Articles and opinion
It is a rather sobering thought that 271 Picassos may have been sat in a cardboard box in someone’s garage for over thirty years, when in the south of France, a retired electrician and his wife have come forward with a collection of unknown Picasso paintings and drawings estimated to be worth at least £50mn.
The potential good news is that a historic and extensive collection is retrieved for the world. But, in the absence of clear documentary evidence, Picasso’s heirs have embarked upon a protracted, undoubtedly expensive and public legal battle ahead of them. Just consider the cost of trying to authenticate each of the 271 works?
His son, Claude Picasso, disputes their origin on the basis that his father “dated signed and dedicated his gifts”.
Without the systematic cataloguing of an artists total works, how can such a situation be prevented?
Rosalyn Breedy, managing partner of wealth management solicitors Breedy Henderson, argues that successful artists should consider establishing an art foundation during their lifetime to protect their works, maximise their market value and protect their legacy.
Typically art foundations are thought of as being set up in memorial to an artist, such as in the case of Andy Warhol, or with the purpose of encouraging art such as with the Sovereign Art Foundation, sponsors of major Asian and European art prizes, or the Julius Baer Foundation, which was set up by the Swiss private bank to promote creative individuals and institutions from every branch of the arts.
However, an artist enjoying commercial success needs to take a commercial approach to their business affairs and planning for future security and your eventual legacy is important. Rather than waiting for your heirs to set up a foundation or charitable body in your memory, you might find that you would capture some other additional benefits in the short term by doing it yourself.
For example, as well as creating a proper catalogue for your work and a mechanism for controlling the authentication process depending on the structure of organisation that you choose, you may also benefit from the ability to control the supply of and demand for your work.
If, like Andy Warhol whose will dictated that almost his entire estate, be used to create a foundation dedicated to the "advancement of the visual arts", you wish your legacy to be a philanthropic one then it would also be sensible to set out your wishes in advance and prepare the ground legally and financially.
Furthermore, if you actually execute your strategy whilst you are the darling of the art world, then you are likely to maximise the value of that legacy. Consider how Bill and Melinda Gates are leveraging their foundation to get other individuals and organisations to contribute to and collaborate with their goals.
There is a wide variety of legal structures that might be suitable for meeting your objectives and your choice of entity will depend upon a number of factors, not least where you live as different jurisdictions differ in the flexibility and protection they offer.
When working with artists, or any entrepreneur, we find that the most critical issue is to uncover their primary motivation? Maximising lifetime wealth will entail a wholly different approach to fulfilling somebody’s philanthropic objectives.
If you decide that you wish to benefit financially then one area that requires specialist expertise is that of tax planning. It is vitally important to engage professional advisers who have experience in the art world to ensure that you do not manage to economically alienate yourself from the sale proceeds, which can be a risk if the complex law and regulations are not adhered to correctly.
Similarly, this is a highly specialist area of law and you will need legal advice from someone who understands art and the laws of trusts and charitable foundations.
If you want to give your legacy away, then you need to decide whether you wish your legacy to be charitable or for the benefit of your heirs. Charities are generally highly regulated and you will need to adhere to the laws and compliance obligations in the country of your choice. If you wish to give to your heirs, then a tax efficient gifting strategy is called for.
One reason why few successful artists have taken this step is that it is a relatively complex and time consuming (often tedious) process. Whilst enjoying being in demand, it s not something that you would normally want to set aside your creative activities to undertake.
It requires attention to detailed implementation from the choice of structure, drafting of documents, selection of service providers, staffing and documenting of policy, governance processes and procedures. You need also to think ahead about what might happen when you die. For example, who and what mechanisms need to be put in place to ensure your legacy?
Of course there are also costs to such an undertaking – both set-up costs and then ongoing costs associated with managing your art works. Here, a key to success will be finding a team that share your objectives and that you can really trust.
The operational aspects are also critical. Where will the art works be held or exhibited? Consider the logistics and necessary insurances. Has each piece been properly catalogued and referenced to provenance documentation? How will conflicts of interest be managed?
By taking control of the market for your works, you need to ensure that you achieve the potential return on investment.
Whilst setting up a charitable trust or foundation is really only an option to be considered for a saleable artist who has a sizeable income already, for those darlings of the art world it is something that is worthy of serious consideration if you have long term ambitions for your legacy.
It may also be a route worth exploring for a small like-minded group, where the benefits in executing a clearly articulated strategy could well result in the difference between firmly assured success and a significant dissipation of value.
Anyway, I must go and check that cardboard box at the back of the garage...