5 Steps to Managing & Protecting Your Collection of Valuables

Posted by: Joseph Kuo | November 8, 2021

There are many hobbies that people enjoy, both before and during retirement, and collecting valuables is one of them. Some of the items that people might collect are cars, art, jewelry, antiques and fine wines. But in order to truly enjoy this hobby, it’s important that you are organized and protective over your assets. When it comes to caring for your collections, these five steps can help you to better manage and protect your valuables.

Step #1: Simplify & Organize Your Valuables

Depending on how long and how often you’ve focused on building your collection, it’s possible you may have accumulated a significant collection. If you aren’t already, start to organize and document your collection. Gather any relevant paperwork together, as well as how much you paid for the item and its current market value (if available). If it’s been awhile since the item was originally collected, now may be a good time to work with an appraiser to help determine its worth. You can also do preliminary research online to get an initial estimate on values.

Don’t forget to also document your collection by taking pictures and video. With a camera you can quickly show both your overall collection as well as get close up detail on each item.

Organizing and documenting your collection will help you gather the information you need to add them to an insurance policy. It will also help you assess and focus on which items of your collection mean the most to you, and which items you can cull to simplify your collection. You may find that some items in your collection have appreciated in value, and are now worth selling.

Step #2: Insure Your Valuables

When you have a large number of valuables, you’ll want to make sure you’re taking the proper measures to insure them. To do this, you may be asked to provide information including receipts or proof of purchase, authentication verification and images.

Create an inventory and put details about each into the document, as this will help with organization when you work with your insurer. Most homeowners insurance policies will provide only limited protection for collectible items, so check what your insurance covers when covering valuables. For instance, if you store all or part of your collection offsite, rental storage units typically do not include collectibles in their insurance policies.

Step #3: Increase Your Coverage If Necessary

There are two steps you can take when increasing coverage to protect your collectibles.

Raise the limit of the liability: This is the less expensive option of the two, however, the amounts are still limited for individual pieces and overall losses of the items. You also need to make sure your policy does cover your particular type of collectible.

Purchase a floater policy: When you do this, you can “schedule” your individual valuables, and while this is more costly, it offers more protection. This covers losses that your homeowner’s insurance will not cover. But before you can purchase this type of insurance, your valuables must be appraised by a professional.

Step #4: Understand Tax Obligations

In terms of purchasing and collecting valuables, the IRS recognizes a few different status types that can affect tax status and liabilities.

These different IRS statuses include:

1. Collector
2. Investor
3. Business Investor
4. Dealer

The IRS presumes that all taxpayers are Collectors, unless proven otherwise. Work with an experienced tax professional to understand your potential tax obligations and to make sure you have the documentation needed if you want to claim a status other than Collector.

Step #5: Determine a Succession Plan

Your collectibles are a hugely significant part of your legacy. There are countless stories of children who just get rid of their parents’ collectibles without understanding or appreciating their true value because their parents had not left any instructions. No collector passionate about their hobby would want this sort of thing to happen. In the event of incapacitation or death, how would you like your collectibles to be passed along to others? Will family members inherit them, or would you like your valuables donated to a museum?

These are personal decisions that will need to be addressed, but once you’ve decided, your financial professional and estate attorney can help develop a plan. There is often emotional attachment to collectibles, especially those that have been in the family for generations. Working with a professional can help determine what you do with your items so ensure that they will be in good hands.

Organizing and preparing your collection of valuables now can help keep them protected and properly cared for when an expected event occurs.

Plan now so that you can enjoy your collections without worrying about the future. When it comes to this type of thing, it is advisable to work with a specialized expert in order to maximize your assets and get the most out of your valuables.