For many affluent families, a family office has become an indispensable ally in preserving and growing wealth and managing financial complexities. More than 4,500 family offices (triple the number in 2019) together manage some $6 trillion in assets.¹ Yet even as they advise on investments ranging from private equity to real estate and mineral rights, family offices may not fully account for the implications of another kind of asset: art collections.

“A significant collection may affect a family’s larger financial picture, from liquidity and credit to risk management and wealth transfer,” says Elizabeth Thiessen, head of Family Office Solutions at Bank of America Private Bank. “It’s vital to bring a similar level of planning and strategy to art and collectibles as you do for other asset classes.”

A passion or a financial asset?

Of course, a painting is not a share of stock. “Most collectors invest for personal pleasure and buy what they love,” says Rosemary Ringwald, Head of Art Planning, Planning Center of Excellence, Bank of America Private Bank. The emotional component makes a potential acquisition more nuanced and subjective than, say, buying into a hedge fund. Moreover, the art market can be complex, opaque and mystifying to outsiders. For all their expertise in portiolio management, accounting or tax law, Thiessen says, “Family offices may not have people on staff with a background in art.”

As such, family offices may be inclined to focus on other assets and leave the art collections to the family. Yet that may be a missed opportunity. While collecting will always be driven by an individual’s passion, joy and artistic tastes, a family office, often with the help of external art experts, can provide vital strategic services across the full life cycle of collecting, from acquisition to managing a collection and creating a legacy.

Acquiring art

For avid collectors, there’s no such thing as an “acquisition phase,” Ringwald says. Many continue purchasing art throughout their lives, even as they create estate plans that may determine the artwork’s ultimate destination. Creating some structure at the outset can help avoid confusion and possible mistakes along the way.

“A good first step might be helping a family create a mission statement for collecting,” suggests Joshua Rief, managing director of Family Office Solutions for Bank of America Private Bank. The statement might include what the family values about art, ground rules for how much the family will spend, and formal processes for insuring and storing works.

Because art tends to be costly and can be difficult to sell quickly, liquidity planning is key. “Family offices conduct detailed planning for illiquid assets such as private equity investments,” Rief says. “Similar conversations should take place about art acquisition.” For example, if a family buys a significant painting, that could draw down a portfolio’s cash reserves and may require adjustments to help keep the family’s liquidity in proper balance. At the same time, a valuable art collection could become a source of liquidity, as collateral for loans used to purchase additional artworks, pursue a business opportunity or fund other goals.

Finally, while family members will ultimately decide for themselves which pieces belong in their collection, a family office can help new collectors learn the subtleties of the art market. Family offices might tap an external resource such as Bank of America Private Bank’s Art Services team, whose experts can help educate collectors, evaluate specific artists or works in the context of the larger market, and perform due diligence on pieces collectors are considering.

Managing a growing collection

As a collection matures and grows, new challenges emerge. “I know collectors who’ve run out of space,” Ringwald says. “They’ve got art hanging in multiple homes, on the walls of their kids’ homes or on loan to arts organizations. It’s easy to lose track of where everything is.”

The same could be said of essential records about the purchase price of a work, how it’s insured and other important information. There might be digital spreadsheets, handwritten ledgers or other kinds of record-keeping that fail to account for the entire collection. “Most family offices already use aggregated reporting technology to organize and review financial assets,” Thiessen says. “A growing art collection should absolutely be included in that reporting.”

The Art Services and Family Office teams work together to gather and maintain information about collections and enter it into the aggregator software used for other assets. Once integrated, this comprehensive window into the collection can help family offices see to it that each piece is tracked, properly insured and cared for, and that covenants are in place for works subject to an art loan, Ringwald says. A family office can also use that information to assess the impact of the collection on the family’s overall financial situation.

Planning for transition

Because of their deep emotional and financial value, art and collectibles play a central role in gift and estate planning. In the 2024 Bank of America Private Bank Study of Wealthy Americans, 78% of individuals with collections worth more than $100,000 described themselves as passionate about passing the art to the next generation. And 69% of those set to inherit the collections said they planned to hold onto them.²

A family office can work with the estate attorneys who draft estate documents to ensure that bequests of art align with their clients’ other goals, and they may recommend specific strategies to optimize taxes. For example, the individual gift and estate tax exemption of $13.99 million (or nearly $28 million for a couple) in effect in 2025 is scheduled to revert to an estimated $7 million per person in 2026.³ Although the current exemption could be modified or extended, families concerned about the potential change might choose to take advantage of today’s exemption, removing works from their taxable estates. In the alternative, a “sale leaseback” requiring no use of the gift exemption might be considered, Ringwald suggests. With this approach, a collector sells artwork to a child or another party and then makes regular lease payments to the new owner for the right to continue displaying the works on their own walls.

At a more basic level, a family office can help by ensuring that collections are specifically accounted for in an estate plan. This can help avert possible family disputes over who gets what and potentially avoid higher-than-necessary tax payments. For example, individuals may plan for some works to be sold upon their passing, with the proceeds going to beneficiaries. “But the expenses of selling, which may be considerable, can only be written off against the estate tax bill if they’ve explicitly stated which works are to be sold. That’s because expenses of sale are deductible only if they’re necessary to pay debts, taxes, administration expenses and preservation of the estate, or to effect distribution,” Ringwald says. “In reviewing an estate plan, family offices may be able to spot such gaps or oversights and recommend updates or amendments to make sure everything is taken care of.”

For current and future generations of art lovers, collecting will never be solely a financial pursuit. Yet with the help of their family office, collectors can pursue their passion in a disciplined way that supports their larger financial lives.

¹ Robert Frank, “Family offices have tripled since 2019, creating a new gold rush on Wall Street,” CNBC, March 8, 2024.
² 2024 Bank of America Private Bank Study of Wealthy Americans, Bank of America Corporation, June 2024.
³ Adjusted annually for inflation.

This article does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the author nor any other party assumes liability for loss or damage due to reliance on this material.

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