insured? If, so, where is that appraisal and does it need to be updated?
- Do any of the articles in your possession belong to someone else?
- Are there certain dealers or other experts you trust to provide guidance to your heirs?
- Is there a firm that you and your heirs will wish to use in the collection’s disposition after your death?
Mrs. Smith was asked if she had any idea of the value of the collection. She replied that she knew that rare coins were valuable, and since her late husband had worked so diligently on his collection for so many years, she assumed that the proceeds would enable her to afford a nice retirement in Florida.
We had to carefully explain that we couldn’t help her with the sale of the coins. Her husband had enjoyed himself thoroughly for all those years, but he had never told her that he was spending more on holders, staples and boxes than he was on the coins. Her dreams of a luxurious retirement diminished, we advised her to contact two dealers who routinely purchase such coins. Mr. Smith’s fault was not in his collecting, but in his failure to inform his wife of the nature of the collection.
Widows and heirs are more typically encountered at the other end of the spectrum. When your spouse spends $50,000 or $100,000 on rare coins or other collectibles, you generally have some knowledge of those purchases, but not always — and often the most prodigious collectors are coy with their family about just how much they’re investing. This leads to the more enjoyable surprises — those made-for-TV moments where we inform unsuspecting heirs of the vast fortune they’ve inherited.
Years ago, we encountered the younger of two sisters who were dividing their father’s estate. Dad had left Germany in the early 1930s — not a great time to immigrate to America, but an excellent time to be leaving Germany. Dad brought to America two collections: antique silver service pieces and his rare coins. The coins were mostly sold to establish his business in Iowa. He prospered despite the hard times, and devoted the next 30 years to rebuilding his collection of Germanic/European coinage.
At the same time, he continued to expand his collection of 17th and 18th century German silverware. We knew every aspect of his collecting history, because he left a meticulous record on index cards. Every coin, every piece of silver was detailed with his cataloging and purchase history. His daughter was in awe of his passion for maintaining such detailed records.
After his death, his daughters decided to split his collections between themselves. They added up the purchase values of each of his collections, which were just about equal. The older sister/executor had acquired some small knowledge of antique silver, and since she wished to keep all of the elegant heirloom tea service for herself, she decided to keep the silver and give her younger sister the coins. She was definitely not interested in splitting. She sold the non-family silver pieces through a regional auction house, and boasted of realizing more than $200,000 from her father’s $27,000 investment.
The younger sister came to us with only one box of his coins. Her father’s records for that box indicated a cost of less than $2,000, but knowing the years he had collected, we were anticipating at least a few nice coins. However, we were totally unprepared for what came next: pristine coins of the greatest rarity. His $2,000 box was worth more than $150,000, surpassing our wildest expectations. She then produced the record cards for the rest of the collection, and we offered to travel back to Iowa with her the same day. When we finished auctioning the coins, she had realized more than $1.2 million.
Another story: The wife of a deceased coin dealer called us to consign $1 million in rare coins from his estate. This asset represented a significant portion of her retirement assets. We eagerly picked up the coins, and had already started cataloging and photographing when we received an urgent phone call from her attorney. The coins had to be returned immediately. It appeared that her husband had been holding the extensive coin purchases of his main customer in his vaults, and he had neither informed his wife nor adequately marked the boxes. Most of her $1 million retirement asset belonged to her husband’s client and not to her husband.
A final example that really distressed us demonstrates that partial planning, no matter how well intentioned, cannot always guarantee the desired outcome. A collector with sizeable holdings divided his coins equally (by value) between his adult son and daughter, with instructions that they should seek expert advice before selling. The daughter came to us, and was pleased to learn that her coins were worth in excess of $85,000.
After she signed the consignment agreement, she told us the rest of the story. Her brother had “sold” his share eight months earlier to a local pawnbroker for less than $7,500. Her father hadn’t shared his knowledge of the asset’s value with his children for fear that his son would spend the money foolishly. Instead, her brother basically gave it away.
So, what should you do to prevent such problems?
GET YOUR FAMILY INVOLVED
If transferring your collection to the next generation is desirable, you will want to provide for an orderly transition. If they aren’t interested in sharing your love of the collectibles, you will have to decide whether to dispose of the collection in your lifetime, or leave that decision to your heirs. If the latter, your family should — at a minimum — have a basic understanding of your collection, its approximate value and how you want it distributed.
The horror stories here are all true, none are isolated cases and they won’t be the last. If, for whatever reason, you cannot allow yourself to share this information with your whole family, choose one trusted individual — perhaps the person you are considering to be the executor or trustee of your estate. If that doesn’t satisfy you, please take the time to write detailed instructions, or simply keep notes, and leave them in your safe deposit box, or wherever you keep your valuables.
The Collector’s Handbook will further define your options and aid you in finding assistance in implementing those options. Whatever your choices, your written instructions can be incorporated into your will or trust. At minimum, you will have a document kept with your collection’s inventory. Your heirs will thank you for this attention to detail.
JAMES L. HALPERIN is co-chair and GREGORY J. ROHAN is president of Heritage Auctions. MARK PRENDERGAST is director of the Trusts & Estates department at Heritage.
©2015 James L. Halperin and Gregory J. Rohan