Tag Archives: estate planning

Directive Communication Systems’ Lee Poskanzer

Lee Poskanzer, CEO and Founder of Directive Communication Systems, talks with ITL CEO Wayne Allen about the growth of digital assets and why access to these are at risk of being lost in estate planning without specific legally compliant steps to protect them for heirs. DCS, he says, aims to make this process easier for individuals to decide which assets—from social media, cloud storage, bank accounts and more—should be passed on and to whom..before it’s too late.


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Captives: Congress Shoots, Misses

In late December, Congress put together a last-minute “tax extender” package that, among many other things, made some changes to section 831(b) of the Internal Revenue Code. That section allows “small” captive insurance companies to elect to exempt from income tax all of their insurance income.

These small captives have been widely used in recent years by owners of large, privately held businesses to allegedly add to their existing insurance coverages while enjoying immediate income tax reductions. Further tax benefits could include conversion of ordinary income to capital gains and a potential estate transfer benefit, depending on the ownership of the captive.

Congress has changed those benefits a bit, by eliminating any estate planning benefits, starting in 2017. But Congress failed to address the true levels of abuse that this code section has spawned and, indeed, may have made things worse.

These “enterprise risk” or “micro” captives are primarily used as a form of tax shelter, notwithstanding the pious claims of captive managers that they are meeting legitimate insurance needs. While such needs certainly may exist in some clear cases, the vast majority of entrepreneurs forming these captives care much more about the tax benefits than any increased insurance coverage.

The IRS knows this and has stepped up both audits of individual companies and larger, promoter audits of captive managers in an effort to crack down on captives that are being formed without the intent to form an insurance company. In addition, the IRS is well aware that unscrupulous captive managers create vastly inflated “premiums” payable by the operating company to the captive to maximize the tax benefits of owning such a small captive. These premiums often bear no relation to third-party market costs, nor can they be justified by a reasonable actuarial analysis of the actual risk being insured by the captive.

Another abuse is found in captive managers’ offering the new captive owner what the IRS would call a sham “pooling” arrangement, to comply with certain “risk distribution” requirements of court cases and revenue rulings.

There are many cases pending in the Tax Court that attempt to corral these abuses. Their outcome is, of course, uncertain.

So the Treasury Department went to the Senate Finance Committee in early 2015, hoping to obtain legislation that would gut section 831(b) (and put a lot of captive managers out of business).

Instead, the department got legislation that only stops these captives from being used as estate planning tools.

The legislation also increased the annual allowable premium paid to such captives, from $1.2 million to $2.2 million, indexed for inflation. The reasons for this failure have a lot to do with Sen. Chuck Grassley of Iowa, who has long wanted an increase in premium to benefit certain farm bureau captives in his state. He needed some revenue offset to allow for the increase, and, by closing this “estate planning loophole,” he can claim that tax revenues will increase.

That claim may be doubtful (only about 1% of taxpayers end up being subject to the estate tax), and captive managers now have a new, higher goal of $2.2 million for the “premiums” to be paid to these small captives.

It is also clear that this new legislation will have no effect on the current robust enforcement actions underway by the IRS. The issues of inflated premiums, sham pooling arrangements and lack of substance in the alleged insurance transaction remain in force and subject to serious scrutiny.

It is unlikely that Congress will bother to look at this code section again any time in the near future.

As a result of this new legislation, section 831(b) captives can generally no longer be owned by the entrepreneur’s spouse, children, grandchildren or trusts benefiting them. (Details about how the legislation achieves this change can be found in other sources).

Perhaps as many as half of all existing micro captives were formed with estate planning in mind. These captives will have to change their ownership or dissolve before the end of 2016. Tax professionals should review all captives owned by their clients to ensure that they remain complaint with the changes in the law. Relying on the captive managers may not be sufficient.

ID Theft: A Danger Even After Death

Take your driver’s license out of your wallet. Flip it over. Now look carefully at the back of it. There’s no box to check for “identity donor.” Yet when it comes to identity-related crimes, one of the greatest times of vulnerability is immediately after you die.

You can do everything right. You can use long and strong passwords and account-unique user names. You can check your financial accounts and monitor your credit on a regular basis, you can set up transaction alerts on your credit cards – even order a credit freeze – and then you die. Well, not entirely…

Include Identity in Your Estate Planning

A good identity thief can undo all your fraud precautions with a few phone calls. Most people don’t think about this, because it’s a wee bit late to refinance the family homestead – much less worry about interest rates – when you’re dead. Regardless, the recently deceased continue to exist on paper, and this may be the case for some time. Meanwhile, many bankable facts – key among them your Social Security number and personally identifiable information – are just sort of there in the form of “zombie” purchasing power. An identity thief can use that purchasing power to drain your bank accounts, open new credit in your name and perpetrate all sorts of fraud that can harm your family and heirs.

Think of your post-mortem identity as a would-be extra on “The Shopping Dead.” Now that you have that image in your head, take the time to arrange for the deactivation of your identity by making it part of your estate planning. This will mostly take the form of a to-do list for whomever will be handling your affairs, because nothing can be done till…well, you know, after the fact. There are many good resources, including this list from IDT911.

There are many different scams out there, ranging from the misappropriation of Social Security payments to the more old-fashioned practice of ghosting, whereby a person of approximately the same age assumes the identity of the deceased. In keeping with the proliferation of possible crimes, there are plenty of criminals out there who make a living in this post-mortem niche. They scan death notices in the local paper, read obituaries, even attend funerals and, make no mistake about it, can get a lot of shopping done with your available credit before the three credit reporting agencies and your current and future potential creditors are notified of your demise. Those same bad guys may also use your Social Security number to grab a big fat tax refund (if you’re lucky enough to pass away during tax filing season).

How will they get the information needed to commit fraud? Sometimes the perpetrator is a family member, so he already has access. But more often, family members are distracted and distraught. There are visitors who come and go, unchecked, and of course the numerous demands of making final arrangements and dealing with matters of the estate. If there was a long illness, unsupervised healthcare workers may have had the run of the deceased’s domicile – including the owner’s most sensitive information. Maybe the wake was at the deceased’s home, or people sat shiva there. The opportunities for fraud abound. Funerals, of course, provide a thief with a precise time to get what he or she wants. But instead of grabbing the television or the silver (too easy to miss), an envelope containing a financial statement or a copy of last year’s tax return might go walkabout. From there, it’s a race to apply for as much credit and buy as many pricy things for resale as possible before the money spigot coughs credit dust.

The Bigger Picture

Government agencies are famously slow to get the news of a person’s undoing.

An audit of the Social Security Administration conducted by the Office of the Inspector General found approximately 6.5 million Social Security numbers belonging to people aged 112 or older whose death information wasn’t in the system. Of those numberholders, only 13 people were still receiving payments; the rest consisted of “numberholders who exceeded maximum reasonable life expectancies and were likely deceased.” The fact that their deaths were not recorded in Numident (the SSA’s numerical identification system), and thus are also missing on the Master Death List, leaves plenty of runway for misconduct. According to the audit report, the “SSA received 4,024 E-Verify inquiries using the SSNs of 3,873 numberholders born before June 16, 1901.”

On the off chance you missed the memo while diving for sunken treasure at the bottom of Loon Lake: Identity theft is now the third certainty in life, right behind death and taxes. When a loved one passes, there is a trifecta, which is why it’s trebly important to protect against the threat of a different kind of life everlasting.

How to Reengage a Disengaged Spouse

My partners and I spend a lot of time writing about how difficult it is to be a family successor to-be or child working for a parent. We also have many articles detailing how business owners can communicate more effectively with employed family members so they can have positive working relationships while protecting their familial relationships. We’ve explained how important it is to establish boundaries so that work issues stay at the office to provide quality family time at home.

What we haven’t spent enough time on is recognizing how tough it is to be the spouse of an ambitious, successful and highly driven business owner. Typically, although not always, these roles are cast stereotypically, with the husband running the business while the wife holds their personal lives steady raising the children and managing the household. For the sake of simplicity, we’ll talk in terms of the stereotype, but the description works with the gender roles reversed.

The women are dynamic, intelligent, educated, assertive people – many left rewarding careers to care for their families so their husbands could fully concentrate on building a substantial family business. They have typically not been included in much of the financial and business-related decision making because they were not actively involved in the business. When families are young, this makes a lot of sense as each spouse is fulfilling a necessary role to provide and care for a growing family and business. The wife protects her husband from family distractions and worries so he can concentrate on building a business legacy and their financial security. The husband protects his wife from the day-to-day business challenges, makes sure there is enough money to run the household and generally learns it is easiest not to burden her with worrisome details of how he manages the business checkbook. However, when it comes to making the critical decisions that will provide for the financial stability of your children’s future and your financial security, you can bet it is important for both spouses to be involved and participate in the discussion if you want to maintain family harmony and have a smooth transition for the next generation.

The Disenfranchised Spouse

By the time we are engaged to develop and implement a business succession and estate plan, the business owner’s children are usually grown, working in the business and building their own families and the wife/mom is busy being a grandparent, participating in all kinds of civic/community/church activities and planning their next vacation trip. The husband/dad is still running the business and making all of the financial and business decisions.

On the surface, the couple is solid, dedicated to supporting each other, and wants to provide for each other in their declining years. But deep down, there is usually a woman who feels disenfranchised and fairly clueless as to how the business will provide for her personal financial security in the event she outlives her husband. When advisers bring documents for her signature, this is her one time to be able to voice her opinion, take a stand and even hold up progress if she feels uncomfortable with any aspect of the process. She is told not to worry, that she will be provided for – but how and who will she have to turn to after he’s gone? Her children? The managers? The family attorney? Not likely.

We have seen women known to be gentle, supportive and trusting change when it comes to protecting her financial security and whether she will have to rely on someone else running the business or get her monthly allowance from her children or, even worse, a banker.

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Re-Engaging Your Spouse

If you haven’t both been involved with your estate and succession planning team, it is likely you may be experiencing some challenges — perhaps your progress has even come to a standstill, and there may need to be some discussion on this topic before you can proceed any further. What are some of the key factors to make sure that when you are ready to begin your estate or succession planning that you will be comfortable with the people and decisions that must be made? Here are some helpful tips to keep in mind:

  • Never think that protecting your spouse from the truth is being helpful. It indicates you don’t think she will understand, that she will overreact or that she is weak. None of these assumptions demonstrate an appreciation for her inner strength, intelligence and sensitivity to your concerns. Additionally, it prevents your closest, most trusted ally from being able to be part of the solution.
  • Make sure your spouse knows and appreciates the key players you depend on each day to run and care for the business. If all she ever hears is your grumbling about a family employee’s ineptitude, it is highly likely that she will not feel very good about that successor’s ability to manage the business in your absence. The same goes for complaints about any other manager or adviser who is critical to your business stability.
  • When putting together your adviser team (estate attorney, accountant, succession planner), make sure you do the choosing and subsequent meetings together. Interview prospective members of this team together — you both need to feel comfortable with people who are going to help secure your family’s legacy and financial future. There is nothing worse than a business owner who says his spouse doesn’t need to be included in the discussions because she isn’t involved in business operations. It is amazing what kind of insight we get from spouses — about family, employees and managers, and about how their husbands are being affected.
  • Just because your spouse is not an active employee in the business does not mean she is not your partner in every sense of the word. Every decision you make, every success or failure you experience, is shared by your spouse. When you are stressed, so is she; when you celebrate success, so does she. Why then, wouldn’t you consider involving her in decisions that will ultimately affect her, too? You don’t need to discuss every operational decision made each day, but it is important to share the strategically important ones that will affect her future, too.

When you reach an agreement that you have the right people facilitating your family’s future, certain that you will each will have equal input, be respected and listened to, you will have increased your odds for achieving succession success!

Breakthroughs in Managing (and Insuring) Tangible Assets

In recent years, high-net-worth families have increasingly turned to tangible assets for more than their aesthetic values. A 2012 Barclays report found that high-net-worth individuals in the U.S. hold an average of 9% of their wealth in tangible assets. A 2011 ACE Private Risk Services study of high-net-worth households found that 74% of respondents, all with more than $5 million in investable assets, cited investment value as a reason to purchase rare art or wine, valuable jewelry, sports memorabilia or classic cars. Two-thirds said the potential for appreciation in value was important in their purchase decision.

As values of many categories of tangible assets have escalated, these assets increasingly serve to diversify investment portfolios during periods of volatile market gyrations. In the ACE study, more than half of the respondents reported that the investment diversification value of their tangible assets has become more important to them since 2008.

“Investors are increasingly looking to hard assets, such as valuable art, antiques or fine watches and wine collections, because of the perceived ability of these assets to hold value during market fluctuations,” says Tom Livergood, chief executive officer and founder of The Family Wealth Alliance, a Chicago-based family wealth research and consulting firm. “Across the industry, we’ve seen investors rush to safety and stay there.”

Blind spot

Even as tangible assets gain recognition as a new asset class, high-net-worth individuals rarely bring to their passions for art, wine or jewels the same rigor they have when making financial investments or business decisions. In ACE’s 2011 study, despite the growing number of households reporting greater importance of tangible assets to their investment portfolios, nearly 40% of those surveyed did not have all of their precious items insured against property loss with a valuables policy. Additionally, one in three reported that they were not updating the market value of these assets at least once every three years, and a full 15% of respondents had no formal documentation of their non-financial assets.

“It’s amazing how often some advisers, especially those with sophisticated knowledge of financial markets, suddenly turn unsophisticated when it comes to non-financial assets, notably art,” says Ronald Varney, owner and president of New York-based Ronald Varney Fine Art Advisors.

To Evan Jehle, a New York-based principal at Rothstein Kass, a professional services firm with a significant family practice, wealthy families typically pay 
far less attention to their personal property than to their business affairs. “Our clients would never let something fall through the cracks in their professional lives, but many families have never thought of their tangible assets in this way before.”

Thomas Handler, partner and chairman of the Family Office Practice Group at Handler Thayer, a Chicago-based law firm recognized as a leader in serving family offices, private businesses and high-net-worth individuals, says his office often advises clients who don't have a business plan for their tangible assets. “It is incredibly important for wealthy households to understand how to hold, report, title and insure their non-financial assets in estate planning.”

Challenges of managing tangible assets

Today’s investors have the opportunity 
to reap significant benefits – financially
 and aesthetically – by investing in
tangible assets, but these investments 
pose risks and challenges different from investment
 in traditional assets. Wealthy households and their advisers may cheer the rebounding market for art and other valuables, take comfort that they have diversified their investments and look forward to potential price appreciation in the future. However, those cheers could be premature if owners of non-financial assets fail to understand and properly address the critical issues facing these assets. Those issues include: value and authenticity, documentation, estate and tax planning 
as well as insurance; additionally, owners of tangible assets should embrace the new technology tools that dramatically improve the management of tangible wealth.

Value and Authenticity

The market value of tangible assets can change, sometimes rapidly. In July 2013, a 1954 Mercedes-Benz sold for $30 million, the highest price ever paid for a car at an auction, shattering the previous record of $16.4 million set in 2011. Global sales of wine, diamonds and precious gems have also been increasing, often to record levels. In December 2012, Sotheby’s recorded its highest one-day jewelry sales in the Americas, selling $64.8 million of high-carat diamonds and precious gems. The Live-ex Fine Wine 50 Index reached 106 in April 2013, up 5.3% in the first half of 2013. Over a 10-year period, prices for gold more than quadrupled, only to retreat more recently.

The market for fine art is especially robust. In 2012, Christie’s auction sales totaled more than $6 billion, a 10% increase from 2011. In May 2013, Christie’s reported $640 million of sales in its Post War and Contemporary department in one week, setting an auction record for any individual category.

Dramatic shifts in the market present challenges as well 
as opportunities for investors in tangible assets. “Today’s market is both global and complex,” Varney says. “Modern and contemporary art have made all the headlines, for that is where the greatest demand is today; but by next year the market could be turned upside-down, as happened in the fall of 2008 amid the global financial crisis.

Alan Fausel, vice president and director of the Fine Art Department in the New York office of Bonhams, a London-based auction house, cites the rapidly changing market as a serious issue for investors. “There is a huge risk and reward in today’s market because so many investors are entering uncharted territory. Today’s contemporary market has seen so much volatility and so much uncertainty with newly famous artists, that investors are especially challenged to understand the true value of the works they own.”

Protecting investments in art, jewelry, antiques or wine begins with an appraisal. Smart investors should perform their due diligence to select appraisers with specific expertise in the genre of their assets. “An accurate appraisal is the foundation for every decision 
an investor will make regarding his or her tangible assets,” says Anita Heriot, Philadelphia-based president of Pall Mall Advisors, a U.S. and U.K. art appraisal firm. Before donating, selling, insuring or placing valuable items in a succession plan, investors must know how much everything is worth. “Wealthy individuals must understand that the values of their tangible assets have changed, and these values will continue to change over time,” Heriot says. “Without understanding the value of their property, people cannot even begin to make correct decisions.”

Heriot observes that wealthy individuals sometimes drastically undervalue their tangible assets. She recalls one family that was tracking assets based on appraisals from 1983, with nearly 30 years between consultations. The collection was originally valued at about $2 million, but, after an updated appraisal, the
 fair market value was nearly $100 million. “There were paintings of incredible value hanging on only one nail, including a Rothko with an insurance value of at least $70 million. Had this family known what their property was worth, they certainly would have taken better care
 of it.” An appraisal from a qualified professional can
 also minimize other risks, as well as provide guidance regarding potential fakes and forgeries. In addition, an appraisal can identify other issues that could affect the value of the item or the right to ownership. These include the sale of items made from protected species, protected antiquities or stolen works.

Documentation

All too often, high-net-worth individuals and families find the process of documenting, tracking and managing
the contents of their home, including fine furniture and other valuable items, to be onerous. Proper documentation of personal property typically involves photo or video records, storage of purchase receipts and, in the case of highly valuable items, expert appraisals, proofs of title and provenance and records of any restoration work. Moreover, values need to be regularly updated, sometimes on both a depreciated-value and replacement-cost basis.

“Families rarely keep accurate records of their tangible assets because, quite frankly, it can be a lot of work,” says Jarrett Bostwick, wealth transfer and estate planning specialist at Handler Thayer, the Chicago law firm.

“If someone buys two pieces of art, a piece of jewelry, two watches and a diamond pendant for his wife, then they have to sit down and put a schedule together, contact the insurance company and have them come in and have them ask you a whole bunch of questions, which is kind of a pain. Rarely do our clients partake in this kind of rigor.”

If documentation is done at all, it tends to be completed inadequately and infrequently. ACE Private Risk Services and Trōv have been collaborating on a program in which specialists have examined the contents of more than 3,000 homes of high-net-worth families. In this Home Contents Valuation program, ACE risk consultants used Trōv technology to provide the industry’s first customized estimates of the value of a home’s contents at policy inception. Nearly 50% of the homes evaluated did not have enough insurance to cover their contents, and the average amount of underinsurance exceeded $415,000 per home. Condominium homes were particularly at risk. Nearly 80% had inadequate contents coverage. Among homes warranting an increase in contents coverage, those with a structural value of $2 million to $3 million had an average shortfall of $417,000 in contents coverage; those with a structural value of $5 million to $7.5 million had an average shortfall of $852,000. Furthermore, many valuable items were only protected by general contents coverage in the homeowner policy, when they should have been listed as scheduled items in a valuables policy.

The lack of proper documentation of a family’s tangible assets can lead to wide-ranging problems. “You have to know what you have in order to be worried about it, and to take steps to avoid losing it,” says Joy Berus, attorney at Berus Law Group in Newport Beach, Calif., a specialist in tangible asset protection. “If a family doesn’t have an updated inventory of their valuable possessions, they leave themselves vulnerable to taxes that could have been planned for and reduced, discrepancies, risk of serious financial loss and the inability to pass down their assets to the next generation with a step up in basis. Proper documentation of a household’s tangible assets is the first step in identifying a family’s tangible wealth, and can make the difference between security and paralysis.”

The magnitude of the potential issue is evident in one statistic: Over the next
 30 years, as much as $27 trillion of 
family wealth will be transferred from 
Baby Boomers to their children and grandchildren. That inheritance will include a great deal of tangible assets that will need to be documented, appraised, accounted for and protected.

Wealth managers often encounter situations in which a client dies and the family or trustee does not know where all of the valuables are. “These issues don’t usually come up until a client passes and you have to collect all of the assets and figure out what’s there,” says one wealth manager who works with high-net-worth clients. “Tangible assets aren’t addressed enough in the typical conversations between wealth managers and their clients.”

Handler, the attorney, points to a noted photographer who was living in a retirement home. 
He kept with him a large collection of negatives of images of leaders, celebrities and historical events.
The photographer suffered from dementia, and over
 the years most of the collection slowly disappeared. “Unfortunately, the family did not have a record of everything and didn’t know who took the photographs,” Handler recalls. “We found some of the items on the black market on websites. But the vast majority is never going to see the light of day.”

Berus recalls working with professional athletes and asking if their wealth advisers asked them if they possessed sports memorabilia. “Every one of them said the same thing, ‘Nobody has ever asked before.’ One retired football player talked about how he lost the majority of his lifetime collection because it had been in a fire, and it wasn’t insured. He couldn’t prove what he had and had a major loss because of it.”

Berus adds, “When people don’t know what they have, they can lose money and be taken advantage of by people who do know what they have. You don’t want to lose the value of what you own or be taken advantage of. You also don’t want to cause tax problems for yourself or pay unnecessary taxes. When you know what you have and know what it is really worth, you can make better decisions.”

Loss Prevention

By definition, tangible assets are subject to risks of physical damage, theft and the ravages of time. Yet experts say that high-net-worth families often neglect
 to take steps to protect their art, jewelry, wine and other valuables from these threats. One ACE study, for example, found that 40% of wealthy individuals surveyed failed to take advantage of the services of a risk consultant who could help them reduce the risk of damage and theft.

Collectors do not always realize the risk-prevention measures available to them to help guard against, 
and minimize, exposures, says Heather Becker,
 chief executive officer of the Conservation Center, a Chicago-based provider of conservation services for fine art, textiles, photography and sculptures. “No one wants to think a significant loss will happen to them.”

Many families display or store their precious possessions in ways that increase the risk of loss. For instance, they hang artwork above an active fireplace, where the hot, dry air and soot accelerates deterioration. They neglect to place a historical artifact, such as a letter written by a famous figure, in an archival box protected by anti-ultraviolet protective glass, exposing the artifact to dangerous rays and fumes.
 Or they store a valuable stamp collection in a closet beneath a bathroom. If the tub overflows or the toilet develops a leak, the stamps could be ruined. “So many people forget that these assets – art, wine, gems – are very fragile,” Varney says. “Valuable assets can go from $1 million in value to $0 in the blink of an eye.” Investors who fail to properly address these threats remain vulnerable to severe financial loss.

Even items made of strong, durable materials can be
ar risk. Becker recalls the story of an ancient metal sculpture, which its owner stored in a warehouse for several years while not on display. While the owner made sure the sculpture was stored in a protective crate, the crate was stored on its side, instead of standing up. “The sculpture was severely warped and sustained considerable damage,” Becker says. “There is a cumulative effect to these risks that individuals must account for.”

Insurance

Given the increasing value of rare art, precious gems and fine wine, and the array of physical threats and other financial exposures confronting these pieces, proper insurance represents a critical part of a complete wealth-protection plan. Often the best place for families and their wealth advisers to start addressing this need is with an insurance broker or independent agent who specializes in serving families with emerging or established wealth. These insurance advisers, who can be recognized by their access to specialty insurance carriers, can usually suggest and coordinate services from a variety of experts.

While investors of tangible assets may go to great lengths to acquire the items they desire, they frequently fail to adequately protect them. In a 2012 ACE survey, fully 86% of insurance agents said the families who insure their homes and possessions with mass-market insurance companies likely carry too little insurance for their treasured items. One in three wealthy families was updating the market value of their collections every three years.

“Waiting three years or more mean their valuations will be wildly out of date,” says Fausel of Bonhams.

ACE Private Risk Services and Trōv analyzed 94 valuables schedules to compare stated replacement values with current market values. For the 48 schedules of fine art assets, comprising 1,722 objects, 665 objects were potentially underinsured. For the 46 jewelry schedules, one in four objects was potentially underinsured. Moreover, 32% of all the analyzed items had descriptions that were too vague or incomplete to allow for an accurate valuation. If a loss were to occur, this could lead to a dispute.

Emerging technology

For individuals and families with substantial tangible assets, new technology tools exist to make tracking, analyzing and sharing information about their assets significantly easier and more efficient. Pall Mall’s Heriot sees high demand for these tools: “As tangible assets become more valuable and wealthy families become more invested in their personal property, we see clients begging for a better understanding of what they own and greater knowledge of what it’s all worth.” The goal for wealth advisers and their clients should be to make tracking and analyzing information about personal property regular, everyday actions rather than infrequent behaviors.

Progress is promising. ACE Private Risk Services offers clients access to its Home Contents Valuation service, providing guidance regarding general contents coverage at policy inception–at the moment, coverage for personal property, a home’s contents, is typically assigned based on a percentage of the home’s structural value or it is a guess. Trōv has developed technology, partnerships and applications to tame the unruly mass of data about every tangible asset in its members’ lives. The core of the
 Trōv platform is a private, online digital locker where the information about property and possessions is collected and securely managed (called a Trōv, like treasure trove). Because most of Trōv users’ important personal property is located in their private spaces, Trōv is training appraisers and insurance risk managers to use its Trōv Collect application when they are in their clients’ homes. With the acquired information, a Trōv is activated – and with it a complete knowledge of what each family owns, where it’s located and what it’s worth. Acquisitions can be automatically added to a personal Trōv at retail point-of-sale, via electronic receipts and through a mobile application. The Trōv Mobile app enables members to snap a picture of any acquired item, add any support information, such as a receipt, package art, bar-code or QR-code, and send it to their Trōv in real time. As purchases are added, and as values change within the Trōv, the member can choose to have his or her advisers automatically notified to ensure the items are always accounted for and adequately protected.

Vision of the future

The future of wealth management encompasses an understanding of a client’s tangible assets as well as financial assets, completing the picture of total 
net worth. By using a continually updated inventory
 of personal property, families can manage risk on a real-time basis, applying effective loss-prevention techniques, securing the proper amounts of high-quality insurance coverage and anticipating tax and estate-planning issues. Insurance companies such as ACE will be able to recommend safety measures and introduce coverage rates that are increasingly fair, accurate and economical. Private bankers, estate planning attorneys and family offices will develop deeper relationships with their clients and referral networks. Wealth advisers will be able to expand the perspective they offer to clients and engage other appropriate professionals, such as insurance brokers, on a more timely and routine basis. Advisers who provide clients with a full-circle view of their assets will be well-positioned to gain a competitive advantage.

Cloud services, such as those provided by Trōv, will even enhance enjoyment of prized possessions. With a few simple strokes on a mobile device, an owner will be able to find like-minded collectors. Buying, selling and sharing will become a dynamic experience, and, because it will be easy to track the history of an object, every possession with have a story built into it. 

Conclusion

Demand for tangible assets of art, wine, jewelry and other collectibles is on the upswing, and auction sales across the globe continue to skyrocket. As these tangible assets are increasingly recognized as means of investment diversification, wealth advisers are challenged to provide a full-circle, comprehensive view of a client’s entire portfolio. Fortunately, new technology tools are meeting these ever-expanding demands. Mobile and cloud technology services improve the tracking, management and valuation of tangible assets, providing families and their advisers with greater awareness. Furthermore, these tools enable families to secure comprehensive insurance coverage and loss-prevention services, assess investment risk across both financial and tangible assets and more effectively anticipate tax and estate-planning issues. In today’s digital age, an analysis of any high-net-worth individual’s assets must include these tangible assets to complete the picture of total wealth management.

For the white paper on which this article was based, click here