Potential Benefits of Art Finance – Trust and Estate Planning

May 13, 20203 min read
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Our financial solutions are designed to preserve flexibility, working in collaboration with your client’s existing fiduciary and other professional relationships.

Trust and estate planning requires the careful execution of long and short-term sophisticated strategies regardless of shifts in financial and other markets. Executors and trustees are often tasked to manage their clients’ assets and prescribe a strategy that offers the most lucrative and sensible outcomes. To empower the client, the estate planning process helps to ensure that a collection is taken care of.

Selling a work of art or a collection may seem reasonable and necessary. However, fiduciaries are expected to realize the best possible value and the best potential outcomes when they are faced with selling assets to raise capital, according to Leah Hokenson, a Senior Estate Settlement Officer with Fiduciary Trust Company International. This requires being “prudent, deliberate, and thoughtful.” Not maximizing an asset’s value could be flagged as a dereliction of duty.

All markets fluctuate, and the art market is no exception. There is no guarantee that an individual artwork or collection will sell for its appraised value at the time when a client needs liquidity. Additionally, bringing a work(s) to sale has associated tax implications, which may further burden the ability to maximize an estate’s objective. Prudent solutions, such as art-backed lending, can preserve the integrity of the collection by providing the estate income and time to plan until the markets are more favorable. “There’s a demonstrable difference in real life price when it is the right plan versus the immediate one,” Ms. Hokenson added.

There are other options to selling that trust and estate planners are increasingly considering. Athena Art Finance allows fiduciaries, executors, or collectors acting on their own behalf the ability to use their art collection as collateral for an art-backed loan. These loans can be used to satisfy current financial demands while retaining the underlying assets.

“Art-secured lending offers our clients additional flexibility in times of limited liquidity,” said Cynthia Sachs, Athena’s Chief Investment Officer. “By using Athena’s services, potential borrowers can obtain a loan that is tailored to meet their needs, allowing them to take time to make important and timely decisions, which often offers them more leverage should they opt to sell.  Most importantly, we believe our unique underwriting process and specialization in art finance grants us more agility and the ability to offer lower interest rates than many of our competitors.”

When a fiduciary brings multiple artworks or an entire collection to market, they also face timing pressure, and financing to pay estate taxes. With art-secured lending, fiduciaries and executors can leverage the equity of a collection or an individual piece that can help them to satisfy their immediate liquidity needs while determining the best opportunity for their client’s art collection and ultimately generate the optimal result for the decedent’s beneficiaries. “Leveraging the asset can help enable a fiduciary to make a stronger and more lucrative disposition of the artwork or art collection in the estate plan. This typically helps yield a better result for the beneficiary,” Ms. Hokenson said. “It’s designed to work as a bridge loan to meet the immediate cash requirements of an estate,” she added. By using Athena’s services, fiduciaries and executors can better plan for the future in an effort to ensure that their liquidity needs can be met. “Art lending can be an important tool for estate planning attorneys and fiduciaries,” Ms. Hokenson concluded.

If you or your clients would like to know more about the benefits of art-secured lending related to your trust and estate planning, please contact Naomi Baigell, Managing Director of Client Relations, [email protected].

Read our latest update on our process during the COVID-19 crisis, Art Backed Loan Process during COVID-19

Yieldstreet x Athena Art Finance is dedicated to the continued refinement of our process in an effort to make it as transparent and effective as possible for our clients. We hope that this information is of value as you consider how best to access liquidity within your collection. We encourage you to reach out and work with us to create a bespoke program that supports your goals and objectives.