The Experts’ Guide to

APPRAISERSASSOCIATION.ORG Why This Guide? Protecting, valuing and maintaining artworks and collections Table of Contents requires specific expertise, including knowing how to find the right specialists and how to ask the right questions in each phase of the ownership process. The Appraisers Association of America offers this resource to collectors and allied profes- sionals to help guide them as they buy, sell, insure and maintain 1. BEFORE YOU BUY their artworks and collections. 1.1 Choosing a Marketplace —Advisory Council of the Appraisers Association of America 1.2 Performing Due Diligence 1.3 The Bill of Sale

Who Is a Collector? You are a collector whether you simply own objects you love 2. WHEN YOU OWN: or programmatically collect in a specialized field. Your col- CARING FOR YOUR lection may consist of your childhood collection of baseball 2.1 Protecting Against Physical Risk cards, grandmother’s sterling silver platters, inherited jewelry 2.2 Working with a Conservator or a large group of works by modern masters. 2.3 The Role of the Appraisal Report 2.4 Management In each case, you are a steward of cultural history. Your arti- 2.5 Insuring Your Collection facts will define later generations’ understanding of cultural values, and may be a lasting legacy to your heirs or a favorite . Meanwhile, your objects will give you great plea- 3. WHEN YOUR COLLECTION TRAVELS sure—the hallmark of a prized collection. 3.1 Shipping 3.2 Storage

4. ASSESSING VALUE 4.1 The Appraiser 4.2 The Appraisal

5. YOUR COLLECTION AS AN ASSET 5.1 Using Your Collection to Create Liquidity 5.2 Art Financing 5.3 When You Inherit 5.4 Divorce-related Issues 5.5 Estate Planning and Settlement

6. SHARING YOUR COLLECTION 1. BEFORE YOU BUY

1.1 Choosing a Marketplace: Art and Antiques Dealers, , Auction House or Internet? Each source has unique selling practices that offer the pro- spective buyer both advantages and disadvantages. To most effectively participate in the art market, the active collector should be familiar with the business practices of each potential source of art, antiques and collectibles.

Dealers and Galleries The role of the dealer and gallery often extends beyond buying and selling to include: • Educating the public at their galleries through exhibitions, catalogues and websites, and at national and international art fairs • Nurturing new artistic talent, and presenting it to a wide audience through openings and exhibitions • Selling with clear title and warranting the authenticity of the object • Explaining to potential collectors the factors that constitute value and quality with respect to a work by a certain artist or within a particular genre • Providing advice about the maintenance, installation, shipping, conservation and framing of the works they offer • Taking back on consignment works they have sold, to re-sell at the current market price (regardless of the price originally paid)

Dealer and Gallery purchasing tips • Consider hiring an independent art advisor to vet purchases and negotiate sales. • With some purchases, consider hiring an attorney to aid in the transaction and review the bill of sale. • Inquire about the gallery or dealer’s reputation, profes- sional background and solvency, by doing due diligence. • Ask about a gallery’s involvement with local organizations, as well as with national and international art fairs, biennials and exhibitions. • Inquire about dealer’s selling history to . Review the quality of their catalogues and exhibition press coverage. • Avoid dealers and galleries that emphasize the investment potential of what they sell. In all cases, buy what you love, and buy the best quality objects your budget will allow. Auction Houses Online Purchasing There are benefits to purchasing art and antiques from an A significant number of antiques and collectibles are now auction house — including but not limited to — the greater purchased online. The most important advantage to this range of items often available. method is the convenience of viewing and researching pieces • Auction houses efficiently gather thousands of items annu- online. Protect yourself by ensuring that: ally across a broad spectrum of genres, periods and media. • All lots have guarantees for authenticity and condition • At nearly every auction house, and particularly at larger • The seller has a well-established reputation regional and international houses, experts offer bidders • Complete condition reports accompany every lot guidance about the items on offer. • Each lot is fully displayed in several clear photographs • At an auction, buyers are encouraged to both examine • Consider all additional charges, which may include, but the exhibited art and antiques, and to ask specialists are not limited to, buyer’s premiums, taxes, and shipping their questions. and handling charges • Buying at auction can be a more “democratic” method of acquiring art and antiques, as auctioneers accept the 1.2 Performing Due Diligence: What Every Collector highest bid via the age-old process of real-time bidding. Should Know Before Buying an Artwork • Auction catalogues are a superb resource for learning Before purchasing an item, ask yourself the following about art and antiques. questions: • Is it authentic? Practical guidelines to consider when buying at auction: • Is it in acceptable condition? • Familiarize yourself with the auction house and ensure that • Am I paying a reasonable price? it is reputable and trustworthy. • Will I own it with a clear title? • Read the “Terms and Conditions of Sale” listed at the front or back of every auction catalogue. Authenticity • If you are unable to visit the auction house, consult its What constitutes authenticity may vary between works of website to view the results of past auctions and to learn art. A Picasso painting is not “authentic” if it was not painted about upcoming auctions. by Picasso (and may cease to be if it is over-restored), but • Prices realized for specific artists/makers are often other works — e.g., tribal art — may be authentic without any available through art price data websites including information as to the identity of the artist. Ultimately, a work artnet.com, artinfo.com, p4a.com, askart.com, is deemed authentic if the art market accepts that there is artfact.com and artprice.com. enough evidence that the work is what it claims to be. • Before you buy, carefully examine items of interest at the pre-auction viewing. If you cannot personally view Basic steps to take to ensure that an artwork is authentic: the objects, it is advisable to have a knowledgeable agent • Start with the , or the ownership history of the attend the viewing on your behalf. Remember, all items work. Obtain this from the seller and verify it (with help offered at auction are sold “as is,” so buyer beware. from an appraiser or art historian) by tracing its actual Ask for a condition report from the auction house, and movement through as many prior owners as possible. if possible, documentary photographs. • Have a recognized expert in the area (scholar, founda- • Most auction houses allow for bidding by one of four tion, etc.) authenticate the work. In Europe, there could separate methods: in person, by telephone, or in absentia be a “droit moral” authorizing a particular authenticator, online or by commission bidding. who may be a scholar, family member of the artist, or an • Be aware that purchasers need to pre-qualify financially to appointed specialist. Catalogues from the major auction bid at certain auctions. An auctioneer’s printed “Conditions houses usually reference experts who have been consulted. of Sale” should be studied carefully in advance, noting the These may provide a guideline for which “experts” the addition of a buyer’s premium and taxes to the hammer commercial art market currently recognizes. If relevant, price, rules for payment, and pick-up procedures. Be careful consider consulting a scientific expert who can date the to understand the “glossary” of terms usually printed in the paint or materials. front of the catalogue for nuances of attribution and dating. • Check to see if the work is included in, or will be in included • Finally, be certain after your winning bid, you safeguard in, a catalogue raisonné authored by a recognized expert. all of your documentation (invoice and original copy of Be aware that scholarly opinions can change over time. catalogue), as well as arrange for a professional shipper to Make sure you have the most up-to-date information. transport your object. • Check the exhibition and publication history to determine fees if that title is challenged (which would be covered by an whether others have deemed the work authentic. “indemnification”). For more, consult an attorney and see • For a particularly complicated work of art, a thorough “What Every Collector Should Know About Documenting a scholarly investigation by IFAR (International Foundation Purchase of Art” (page 10). Remember also: Ars Longa, Vita for Art Research) may be recommended. Brevis. Living artists and gallerists may place limits on what you • Finally, see “Working with a Conservator” (page 12). can do with the work (e.g., whether you can publish copies, change it, and even how you can sell it) and how you conserve Title it (a federal law can affect whether the work is still deemed It is more difficult to confirm title claims for an artwork than authentic if it is restored after damage). for, say, real estate. Artwork is portable and typically not regis- tered, as a parcel of land would be. Thorough due diligence will The Art Loss Register (ALR) is the largest private international help you to identify potential claims before you buy, and help database of stolen, missing and looted artworks. Before you you win if a claim does arise. buy a work of art, visit www.artloss.com to perform a database • Again, start by confirming provenance by acquiring all check. For a nominal fee, you can ensure that you are not relevant documentation pertaining to the object. buying items known to be missing or stolen, or those subject • Check the Art Loss Register and Interpol for works to a dispute. Subject to the results of the database check, an identified as stolen — you can acquire good title to a ALR certificate will be issued as confirmation. work even if there are claims, if you buy from a dealer in good faith; getting title to a work that was stolen can be Price/Value more complicated. Consider finding an independent art appraiser who can act • If you can find out who the seller is (which is not always as an advisor or consultant. An appraisal of an object for sale easy), check for liens (e.g., a “UCC-1”) in state and local correctly identifies the object and establishes its proper registries and for lawsuits that may affect title. value for the purpose of sale. It provides the buyer with the • Be especially careful about a work another country might confidence that the object is correctly identified, that its value deem its “cultural property,” or a work transferred in the is based on relevant comparable sales in the marketplace, and shadow of WWII. that the provenance, if applicable, is correct and verified. • Check to see if the work was properly imported and exported by reviewing customs paperwork and relevant Alternatively, consider finding an independent art advisor — country laws. one who has specialized knowledge about the field which you • Consider obtaining title insurance for comprehensive are interested in collecting, and with the reputation of having protection against defective title claims and defense costs. the highest ethical standards, especially if you are planning to • Check for “lack of authority to sell” claims. For instance, make a substantial investment. An art advisor who charges for if a seller sold the work as a result of a divorce without the his/her time, rather than by a percentage of the transaction, consent of his/her spouse. might be best suited to give you honest, conflict-free advice, and may be able to save you from “mistakes,” especially when Art title insurance you are beginning your collecting career. Your art advisor Art title insurance policies transfer the financial risk of defec- should be helpful in negotiating the price, and can advise you tive title to a third-party insurer and cover the full spectrum on proper collection management. of defective title risks—from historical and recent theft to the broad range of liens and encumbrances that may exist. Condition Title insurance protects against: It is part of the due diligence of the buyer to request a condi- • The loss of the object tion report for the object for sale. Condition reports are • The purchase price typically provided by sellers; however, when an object of • Legal fees associated with defective title significant value is involved, a conservator should be hired by the buyer for an independent assessment of the object. See Get it in writing “Working with a Conservator” (page 12). You need more than an invoice. While an invoice or bill of sale can be helpful, it is only one part of a secure purchase. You will also need specific warranties about title and authenticity. A typical bill of sale or dealer invoice might give you good title to the work, but it likely will not address who pays the legal 1.3 The Bill of Sale: What Every Collector Should Know About Documenting a Purchase of Art When a collector buys art from a dealer or gallery, the collector typically receives a one-page invoice that generally includes the following: • A complete description of the artwork • Its purchase price • The sales tax • Instructions for payment (often by wire transfer) • An indication of which party (dealer or buyer) pays packing/ shipping/crating costs • A notation that title does not pass to buyer until payment is made in full

While such an invoice accords the buyer certain protections (in New York State, for example, a dealer’s invoice describ- ing a work of art as being by a particular artist amounts to an express warranty of authenticity), collectors should have additional legal protections. For example, collectors can have tailor-made bills of sale signed by the collector and the dealer, turning the invoice into an Agreement, which is a titled instrument.

The tailor-made bill of sale includes all of the above-noted items, and can address the following: • Requires the dealer to make representations and warranties with respect to authenticity and good title; that the dealer has furnished the buyer with all of the information about the art that dealer has; and that to the best of the dealer’s knowledge, the art has not been restored or repaired (other than as indicated on an attached condition report) • The dealer should also be required to back up the dealer’s warranties with an indemnification • The dealer should also provide the purchaser with the provenance, the exhibition history and the particulars of any literature mentioning or illustrating the artwork • Where and when appropriate, the dealer should also be required to provide an Art Loss Register report to ensure that there is no claim on record that the art has been lost or stolen • Ensures that the art is delivered by experienced art han- dlers, where applicable • Determines which of the two parties insures the art while in transit, where applicable • Because of the technical nature of modern conservation, 2. WHEN YOU OWN: conservators usually specialize in a particular type of object, CARING FOR YOUR COLLECTION i.e., paintings, objects, furniture, textiles, etc. • A conservator can be consulted in the event of an insurance 2.1 Protecting Against Physical Risk claim or future sale. Every collection faces a wide range of physical exposures. Although natural disasters such as hurricanes, wildfires and The American Institute for Conservation (AIC) offers “Find earthquakes are all potential risks, most typical art losses are a Conservator,” a Web-based tool for locating its members due to transit, water, fire, theft, inadequate storage, improper (www.conservation-us.org). AIC is the only national mem- installation, accidents and lack of environmental controls. bership organization in the United States dedicated to the preservation of cultural material and plays a crucial role in Help protect your art at home by following this advice: establishing and upholding professional standards. Hiring • Shield your collection from sunlight and strong lighting. an AIC Fellow or Professional Associate is recommended. Installing UV-filters on your windows can limit damage caused by direct sunlight. Obtaining a condition report • To limit damage from environmental conditions, maintain Accurate, technical and succinct condition reports form one a steady temperature and humidity in rooms containing of the cornerstones of artwork ownership. A condition report valuables. A constant relative humidity (RH) of 45–55% documents the following conservation concerns: and a temperature of 72 degrees is recommended for a • Stability: the structural soundness or surface condition general collection. Collections of certain materials require of an object or painting. specific recommendations, e.g., pastels and metals. • Effects of the environment: temperature, relative humidity, Consult your conservator to determine the acceptable light and UV radiation, pollutants, insects and mold are range for your collection. major factors that affect art objects. • Never store items on the floor, even temporarily. • Damage: either from daily use, accidents, degradation • Avoid hanging unprotected artwork directly above of materials or inherent vice (an inherent chemical or fireplaces or beneath active air ducts. physical instability). • Engage a professional art handler to install artwork. • Previous treatments or restorations: were the previous • Mount smoke detectors in every room that contains treatments appropriate, and have they aged well. valuables. • Avoid placing artwork in high-traffic areas. Scholarly authenticity • To avoid accidental toppling, ask a conservator if it would Collectors should understand that appraisers do not authenti- be appropriate to use museum wax or a similar product cate cultural property. An authenticity study is recommended to secure breakables to pedestals and shelving. for a very valuable, old or historically significant object, and • Consider adding moisture alert sensors in basements and requires an expert specializing in “technical ” — the areas adjacent to radiators and other potential sources study of techniques and materials of manufacture, restoration of flooding. and conservation, as well as of age, attribution and authenticity. • All art storage rooms should be locked and outfitted with shelving to separate each object. 2.3 The Role of the Appraisal Report • Only use archival-quality materials to wrap artwork, An appraisal by a qualified appraiser (see Chapter IV, and consult an art handler or conservator about which “Assessing Value”) plays an important role in ensuring that materials are best for your collection. your collection is protected. It is recommended that you obtain or update an appraisal for any of the following reasons: 2.2 Working with a Conservator • Insurance purposes The condition of an object affects its monetary, cultural and • Damage or loss aesthetic value. For that reason, a conservator should be • Estate tax liability or equitable distribution consulted regularly to examine your collection, including any • Estate planning and gifting time there is a change in the physical or environmental condi- • Divorce tions in which it is housed. • Non-cash charitable donation • Conservators work to preserve property from the rav- • Liquidation of part or the entirety of a collection ages of time, the threats of pollution and the devastation • Bankruptcy proceeding brought by natural disasters. • Collateral for financing 2.4 Inventory Management Tips for selecting a broker Maintaining thorough inventory records reduces the • Ensure that your broker specializes in insuring artwork. likelihood of a mysterious disappearance and can eliminate • Confirm the process is transparent and streamlined. misappropriation and lost provenance. A good inventory • Ask what services the broker provides. management system also helps expedite the claims process • Ask if the broker has expertise in fine art claims —this is in the unfortunate event of a loss. Properly implemented important as you will need an advocate for a fair settlement. records are vital when a piece is outside a museum or • Ask if the broker provides an annual review of your gallery environment. Thorough inventory management insurance program. encompasses: • Saving all receipts and invoices Tips for selecting a carrier • Storing information about the collection in a secure • Ensure the carrier specializes in insuring art and collectibles. off-site location • Select a carrier with a top ranking in financial solvency as • Maintaining a computerized inventory database with provided by one or more rating agencies. descriptions and images of each item • Confirm that your carrier provides specific art risk • Organizing data by date of last appraisal, location, management services. genre and other relevant information • Price should not be your sole determining factor. A lower • Getting periodic updates on your appraisal when there is premium payment may result in terms and conditions a significant change in the market. A good rule-of-thumb that do not meet your needs or coverage requirements; is every three-to-five years. it may also include undesirable policy exclusions.

To find an effective digital inventory system, consult an art Some other important points about insurance professional that has experience in collection administration. • Be sure to read the policy terms and conditions before you Discuss whether your collection would be better served by a sign a contract. It might be advisable to seek the assistance desktop or Internet-based system, which inventory providers of legal counsel. maintain good service records or offer telephone support, • In most states, “Fine Arts” is a non-filed class, meaning and the pros and cons of a full-service vendor. policies can vary widely from company to company. • If items of your collection are in storage, identify the type 2. 5 Insuring Your Collection of storage facility in your policy. This information is critical Maintaining adequate insurance coverage is crucial to recov- for ensuring proper underwriting and coverage. ering from a loss. Many homeowner policies are inappropri- ate for art collections. Consequently, the collector should Insurance Adjusters purchase a separate fine art insurance policy from a specialty In the event of damage to, or loss of, your artwork, your carrier, or from a homeowner’s carrier well versed in art insurance company will appoint an in-house or, in some insurance. A specialist’s fine art insurance policy contains instances, an independent adjuster to: specific language covering fine arts risks, often with no • Visit the scene and determine the cause of the loss deductible and broader terms and conditions for catastrophic or damage protection in the event of hurricanes, earthquakes, terrorism • Analyze and interpret the insurance contract to determine and other calamities, and for issues such as loss to objects the coverage that applies within a pair or set. • Research whether the piece needs immediate stabilization or evacuation Brokers and Carriers • Secure proof of loss Brokers are state-licensed insurance advisors, and are paid a • If appropriate, help the collector or gallery find the right commission that is included within the insurance premium. conservators and appraisers The broker’s role is to obtain coverage for the client and advise • If it is a theft, work with law enforcement agencies to try the client on the specific policy conditions and exclusions, and recover the piece pointing out differences in carriers. Carriers are the insurance • Manage the timelines and ultimately arrange a settlement companies that provide the insurance contract and have the between the parties legal obligation to pay for the collector’s loss in the event of • Suggest proactive loss-prevention measures to avoid a valid claim. future reoccurrences 3. WHEN YOUR COLLECTION TRAVELS

3.1 Shipping Artwork is extremely vulnerable whenever it is handled or moved. To minimize the risk of loss or damage, transit proce- dures should be scrutinized before a shipment commences. Best practices include: • Using a Transportation Safety Administration (TSA) Certified Packer for all passenger cargo transit— you want to avoid having crates opened during clearance at the airport • Informing the shipping company (or shipping broker) of all subcontractors (or contracted agents) that will be engaged • Using a specialty fine art shipper • Ensuring proper packing of the item to be shipped • Providing specific handling instructions (loading, orientation of crate, etc) • Arranging fast-track customs clearing for international shipments • Confirming a specific delivery time at destination • Securing a complete audit trail of shipping documents from your shipper that demonstrate chain of custody from the original dispatch point to the final delivery destination, including any intermediate storage or trans- shipment arrangement • Identifying signatory names • Obtaining a clear indication whether the item is being shipped or stored as either “Full Value,” “Declared” (in which case the transporter is liable for the full value of the item either by procuring insurance or accepting full liability) or “Consignor accepts transporter’s limitation of,” in which case the consignor is liable for the item being stored or shipped and should secure its own insurance • Making sure that any variation to the service, such as a change in delivery address, is recorded on the documents • Assuring that documents record the dimensions of each item being shipped or stored and an identifier — such as inventory code, bar code, client reference, etc. — is attached to each (this will allow each item to be correctly identified and matched against shipping and storage documents) • Making certain that documents include a current condition report of the piece prior to packing and shipping — a copy of this report may be placed within the crate or transmitted separately • Waybills and warehouse receipts should note any identified preexisting condition of item if unpacked prior to collection, and the external condition of the crate or other packing materials if packed prior to collection 3.2 Storage When storing artwork in an off-site facility, be sure to: 4. ASSESSING VALUE • Use a facility that has the expertise to handle fine art. • Ascertain if the warehouse is the sole user of the building. 4.1 The Appraiser If not, what is the nature of business of the neighbors? Hiring a qualified appraiser and maintaining updated values • Ask if the warehouse prescreens employees with back- is an important part of ensuring that your collection will be ground checks. protected. A qualified appraiser specializes in the area rep- • Most reputable companies will provide a detailed facility resented by your collection; is referred by a trusted source— report upon request. such as a colleague, museum professional, client, local auction • Ask about their qualifications—what is the training and house specialist, attorney or trust officer; is USPAP (Uniform experience level of the staff? Standards of Professional Appraisal Practice) compliant; and • Use facilities with fire detection and suppression follows the requirements set by the IRS for donation, estate equipment. and gift tax appraisals. • Find out how climate is controlled and how that affects your property long term. Guidelines for retaining an appraiser • Use a facility that can track your property with a good • Review the appraiser’s curriculum vitae. Note special train- inventory management system. ing, education and graduate degrees. Evaluate the length • Do your own background check—ask around. Is the facility of time he/she has practiced as an appraiser and the variety trusted by reputable dealers, collectors and museums? of experience. Understand the level of membership the • Never use a self-storage facility, as exposures to your appraiser has maintained in the Appraisers Association of collection cannot be controlled. America: Certified Member: has attained the highest level of specialization; Member: is professionally competent in A Note about Frames field(s) of specialization; Associate: is new to the appraising The importance of a frame cannot be underestimated. field and working towards membership. Today, more than ever it is just as likely that the frame sur- • You should plan to have several important pieces of rounding an artwork can carry great value as the value in the information available before you contact an appraiser to art itself. Period frames span many countries and centuries discuss an appraisal: the nature of the work of art such as and different styles, different methods of fabrication and “painting on canvas” or “silver bowl”; any information different makers can all contribute to the value of a frame. about the artist or maker and the date of the piece; any Historically appropriate framing— the surrounding of an information about when or where it was purchased and artwork with a frame of the same period— is of great concern if you are the owner; and where the piece is located and if to collectors and . It is important to carefully assess there is an image available. the frame—look at the back, look for evidence of age and • Openly discuss with the appraiser the nature of the joining techniques, become familiar with the difference in a appraisal or consultation work that is being contemplated, painted versus a gilded surface. And when in doubt be sure so you can both agree upon the purpose of the appraisal to seek the guidance and information that a frame expert and the scope of work to be performed. can offer. • Inquire about the appraiser’s fee structure; members of the Appraisers Association of America are independent appraisers and their fee structures vary—many have an hourly rate, and others will have a project rate; you should be prepared to discuss these fees and a timeline for your project. It is unethical and against the standards of USPAP and the AAA for an appraiser to base his/her fee on a percentage of the valuation of the object(s) appraised. • Before your appraiser arrives, make sure you provide the proper working conditions for his/her inspection, for exam- ple, proper lighting, ventilation, a stepladder and possibly an art handler to assist. Remember, to do a proper appraisal, the appraiser must be able to examine the front and back of works of art, which should be removed from the wall.

Code of Ethics 4.2 The Appraisal All Members of the AAA are required to adhere to a strict The Elements of a Correctly Prepared Appraisal Code of Ethics which ensures unparalleled standards of ethics, All members of the AAA are required to prepare their appraisal conduct and professionalism. The code requires the appraiser reports according to The Elements of a Correctly Prepared to serve the public interest as follows: Appraisal, which allows the reader to follow the appraiser in • Assumption of Responsibility: it is the responsibility of the the valuation process, in a reasonable and logical manner. individual appraiser to contract for appraisal work only These elements include: within the areas of his or her professional competence • Name and address of client and expertise. • Name, contact info and qualifications of the appraiser • Objectivity: all items of property covered within an • Signed and dated certification: statement that the facts appraisal must be appraised objectively, independent of are true and correct, statement of disinterest, etc. outside influences and without any other motive. • Scope of work: the problem to solve, effective date, • Examination of Property: all items for appraisal must be type of valuation to be used, etc. examined personally by the appraiser, or be so noted. • Purpose of the appraisal: insurance, donation, estate • Purpose of Appraisal: determine the nature and purpose planning, etc. of each appraisal in advance and to note the nature and • Type of report: self-contained, summary or restricted purpose for which said appraisal has been prepared. • Approach to value: market data comparison approach, • Valuation: the following factors must be considered and cost approach or income approach included: purpose of the appraisal; clear identification of • Type of valuation used: retail replacement, marketable each item; valuation method used; valuation approach; cash valuation, etc. quality of the item; condition of the item; and where, • Marketplace in which valuation is applied: auction, available, the provenance or history of the item. retail, etc. • Fees: the fee should be determined and agreed upon prior • Relevant dates: effective (valuation) date and (issue) date to commencement of the appraisal service; no appraiser of report; and also as needed, date of inspection, date of shall contract to perform services for a fixed percentage of donation, date of death, etc. the value of the item appraised. • Description of appraised objects: date, medium, quantity, • Confidentiality: it is the appraiser’s responsibility to keep markings, etc. all appraisals confidential, unless required by the owner, • Disclaimers, extraordinary assumptions, assumptions, or by due process of law, to release such appraisal. limiting conditions: statement of belief in authenticity, etc. • Provenance: prior to the preparation of an appraisal, • For estate or donation appraisals: appraiser’s tax ID# an appraiser should make reasonable inquiry of their and qualifications, statement of how the objects were client as to how the item to be appraised was acquired. acquired, etc. Appraisers should not prepare appraisals for items that • Additional description: artist, title, provenance, exhibition readily appear to have a doubtful provenance and/or and publication history, glossary, etc. may be stolen property. • Support for valuation conclusions: market analysis, • Standards: all appraisals should be prepared in accordance comparables, biography of the artist, etc. with The Elements of a Correctly Prepared Appraisal, • General format: pagination, header/footer with appraiser’s Uniform Standards of Professional Appraisal Practice name, client’s name, type of report, valuation system used, (USPAP), and Object ID. etc., statement of the number of photographs • Relations with Colleagues: an appraiser is obligated to • Photographs are required for any object valued at $20,000 share knowledge and experience with his or her colleagues. or more for the IRS: donation, estate or gift tax It is unethical for an appraiser to volunteer adverse judg- ment on the qualifications of, and procedures rendered USPAP does not dictate form, format or style; the elements by, another member of the Association, except when the listed above must be included, but not specifically in this order. statement is scrupulously based on facts and made to the proper authority within the Association or in a court of law.

A Note about USPAP The Appraisal Foundation (TAF), established in 1987 and based in Washington, D.C., is a not-for-profit organization dedicated to the advancement of professional valuation. TAF is responsible for developing and promoting the Uniform Standards of Professional Appraisal Practice (USPAP), which are the generally accepted standards for professional appraisal practice in North America. Unlike the field of real estate appraising, which is state-licensed, the field of per- sonal property appraising is self-regulating. Users of personal property appraisal services rely on the recognized personal property associations to provide a reliable and trustworthy credential, which is the primary mission of the AAA. Integral to this mission is USPAP, which all of our members are required to take, and which exists solely to promote public trust in appraisal practice.

The IRS is Watching: Appraisers and the Pension Protection Act of 2006 The Pension Protection Act (PPA) of 2006, signed into law on August 16, 2006, substantially tightened the rules for establishing the value of artwork for income, gift and estate tax purposes; made substantial reforms in the regulation of charitable gifts and charitable organizations; and substantially increased the penalties for taxpayers and appraisers for incorrectly prepared appraisals. It is important to check with your accountant, attorney or appraiser regarding the follow- ing new provisions: • Charitable gifts of artwork and the “related use” rule • Fractional gifts of art • Qualified appraisal requirements • Qualified appraiser requirements • Valuation penalties on individual donors • Valuation penalties on appraisers

Be aware that the IRS has specific rules for collectors who treat their collections as investments. 5.3 When You Inherit 5. YOUR COLLECTION AS AN ASSET Currently, when you inherit a collection, the value of the property will be “stepped-up” equal to the appraised value in 5.1 Using Your Collection to Create Liquidity the decedent’s estate as finally determined for federal estate By using art and antiques to secure financing, art owners can tax purposes. An individual who inherits property must obtain avoid the significant transaction costs and taxes associated a copy of the appraisal to establish the cost basis in case of a with the sale of art. Consider these facts: sale for income tax purposes. It is recommended to obtain a • The long-term federal capital gains tax on art and antiques qualified appraisal by a qualified appraiser to establish the fair is currently 28 percent versus 15 percent for stocks, bonds market value. It is also important to record the provenance and real estate and ownership for inherited property. • State and local taxes can result in a total tax bill of 40 percent or more on the gain 5.4 Divorce-related Issues • Selling costs, such as an auctioneer’s or dealer’s Title matters: is the work owned as marital property or as commission, may be as high as 30 percent of the value the separate property of one spouse? of the item sold • An invoice may be evidence of title, but it is not proof of title. • Selling in an unstable economic climate may be a less However it may be the best evidence of title, and without attractive liquidity option, at a time when prices are more, it may be difficult to overcome the presumption falling and the percentage of art “bought in” or potentially created by the way the invoice is addressed. “burned” at auction increases • Remember when one spouse is the buyer of the art, and • Depending on the lender, the collateral and the borrower’s uses separate funds, the gallery may nonetheless address profile, the lender may or may not require possession the invoice to the couple. If the invoice is incorrectly of the art addressed, it is difficult and very expensive to overcome the presumption that title was incorrect 5.2 Art Financing Art financing can be an attractive alternative to liquidating When considering how to value the art a collection. Art lenders may be willing to consider loans • If at all possible, agree in advance how to value the collec- secured by a variety of collecting categories; they often have tion. It is best if the parties can agree on an appraiser. If the in-house art expertise but may also use third-party appraisers parties cannot agree, consider having each party choose to provide values. Collectors interested in arranging financing an appraiser, and then the two appraisers can choose a should start by identifying their borrowing needs, including single appraiser to do the actual appraising. the loan amount and term. Consider making these decisions • “Dueling appraisals” should be avoided, as it increases costs in consultation with a financial advisor, accountant, attorney and will surely add to fees from the dueling attorneys. or estate planner. When considering how to divide the art The art financier will typically need: • Think about the cost basis of the art, the cost of acquiring • Information on the proposed collateral and the and maintaining the art, and the current market value. owner’s financials (e.g., a personal financial statement Will the spouse who gets the art be responsible for all taxes and tax returns) due on that art when and if it is sold? • Art collateral that has an established track record in the • Think about the stability of the art. Is the work made of secondary (auction) market ephemeral or difficult-to-maintain materials? Will insurance • Complete documents pertaining to each piece of art, cover the loss of such a work, or will the insurer deem the including bills of sale loss to be a result of “inherent vice,” which is not covered • Descriptions of the work (including provenance, by insurance? exhibition and publication history), digital photographs • Is the work of art site specific, and therefore unsuitable and insurance policies to move from a specific location? For practical purposes, ownership of that work may be required to stay with whomever owns the site location. • Be certain that all necessary documentation and certifi- cates of authenticity exist. Remember that without the certificate of authenticity, a work of art may cease to be authentic. If one spouse takes art and the other spouse takes another type of property, such as real estate • Be sure to consider the tax treatment upon sale of each type of asset. Capital gains on real estate may be reduced to the extent of capital improvements. Sales of art may be treated at a higher tax rate as ordinary income, and even if treated as capital gains, the available offsets against any gains in art are far less than what would be available for an improved home. • It may cost much more to sell art than it does to sell other property. • It is easier to borrow against a home than against art. If there will be future liquidity needs, this can be a concern. • If at all possible, try to agree on a method of appraising each work in the collection. Appraisal costs can become quite significant. Cooperate wherever possible to minimize these costs.

After the art is divided Consider what an auction house or dealer will require in order to be satisfied that one spouse has sole and exclusive owner- ship of a work of art, and therefore has the right to sell it. One possible solution is to have each party execute a notarized letter in favor of the other spouse, addressed “to whom it may concern,” listing the works to be owned outright by the other spouse. From a practical perspective, that will satisfy any auction house or dealer who has concerns about whether the consignor has the actual right to sell the work.

5.5 Estate Planning: Gifting and Charitable Donations & Estate Settlement: Estate Taxes and Final Distribution Knowing the fair market value of your collection is important for both income and estate tax purposes. Specifically, this information is necessary to properly plan an individual estate, to make gifts to family members and to make donations to charitable organizations.

Tips for executing charitable donations • Donate to a public charity, not a private foundation. • Donate property whose value would be assessed as a long-term capital gain, not as ordinary income. • Satisfy the “Related Use” rule. • Be aware that distribution of property can be determined under a last will and testament or a trust instrument. • Execute an official “Deed of Gift” signed by the donee and donor, outlining the property being donated, the date of donation, and any conditions of the donation. The appraiser should have a copy of this document. • Obtain a “Qualified Appraisal” by a “Qualified Appraiser” as defined in the Internal Revenue Code. 6. SHARING YOUR COLLECTION ABOUT THE AAA There are many reasons to share your collection with other Founded in 1949, the Appraisers Association of America, Inc. collectors and the art community. It can be personally (the AAA) is the oldest nonprofit professional association of gratifying, and exhibiting may add value to your collection. personal property appraisers, with over 700 members in cities Common ways to begin introducing your collection to the across the United States as well as in Canada, Europe and Asia. art community include: The AAA serves the arts, legal and financial communities and • Have your work included in an authorized catalogue private and corporate collectors. Certified Members and raisonné to secure its place in the artist’s canon. This Members provide appraisals for the fine and decorative arts, makes the work known to the scholarly community and jewelry and household contents that meet the highest industry the public. Your name can remain anonymous should standards for purposes of insurance, estate tax, charitable security or confidentiality be a concern. donation, equitable distribution, liquidation, purchase and sale. • Utilize a to organize an exhibition of your collection, or include some portion of it in a larger exhibition. The AAA is affiliated with New York University’s School of • Organize or participate in a seminar or panel discussion Continuing and Professional Studies, which offers a Certificate relating to a theme, period or artist represented in your in Appraisal Studies in Fine and Decorative Arts; numerous collection. AAA members are among the teaching faculty. The AAA is a • Privately publish a catalogue of your collection. Public sponsor of the Appraisal Foundation and a Member of the relations consultants specializing in the visual arts are Appraisal Foundation Advisory Council; the Appraisal Founda- experienced in recommending curators and seminar tion is authorized by Congress as the Source of Appraisal Stan- venues, arranging for the private publication of art dards and Appraiser Qualifications and publishes The Uniform and catalogues, and promoting those activities within Standards of Professional Appraisal Practice (USPAP), which and beyond the art world. is taught by the AAA on an ongoing basis. The AAA was also • Loan pieces to a museum or exhibition. a major contributor to Object ID, the art classification system developed by the Getty Information Institute and currently Endnote endorsed by all major law enforcement agencies, including the The goal of this brochure is to encapsulate the various ele- FBI, and by museums and professional organizations of art ments of building, managing, protecting and gifting your dealers and appraisers around the world. objects of passion. The art of building and maintaining a col- lection, whether it be of vintage toys or old master paintings, is typically founded on a personal vision that will interface with many types of professional art service providers throughout its life. The activity and focus of a collector often changes during the collecting journey, requiring different experts and advisors at different times to help build and preserve the collection for posterity. ACKNOWLEDGEMENTS Special thanks are extended to the members of our Board of The Experts’ Directors and our Advisory Council, many of whom con- tributed to this publication, and in particular to Shannon Wilkinson, Rand Silver, Patricia Dudley, Judith Bresler, Renée Guide to Vara and Catherine Harvey, who devoted time, energy and intelligence to the task of dreaming up our little : struc- turing, writing, editing, designing and gently making it real. Collecting Many thanks to our authors: Judith Bresler, John R. Cahill, Moira Crabtree, Patricia Dudley, Michael Findlay, Roslyn Bakst Yes! I would like to order The Experts’ Guide to Collecting: Goldman, Amy J. Goldrich, Nancy Harrison, Simon Hornby, Single Brochures # @ $5 per brochure, AAA Members Chris Marinello, Claire Marmion, James Martin, Lark Mason, Single Brochures # @ $10 per brochure, General Price Kele McComsey, Alasdair Nichol, Sherri North Cohen, Steven 10-Brochure Packet # @ $40 per packet, AAA Members Pincus, Brian Shannon, Rand Silver, Marion Simon, Dorit 10-Brochure Packet # @ $80 per packet, General Price Straus, Ron Thornton, Renée Vara, Yuri Yanchyshyn, Robin Young, David Weiss and Katja Zigerlig. Thanks to Patrick New York State residents should include 8.875% sales tax Seymour, and Tsang Seymour’s creative staff. —Aleya Lehmann Bench, Executive Director Bulk Ordering Options 11–50 Brochures: Get 25% off Member or General Price 51–100 Brochures: Get 40% off Member or General Price 101–500 Brochures: Get 50% off Member or General Price 501–1000 Brochures: Get 60% off Member or General Price Borro collaborates with world-class appraisers to provide clients with the assurance that they will receive the maximum Please call 212.889.5404 x14 to place bulk orders value for a personal loan using their luxury assets. When art is used as collateral, it is fully insured up to its fair market value NAME and is entirely secure for the duration of the loan. Visit borro at www.borro.com to learn more about our process and the COMPANY TITLE variety of assets we loan against.

The Appraisers Association of America gratefully acknowl- ADDRESS edges Borro for underwriting the design and printing of TELEPHONE FAX The Experts’ Guide to Collecting.

EMAIL Appraisers Association of America, Inc. 212 West 35th Street, 11th Floor South New York, NY 10001 Total number of copies Tel: 212.889.5404 x14 Fax: 212.889.5503 Please find enclosed my check payable to the Appraisal Institute [email protected] of America in the amount of $ appraisersassociation.org Please charge $ to my: MasterCard Visa Amex © Appraisers Association of America 2013 The opinions expressed by authors are not necessarily those of the Appraisers Association of America, Inc. This publication may not be reproduced, in whole or in CARD NUMBER EXPIRATION DATE part, without prior written authorization of the Appraisers Association of America, Inc. This publication is not a substitute for legal or other professional advice; SIGNATURE consult the appropriate professional to address your individual situation.

Image credits: Order online at www.appraiserassociation.org Page 2: Samuel Kirk, American (1793–1872). The Gilmor Ewer. ca. 1840. Silver repoussé work, height 17½ *Please not that orders are non-refundable inches. Photograph courtesy Spencer Marks, Ltd.; Page 4: Shiva and Parvati. East India, eleventh century. Gray schist, height 20½ inches (detail). Private collection; Page 11: Bernard Villemot, French (1911–1989). Perrier/c’est fou. 1977. Offset lithograph on paper, 24 x 17 inches (detail). Printed by S.E. Lalande-Courbet, Appraisers Association of America Wissous, France. Courtesy Swann Auction Galleries; Page 16: Roger Broders, French (1883–1953). Marseille. 1929. Lithograph on paper, 39 x 24½ inches (detail). Collection Tony Fusco. Photograph cour- 212 West 35th Street, 11th Floor South tesy Robert Four; Page 22: Sir Lawrence Alma-Tadema, English (1836–1912). Baths of Caracalla (Thermae New York, NY 10001 Antoninianae). 1899. Oil on canvas, 60 x 37 1/2 inches (detail). Private collection. Photograph courtesy Eileen Tweedy / The Art at Art Resource, New York; Page 27: René Lalique, French (1860–1945). Tel: 212.889.5404 x14 Fax: 212.889.5503 Rampillon Vase. ca.1927. Green glass, height 5 inches (detail). Photograph courtesy Heritage Auctions; [email protected] The mission and primary purpose of the Appraisers Association of America is to develop and promote standards of excellence in the profession of appraising through education and the application of the highest form of professional practice.

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