Buying art is a joy; selling it can be complicated. Here’s how to smooth the way
Even experienced collectors can benefit from help when selling their art and collectibles. At Bank of America the Art Services team can provide advice, simplify the sale process and reduce auction costs. Here are some key insights.
For dedicated art collectors, building a collection may be a lifelong pursuit. Though they may have spent countless hours collecting, some have little or no experience selling. Such was the case for one architect, a client of Bank of America Private Bank and passionate collector of five decades. As he reassessed his estate plan, he decided to create and fund a trust that would provide income for his spouse and children. To do so, he chose to part with a large part of his collection, but he was unsure where to start.
“Collectors are generally not sellers,” explains Drew Watson, Art Services Specialist at Bank of America Private Bank, part of the Art Services team, which advises and arranges for the sale of art and collectibles through partnerships with auction houses. “We work closely on sale strategy, deal structuring negotiation and project management of the consignment. It can be a full-time job.” And then there’s the emotional component: “Clients can be very attached to their art. We can provide an outside objective opinion on the collection, counseling the client and helping them thoroughly understand and execute on their options.”
Besides the time demands, Watson notes, the complexities around art sales are numerous — and may be harder when the seller is an heir. Here are some of the challenges you may need to work through to achieve your goals for the sale.
You built a collection, not a sales strategy
Tastes and trends in the art market change rapidly, notes Watson, making it tricky to assess demand. For the architect, that created questions about how many and which pieces he should sell. When the Art Services team came to examine the collection, they suggested he focus on selling pieces by a particular American Pop artist, whose works were experiencing a renewed surge in demand. In addition, they suggested specific pieces that would command top dollar. “His collection was predominantly post-war and contemporary, with artists whose works were seeing a pent-up market demand, at a time when the market was very supply constrained and auction houses were scrambling for desirable property,” recalls Watson.
“Collectors are generally not sellers, and there’s work that has to be done around organization, logistics and negotiation. It can be a full-time job.”— Private Bank Art Services Specialist, Bank of America
Watson then helped shape fielded proposals from multiple auction houses. The winning house offered the architect some extra financial and marketing incentives to sell the art in a single-owner sale, allowing the auction house to use the collection and collector’s story to generate more excitement. This approach resulted in every piece being sold, with the top lot selling for more than its high estimate, and the auction raised tens of millions of dollars. The proceeds plus the incentives enabled the architect to fully fund his trust.
Not all fiduciaries are art world experts
If you’re an executor of an estate, you may have little knowledge about the deceased person’s collection, and yet, as a fiduciary, you are responsible for maximizing the proceeds from an estate disposal. That was the case for the executor of a prominent arts patron’s estate, which had a collection of over 450 works.
After viewing the collection, the Art Services team procured proposals from three top auction houses. The winning bid, negotiated by the team, stated that the auction house would waive all seller’s fees for a single-owner sale, numerous smaller auctions and private sales transactions, provide a financial guarantee, and fund some conservation work, says Dana Prussian, Art Services Specialist at Bank of America Private Bank.
The Art Services team also worked with the auction house on the marketing plan, a unique challenge given the timing of the single-owner sale. “When the pandemic hit, we had to get creative with PR and marketing, since we couldn’t have an in-person element as originally planned,” Prussian recalls. To date, the sale, which is still ongoing, has raised $80 million for the estate.
Art rich nonprofits may have cash flow constraints
Managing art sales effectively is not just an issue for individual collectors, heirs and executors, notes Watson. Benefactors may gift art to a nonprofit, but institutions don’t always have the ability, desire or the funds to house an art collection. Watson recalls an artist-endowed foundation that held both a large collection of artworks by the founding artist, as well as a collection of works bequeathed by other artists and benefactors. While the foundation appreciated the gifts, it had an otherwise small endowment, which could not support its vision for charitable programming.
After the foundation met with the Art Services team and walked them through its collection, the team suggested they have their collection appraised to determine what their next step should be. After receiving preliminary estimates from auction houses, the foundation decided it would be financially advantageous to sell its bequeathed collection. The team negotiated preferred pricing from the auction house and helped with the marketing strategy, resulting in a successful sale that raised millions of dollars for the foundation’s endowment.
Art acquisition is a passion. But when it comes time to sell, it’s primarily a business transaction. Recognizing the difference and making sure you can manage the intricacies, or bring in the professionals who have the time and expertise to do so, is critical to meeting your goals as a seller.
Other planning considerations
Selling is only one option for your collection
Giving your collection to heirs
For many families, art collecting is an important shared passion and connection point, so you may wish to ensure your family or loved ones can continue to enjoy your collection. Your advisor can help you think through how to make sure you and your heirs are on the same page – and can offer suggestions for how to equalize individual bequests or keep your collection together.
Donating to a museum
Donating your collection may potentially allow you to reap tax benefits while supporting an arts institution. But museums are not always able or willing to accept artworks offered to them and if they do, they may not be obligated to keep or display them as you would like.
Forming your own museum
With a private museum, you have complete control over how your collection is presented to the public. To qualify for tax-exempt status a private museum is usually structured as a Private Operating Foundation, which must meet several tests. Importantly, the significant costs of building, maintaining, and staffing a museum may outweigh any tax benefits.
How can we help?
Your art and collectibles are, of course, expressions of your passions, taste — and pleasure. But they can also be a financial asset and repository of wealth. Bank of America Private Bank’s Art Services team has extensive expertise in helping clients unlock the capital in their collections, incorporate art and collectibles into their estate plans and navigate the art world.
Contact your advisor to find out if the Art Services team can help you.
Nonfinancial assets, such as fine art, are complex in nature and involve risks including total loss of value. Special risk considerations include complex tax considerations and lack of liquidity. Nonfinancial assets are not appropriate for all investors. Always consult your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.
Institutional Investments & Philanthropic Solutions (“II&PS”) is part of Bank of America Private Bank, a division of Bank of America, N.A., Member FDIC, and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). Trust and fiduciary services and other banking products are provided by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A.