Fine Art: 5 Family Office Best Practices

Wealthy patrons and admirers have been collecting art for millennia. The ancient Greeks and Romans eagerly collected not only art from contemporary artists, but also statues and paintings from even more ancient cultures. The motivations for collecting range from wanting to protect and preserve important cultural artifacts, to appreciating aesthetic beauty for its own sake. Many collectors also see their collections as a robust, albeit illiquid, store of value over time. Whether the goal is to build a world-class exhibit or to own a few valuable pieces from a favorite artist, a family office can implement some of these best practices for a fine art collection.

(For a more general treatment of unique and hard to value assets, read here.)

At a Glance

■ Have a fine art insurance policy. 

■ Create an emergency plan for keeping art safe. 

■ Define and document plans for the collection.

Have Proper Insurance Coverage 

It is important to have both the right type and the right amount of coverage to protect an investment in an art collection. Inexperienced collectors (and even some experienced ones) often believe that their homeowner’s insurance policy will cover losses to their collection.

In general, homeowner’s policies exclude fine art or limit the amount of coverage to a minimal amount that would not cover the loss. Also, the deductible will apply, and so smaller claims may not be financially worthwhile to pursue.

A better approach is to have a separate fine art policy that does due diligence on the collection in the underwriting process and establishes full replacement costs with no deductible. The insurers that provide these policies understand the art markets, proper valuation, and how to handle claims. The family office team may need to work with an insurance specialist to procure a policy of this kind.

There are two types of documents needed at the beginning of this process:

  1. Proof of ownership. This can be as simple as a bill of sale or, often with older art the provenance of the item, a record of ownership that indicates authenticity or quality.
  2. An authentic appraisal. Most insurers want the appraisal to be no older than three to five years, depending on the type of art.

The underwriting process will unfold from there. The agent may request any other pertinent information the insurer needs, and then provide quotes.

Keep Good Records

The processes followed to get good insurance coverage apply to the next step—keeping good records. Like any financial asset, art requires detailed and accurate record keeping. While a collector can perform some of this if the collection is small, it may make more sense to pass this task to the family office team (perhaps working with a 3rd party professional).

The art must be cataloged in as much detail as possible. Such details usually include the date purchased and the amount spent, the date of the last appraisal, the location of the piece, and any damage and repairs made to it. The history and provenance of a work of art can add much to its value. For catalog purposes, a video or photo of a piece in its location can be particularly important. Lastly, it could be helpful to include the name of the alarm and security company and its last inspection or system update.

The information can be stored on a computer or as a hard copy. The best recommendation is to do both, which can be particularly important after natural disasters.

Collectors who occasionally loan out their art to museums or other institutions should also track and keep records pertaining to the loan. Where is the piece and for how long is it there? Which transport company is used and what are the insurance arrangements while in transit?  Many art claims come from these types of situations, and the best outcomes result from having good documentation.

Have an Emergency Plan

Ideally, collectors in any part of the world should consider the weather-related dangers that could affect the safety of their artwork. Hurricanes, forest fires, floods, or severe storms can threaten any location and cause tremendous damage to art collections. The best remedy is a written plan that addresses possible threats and seeks to mitigate them.

For example, some coastal properties in South Florida that house art collections have service providers that will pick up and store their art in a secure location when the threat of a hurricane is imminent. Insurers can provide the names of local contractors that are preapproved for just such services. That said, some collectors take matters into their own hands and attempt to transport art out of a threatened area themselves. This is usually not a good idea, because hasty and improper packing and transportation can do significant damage. A professional firm that knows how to pack items and carries the proper insurance is a much safer option.

A localized fire is an important danger to incorporate into an emergency plan. Even a small home fire that does not directly threaten art in a home or building. However, it can trigger sprinklers or fire suppression systems that can cause damage. Consult with local fire officials on suggestions to mitigate fire in a way that also protects art.

Collectors needing help in developing a plan should consider many of the “what ifs” of their location, and then consult with their insurance provider for suggestions and resources.

Be a Good Steward

All materials degenerate over time. Old works of art (and especially collectibles which were not designed to last a long time) can be very fragile. Even modern works using archival materials may begin to deteriorate in a few decades due to poor storage and adverse physical conditions. Important collections need a long-term conservation program to help mitigate irreparable harm.

Much of the world’s valuable art is in the hands of private individuals rather than museums. This places a tremendous cultural responsibility on those individuals to maintain these works. The best way to do this is through professional conservators, who are experts in the preservation and repair of artwork and cultural artifacts. Private collectors can benefit by adopting the same types of conservation programs that museums employ. This includes having conservators do annual inspections of artwork to assess deterioration. These inspections are far more detailed than a regular insurance appraisal designed to determine a piece’s value. A major advantage of these annual inspections is that they give insurance adjusters a baseline of a piece’s condition in the event of a claim.

Finally, the way that the art is exhibited needs to be evaluated. This includes mounting hardware, sunlight intrusion, humidity control, and security. For example, strong sunlight can deteriorate the brightness of pigments very quickly. The best safeguards against having any problems from those factors are to have a professional do the installation. A professional can assess the environment and work to display the items in the safest manner.

Plan Your Legacy

What will happen to the collection when the Collector dies? Collectors should give as much thought to what happens to their artwork after their death as they do to any aspect of managing the collection while they are alive. 

For example, do they want the collection (or individual pieces) to go to certain individuals or to a museum? Remember, this is an asset class and must be given careful consideration in the estate planning process. 

Often the next generation does not have the same taste in art. Prepare for the possibility that the art will not be displayed or will not be treated with the amount of care that it needs. In this case, it might be wise to have a sale plan worked into the estate plan along with provisions for paying the capital gains tax on the proceeds. (Note, the IRS taxes the capital gains on collectibles at a higher rate of 28%.)

Is My Art Valuable?

Art may be a financial investment, but ultimately it holds meaning that goes beyond its monetary value. Some collectors choose art purely for the aesthetic beauty it contains, while others see their purchases as an investment. Art markets tend to be highly volatile and very illiquid. Some artists will ride a wave of a trendy market and reach astronomical prices. These markets have the potential to be bubbles, so the buyer should beware. Other artists create work that appreciates more reliably, but moderately over decades. These works will not produce sensational gains and may not outperform other types of investments. 

For anyone investing in art, the same rules apply as with any investment. Do research and understand that not every purchase will be a financial winner. Furthermore, art tastes ebb and flow over time. Thus, it is important to diversify the collection and have an exit strategy.


Collectors and their family office teams should prioritize obtaining a fine art insurance policy, establishing an emergency plan for art safety, and documenting their collection’s plans.

Essential practices include securing adequate insurance coverage, as typical homeowner’s policies often do not adequately protect art collections, and maintaining meticulous records of the art, noting details like purchase information, appraisals, and provenance.

Preparing for potential emergencies such as natural disasters and fire threats is crucial, as is implementing long-term conservation programs for the artwork. Legacy planning is also important, with collectors needing to consider the future of their collection after their death.