Volume 16, No. 3, Summer 2008
By G. Robert King II, CFP®, AIF®
Art as an investment can seem attractive. We've all seen an episode of Antiques Roadshow where a 50-cent yard sale purchase turns out to be the long-lost masterpiece.
The fine art market is a $10 billion-a-year industry in the United States alone. Over the past half century, art has returned a compound annualized rate of 10.47 percent, according to the top art market index. During the same period, the Standard & Poor's 500 performed only slightly higher, 10.95 percent.
Surprisingly, art prices don't entirely depend on a healthy U.S. economy. Many recent record-setting sales are due to foreign buyers who were prepared to pay top euro or yen for modern masters.
But, like every investment, buying art involves numerous risks.
You can't treat it like a stock:
Art is a fine collectable, and collectables tend to hold or increase in value as they get older or rarer. The risk, however, is higher than the chance of appreciation. For every record-breaking Picasso sale, there's another that sells for less than auction house estimates.
That's because price is dictated by factors like whether the artist is “hot,” provenance (paper trail of ownership), condition, medium, subject matter and size.
Art is for the long term. Unlike stocks, selling art can be a drawn-out process involving appraisals, dealers, insurance, lawyers, and the IRS.
Mutual funds for art do exist through specialty investment companies, but these are very expensive long-term vehicles.
For investors who want a smaller commitment, galleries are welcoming places to start. Many even offer installment payment plans.
Just like stocks, don't buy at the top of the market. Resist the urge to buy what everyone else is buying. In fact, if an artist in your collection is being talked about all over the media, it's probably time to sell.
You may need special insurance
Depending on your collection's value, you may need an additional rider on your home policy. Know what your insurer won't cover. Some may require that you keep art in a vault, not on display.
Estate planning is complicated.
What if both your children love the same painting? Or both hate it and don't want to pay capital gains taxes? And you can't just leave it on the wall for your heir to take home when nobody's looking. A secret transfer of ownership like this not only disrupts the provenance—it's also tax fraud.
BARBEQUE, BANTER…& JUST A LITTLE BUSINESS…This was the menu and participants seem pleased last month when Mike and Susan Smith hosted the third annual July barbecue for fellow networkers of the Community Care Resource Group at their West Harwich home.
That's why many collectors donate fractional or outright ownership to institutions. But here, you might need to hire a professional consultant to identify museums whose collections would be a perfect home for your holdings, plus obtain a solid appraisal that the IRS is likely to accept.
And it's the IRS that will likely determine the value of your collection, not the art world. Bottom line, don’t buy art because you think it's going to make you rich. Make sure it's something you love, because you may be looking at it for a very long time.
(Mr. King is a Certified Financial Planner in Hyannis, 1-800-325-1099 or robert@capitalportfolios.net.)
By Sheila Curtis
Prescription drugs are a part of everyday life for many of our older residents who fall under the umbrella of Medicare coverage. Paying for multiple medications on a regular basis can quickly add up, even if an individual has prescription drug insurance. And dealing with these monthly costs and understanding options can be overwhelming.
Still, everyone deserves to know ways they may be able to lower these costs—and that’s one of the things we here at SHINE (Serving the Health Information Needs of Elders) can help with.
According to national data from the Centers for Medicare and Medicaid Services, there are over 860 seniors living in Barnstable, Dukes and Nantucket County who could save up to $3,600 a year on their prescription drugs. Qualified Medicare beneficiaries can receive benefits such as low to zero annual deductible, low to zero premiums, and low to zero co-pays related to Medicare prescription drug coverage.
The SHINE program is here to assist qualified individuals who may be eligible for the low income subsidy (LIS) to lessen their out-of-pocket expenditures even if they have been paying the full cost to that point.
The requirements are simple. Qualifying recipients must have income below $15,600 for an individual or $21,000 for a married couple living together. Resources cannot be worth more than $11,990 if single or $23,970 if married and living with spouse. Resources include bank accounts, stocks and bonds, but not one’s house and car.
If your income is over the above limits, there still may be help for you. The state has a program called Prescription Advantage where the income level is much higher and they do not count assets.
The regular enrollment period for part D occurs once a year, November 15 through December 31. However, the enrollment period for the low income subsidy program or “extra help” and Prescription Advantage is year round.
The SHINE program can assist elders, the disabled and family members understand their options and to navigate the system with as little hassle as possible.
For more information about lowering prescription drug costs, or to find out about additional services provided by SHINE, contact me at 1-800-334-9999.
(Ms. Curtis is Regional Director of SHINE, a division of the Massachusetts Executive Office of Elder Affairs.)