How The Wealthy Are Protecting Their Luxury Investments

Planning

How The Wealthy Are Protecting Their Luxury Investments

Managing and protecting luxury investments - keeping them in the family and why insurance isn’t enough.

Written by Xiou Ann Lim on 12 May 2017

If you collect wine, watches, classic cars, art or other luxury items – you’re most probably wondering how everyone else is protecting their luxury investments. People often think of insurance when they think about safeguarding valuable possessions. But do you know about the other options available to you?

One way to protect your luxury investments is to set up a trust or a foundation. In a trust/foundation, a trustee/ counsel member is given the authority to hold or manage an asset on behalf of the beneficiary.

Why set up a trust to protect your luxury investments?

This is a more comprehensive way of protecting your assets as compared to buying insurance because – while insurers pay out in the event of an unfortunate circumstance – a trust can create longevity, in that it can manage the assets as well as keep them in the family.

“This allows our clients to enjoy the collection and utilise alternative assets to leverage their portfolio and secure lending,” adds Karen O’Hanlon – Managing Director of First Names Group, Singapore.

The services afforded by setting up a trust/foundation are pretty extensive. For example, art collectors who like to exhibit their collection in different countries may find that a trustee will not only protect their collection throughout the entire process, but also manage it on their behalf.

“A trustee or foundation provider such as First Names Group can deal with the gallery, manage the transportation of the collection and help to insure it – which allows for manoeuvrability of the collection,” O’Hanlon points out.

A trust can create longevity, in that it can manage the
assets as well as keep them in the family.

Another example is the management and protection of yachts. “A fiduciary can help register the yacht, work through the jurisdiction in which to do that, help secure the best-in-marketplace yachting crews, help owners work through the different VATs when sailing in different waters as well as suggest tax advisors and accountants to manage payment of VAT,” O’Hanlon continues.

What can you protect with a trust?

“As long as an asset can be insured, a trustee can help structure it,” O’Hanlon reveals. This can be real estate, businesses, classic cars, stamps and coins or even racehorses. “We have helped a client transport racehorses across the globe to compete in the Cheltenham Gold Cup,” she adds.

There isn’t a one-size-fits-all approach to protecting your luxury investments, but trusts still allow you to maintain a lot of control and autonomy over your assets. O’Hanlon comments: “There are different mechanisms that can be integrated into the structures to give control – for example, one solution is to create a private trust company structure whereby the client establishes a company to act as trustee.”

How The Wealthy Are Protecting Their Luxury Investments

The cost of a trust

However, it’s worth bearing in mind that it is most cost-effective setting up a structure if your collection is in excess of SGD2 million. The cost of setting up a trust or foundation is relative to the value of the asset and how much work is involved as trustees can charge based on time spent.

“If there is only minimal work, then there will be no time charges on top of the annual responsibility fee – which is based on the type and value of the asset,” O’Hanlon says. “Alternatively, a fixed fee arrangement can be negotiated,” she adds.

The bottom line

There are long-term benefits to setting up a trust or foundation to protect your luxury investments – these can help to keep the asset in the family, avoiding devolution and also offer a comprehensive range of support services for managing or maintaining the asset. At the same time, you can still enjoy your assets while maintaining autonomy and a degree of control over them.

Want to find out more about how you can protect your assets? Learn more about First Names Group here.

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