Latest / Your Estate Matters / Episode 43 - The Hidden Risks of Collectibles: What Every Executor Needs to Know with Steven Joe

Transcript

Episode 43 - The Hidden Risks of Collectibles: What Every Executor Needs to Know with Steven Joe · Your Estate Matters

0:02
[SPEAKER_05]: Hello, and welcome to your estate matters with your hosts, my colleague Greg Bernand, and myself Nicole Garton of Heritage Trust.
0:09
[SPEAKER_03]: Your estate matters is a podcast dedicated to everything a state, including building and preserving your legacy.
0:16
[SPEAKER_05]: If it's a state related, we'll be talking about it.
0:19
[SPEAKER_05]: We're having the conversations today that will help Canadians protect their families, their assets, and their legacies tomorrow.
0:33
[SPEAKER_05]: With us today on your State Matters is Steven Joe, Senior Financial Planner at a Sante Financial Management.
0:39
[SPEAKER_05]: Steven is a leader in the both management space, focusing on helping business owners with complex needs as well as top earning professionals.
0:47
[SPEAKER_05]: Steve leverages his rare background in accounting tax.
0:51
[SPEAKER_05]: Financial planning and a state planning to provide high-end service to his clients.
0:55
[SPEAKER_05]: In the youth community, Steve has been active in big brothers for many years, helping underprivileged youth reach their potential through mentorship.
1:03
[SPEAKER_05]: And then business community, Steven actively mentors several young business clients.
1:11
[SPEAKER_03]: Steve, thanks for being with us here today to talk about wealth management and the context of unique assets.
1:17
[SPEAKER_03]: Tell us about yourself and you journey to your current role as the senior financial planner at Asante.
1:21
[SPEAKER_02]: Thanks, Greg.
1:23
[SPEAKER_02]: I was born raised in Vancouver.
1:24
[SPEAKER_02]: I spent a little bit of my time as a accountant, so I was trained as an accountant.
1:30
[SPEAKER_02]: Half of the accounting world and half of the tax world.
1:33
[SPEAKER_02]: I moved into TD Bank and I was a high net worth financial planner for a couple years with another person on your show, Sandra Abley.
1:41
[SPEAKER_02]: And I've been at a Sunday about nine years now, probably.
1:45
[SPEAKER_02]: And it's been a fantastic journey just being a tax specialist in the financial planning world is a very rare thing.
1:52
[SPEAKER_02]: And so I've just really leaned into that as many things.
1:56
[SPEAKER_05]: And you're a long-term senior volunteer with Big Brothers.
1:59
[SPEAKER_05]: Tell us about that.
2:01
[SPEAKER_02]: Yeah, so my family's always really been into charity and the community.
2:05
[SPEAKER_02]: And about eighteen years ago I was looking for something to do to give back to the community and met a friend at a party and he was a big brother and sounded a lot like something that I wanted to do.
2:18
[SPEAKER_02]: So I did that as a volunteer mentor for ten years and then they targeted me and convinced me to join the board about eight years ago.
2:26
[SPEAKER_02]: So I know the chair of the board of their foundation and it's been a really great thing for me.
2:32
[SPEAKER_02]: I've taken more than I'm sure I've given to them.
2:35
[SPEAKER_03]: Steve, when it comes to wealth management, how do you unique asset classes such as fine wine, art collectibles, different from traditional assets like real estate or stocks?
2:46
[SPEAKER_02]: It's a good question because traditionally I'm trained to advise on things like public market securities, even private assets, like private infrastructure, private debt, that kind of thing.
2:56
[SPEAKER_02]: But I found increasingly in my career, the larger clients we would bring on, the more likely they would have these alternative asset classes in their portfolio.
3:08
[SPEAKER_02]: So we put out our discovery questionnaire with the client and we'd sit down with them and inevitably we'd find out that they had some kind of collection art or cars or wine.
3:19
[SPEAKER_02]: I sort of went into the wine world about ten, fifteen years ago with a mentor on my old boss and so I have that connection with all over the clients.
3:29
[SPEAKER_02]: So it's been an interesting transition in my career to see a lot more of this every year.
3:35
[SPEAKER_05]: So what are some common mistakes people make when they include valuable alternative assets as part of their wealth management plan?
3:42
[SPEAKER_02]: I think there's a very long list of alternative assets, so maybe we'll use wine as an example.
3:50
[SPEAKER_02]: One of the mistakes people make are they just don't know how to handle things like wine because it is something can just spoil with either light or heat or all these things.
4:02
[SPEAKER_02]: So storage is a big issue for the executor.
4:06
[SPEAKER_02]: We heard about a situation where the executor forgot to pay the hydro bill.
4:12
[SPEAKER_02]: and the storage system for the wine turned off, so the fan turned off, the humidifier turned off, the cooling system turned off, and they ruined hundreds of thousands of dollars of wine just because they forgot to pay a hydro bill.
4:25
[SPEAKER_02]: So when you have these types of unique assets,
4:29
[SPEAKER_02]: The executive really needs to know what they're dealing with.
4:32
[SPEAKER_02]: So I find that's a issue.
4:34
[SPEAKER_02]: You know, the other common issue is security.
4:36
[SPEAKER_02]: I would say that people don't know often the value of these things, but maybe one person might.
4:42
[SPEAKER_02]: And so you need to be very careful about security of the assets because someone can come in and, oh, just take a bottle of wine from the fridge and happens to be a, you know, three or five thousand dollar bottle of wine.
4:53
[SPEAKER_02]: very tricky to secure these types of assets if you don't know the value.
4:59
[SPEAKER_02]: When we get to the sale, the executor often doesn't know how to sell the asset, what the value is, who is going to sell the asset.
5:07
[SPEAKER_02]: So it can be very tricky, which is why we often suggest corporate executors or executors that are told in advance about what kind of assets are there and what kind of values are there.
5:17
[SPEAKER_05]: What have you see that like we've had a states where there's been
5:21
[SPEAKER_05]: Very valuable art collections.
5:23
[SPEAKER_05]: Do you see watches?
5:25
[SPEAKER_05]: Do you see wine cars?
5:27
[SPEAKER_05]: What other interesting alternative assets of using?
5:30
[SPEAKER_02]: Yeah, I would say art is probably the most common.
5:33
[SPEAKER_02]: I have seen antique furniture.
5:36
[SPEAKER_02]: That was a very interesting one.
5:37
[SPEAKER_02]: And a lot of that furniture got donated to museums in the United States.
5:42
[SPEAKER_02]: I've seen antiquities.
5:43
[SPEAKER_02]: I have a current client right now who's got a lot of antiquities, particularly stuff that they buy in London.
5:49
[SPEAKER_02]: And so antiquities is a very rare asset class.
5:53
[SPEAKER_02]: And in particularly in Vancouver, the appraisers for these things are the options for these things.
5:57
[SPEAKER_02]: Don't exist in Canada at all.
6:00
[SPEAKER_02]: And they're very difficult pieces to value and to understand.
6:05
[SPEAKER_02]: But pretty traditional things.
6:06
[SPEAKER_02]: I haven't seen anything too crazy if that's what you're getting at.
6:10
[SPEAKER_02]: So antiquity, what, what is it, book?
6:12
[SPEAKER_02]: So what is it?
6:13
[SPEAKER_02]: Yeah.
6:13
[SPEAKER_02]: So in this particular client's case, they have a lot of Egyptian and Roman antiquities.
6:18
[SPEAKER_02]: So they have Egyptian jewelry, for example, and Roman jewelry, Egyptian masks and things.
6:24
[SPEAKER_02]: And they put it as art pieces in their house.
6:27
[SPEAKER_02]: So it's sort of a question of, is it art?
6:29
[SPEAKER_02]: Is it antiquities?
6:31
[SPEAKER_02]: Is it jewelry?
6:32
[SPEAKER_02]: What is it?
6:33
[SPEAKER_02]: I guess very complicated.
6:34
[SPEAKER_05]: What's their plan with respect to securing it and what happens when they pass away?
6:40
[SPEAKER_05]: Is there a standard practice about how to protect it and retain its value?
6:43
[SPEAKER_05]: What do people do?
6:44
[SPEAKER_02]: Yeah, I think house security is the number one thing.
6:48
[SPEAKER_02]: You know, if you walk into someone's house who's a collector and they have a house full of antiques or antiquities or art,
6:57
[SPEAKER_02]: anything could be of any value really and inevitably someone knows a little bit about the value you know might be one of the children know or the spouse knows or a friend knows and so you really need to secure where the assets are some clients have off site storage so they'll have for example a wine collection in a private wine vault in Vancouver then there's a few of those in Vancouver so they might store the
7:24
[SPEAKER_02]: assets there, and those have very good security and insurance systems, but usually the houses were a lot of, yes, or help.
7:31
[SPEAKER_03]: And that goes to a fundamental role of the executive administrator is securing that house the minute you hear about the death.
7:40
[SPEAKER_03]: Right, because everybody does know of the value and it's very portable.
7:44
[SPEAKER_03]: But other tax implications you need to pass and gotten collectibles like win or art or rare watches and how can a state planners mitigate potential issues that would occur in the estate?
7:55
[SPEAKER_02]: I'll give you the tax technical answer, you know what I think.
7:59
[SPEAKER_02]: Some people don't want to hear it, but it's sort of like any other asset generally.
8:02
[SPEAKER_02]: There's a thousand dollar threshold for these things.
8:05
[SPEAKER_02]: So you might, you know, give the bowl of wine through your estate or even while you're alive to somebody.
8:11
[SPEAKER_02]: And if it's hundred thousand dollars, you're not going to pay any capital gains tax on it.
8:16
[SPEAKER_02]: But, you know, for things that are larger, like cars or jewelry, off these things, gonna appreciate quite a lot.
8:22
[SPEAKER_02]: And so your state would be subject to a capital gains tax.
8:26
[SPEAKER_02]: There's a few different ways to mitigate that.
8:28
[SPEAKER_02]: I mean, I think you see a lot of donations, especially at someone's death often because somebody isn't really dying to take that rare asset that was unique to that person, but also because the donations get a really great tax credit.
8:43
[SPEAKER_02]: So that would be generally what we see.
8:45
[SPEAKER_02]: You know, we always joke in the wine community to drink your expensive stuff before you die.
8:50
[SPEAKER_02]: You don't want a huge capital gain issue.
8:52
[SPEAKER_02]: You know, it's better to pass on the hundred dollar ball than the five thousand dollar bottle.
8:56
[SPEAKER_02]: It's a front new recommendation.
8:58
[SPEAKER_03]: Yeah, and I don't know what year they put that thousand dollar limit up, but it's got to be a couple of decades already.
9:04
[SPEAKER_03]: It's never moved up.
9:06
[SPEAKER_02]: Yeah, it's sort of unfair for a certain thing if you think about it because cars are never going to be under that limit.
9:10
[SPEAKER_02]: But you can have a wine collection that's the same value, but because they're individual bottles, you know, the majority might be under the thousand dollar moment.
9:19
[SPEAKER_02]: So.
9:20
[SPEAKER_05]: So what would you tell a collector about how to make sure that these valuable items are correctly valued in past to who they wish?
9:29
[SPEAKER_02]: So if it's a diligent collector,
9:33
[SPEAKER_02]: No, maybe an accountant or somebody ain't listening.
9:35
[SPEAKER_02]: Like myself, I would hold an inventory list of everything, and I would keep that list somewhere where somebody could find it.
9:41
[SPEAKER_02]: You don't want to be in a situation where you don't even know what you have, and somebody can come in and remove an asset, especially something's quite valuable.
9:49
[SPEAKER_02]: So, certainly a list is good, and then just communication to the executor.
9:54
[SPEAKER_02]: So often, you know, the executor is the spouse or a child, but also a trust company.
9:59
[SPEAKER_02]: And so communicating to them, you know, what's what, you know, what are they looking at?
10:04
[SPEAKER_02]: I think this is generally done with in families, you know, if somebody's a big, you know, collector hobbyist or something, their family generally knows what's what in the assets, but at a certain point,
10:15
[SPEAKER_02]: It might be very difficult just based on the quantum of the items.
10:19
[SPEAKER_02]: I would also say if you're interested, you know, you should certainly talk to an auction house or an appraiser before then you'll get an understanding of the valuation, but the executive will also know who to call in case something happens.
10:34
[SPEAKER_02]: And that's usually the first call they make for that particular asset.
10:38
[SPEAKER_05]: We had Jim Finley on who's a art a prisoner, and he mentioned something about remember providence.
10:45
[SPEAKER_03]: Yeah, the providence, the paper, the backpapers, to whose hands it's been through and how does it establish?
10:52
[SPEAKER_03]: It's an art analogy.
10:54
[SPEAKER_02]: Art is the prime example of that.
10:56
[SPEAKER_02]: Wine is also very high on that list.
11:00
[SPEAKER_02]: When you're selling wine, say at auction house and say, say you're selling large amounts, they will want to see that it was stored correctly.
11:07
[SPEAKER_02]: You know, they want to see that it is authentic wine because wine could be faked and there's a whole movie documentary on that.
11:14
[SPEAKER_02]: I think other people have seen.
11:16
[SPEAKER_02]: So certainly, they're going to want to see some kind of provenance.
11:18
[SPEAKER_02]: They're going to want to see that you have a cooling system in place at it.
11:22
[SPEAKER_02]: You know, didn't go out of system.
11:23
[SPEAKER_02]: For example, there's certainly a provenance of where you might have purchased the wine as well.
11:28
[SPEAKER_02]: Very similar to art, I would say.
11:31
[SPEAKER_02]: Wines life span is a lot shorter than art and antiquities.
11:35
[SPEAKER_02]: So the provenance is usually one or two hands before, you know, I guess so the factor.
11:40
[SPEAKER_02]: But where things like antiquities is very different.
11:44
[SPEAKER_02]: You need to see a long chain of certification.
11:47
[SPEAKER_02]: You might need to see appraisals or specialists authentication system or sort of authentication reports.
11:55
[SPEAKER_02]: It's a very different
11:57
[SPEAKER_02]: kind of game when it goes to those assets, but again, prognosis is really important.
12:02
[SPEAKER_03]: So when they're looking at wine collection and collectibles and accurate appraisals, like you were just saying for this antiquity collection, there's probably a handful of places that could do that and provide an executive real values.
12:20
[SPEAKER_03]: And of course, you wouldn't get that selling it here.
12:22
[SPEAKER_03]: Have you ever found a client say head to move it to another location to actually deal with the
12:27
[SPEAKER_03]: The sale.
12:28
[SPEAKER_02]: This is very common and have you seen the show antiques roadshow?
12:33
[SPEAKER_03]: Yes, yes.
12:34
[SPEAKER_02]: Very popular show.
12:35
[SPEAKER_02]: My parents love the show and everyone brings their unique thing that was from their grandparents or their parent to this to the show and they get it at a price.
12:43
[SPEAKER_02]: And, you know, they're often blown away by some of the values or these things.
12:49
[SPEAKER_02]: These appraisers are often at the large auction houses or they're independent, and they're in large city centers.
12:57
[SPEAKER_02]: Things like London, things like New York, Hong Kong.
13:01
[SPEAKER_02]: So for rare, rare, or a liquid assets like art and take what is for example, you often have to bring it to
13:10
[SPEAKER_02]: somebody to your praise at London.
13:13
[SPEAKER_02]: Let's say a good example would be antique ways would be London.
13:16
[SPEAKER_03]: And it would be very unique to have to ship it there and all the paperwork is Jim Finley talked about that, you know, just to get it across borders.
13:24
[SPEAKER_03]: It's quite interesting.
13:26
[SPEAKER_02]: Yeah, absolutely absolutely.
13:28
[SPEAKER_05]: But you know, and I think
13:30
[SPEAKER_05]: In this current climate, I mean, I think there's controversy around that in, I guess, cultural appropriation.
13:36
[SPEAKER_05]: And I know my husband's Greek and the Elgin marbles are a hot topic in our house and that grace wants them back.
13:44
[SPEAKER_05]: And they can you just ship these things around or their restrictions around what you can do with different artifacts or art.
13:52
[SPEAKER_02]: That's an interesting question.
13:54
[SPEAKER_02]: My client framed this to me once.
13:56
[SPEAKER_02]: He said to me, I feel comfortable buying from the thieves.
14:03
[SPEAKER_02]: He said, I really want this thing from my culture.
14:06
[SPEAKER_02]: And I'm just going to buy from the British people that took this thing from our land and just bring it back to our land.
14:14
[SPEAKER_02]: And I'm just going to use my own resources to that.
14:17
[SPEAKER_02]: So very interesting cake on that question.
14:19
[SPEAKER_02]: Is that justice?
14:21
[SPEAKER_02]: Yeah, maybe he's just exercising his own justice and monetary policy, I guess there.
14:26
[SPEAKER_05]: So can I ask a question of you as a wine guy?
14:29
[SPEAKER_05]: Just out of interest, like you said, it's not just provenance, but showing how you store it.
14:36
[SPEAKER_05]: Because I think we're probably interested to make sure we're not really in our own wine.
14:40
[SPEAKER_05]: Given that you're an expert in this, how are we supposed to correctly document and store wine so we don't damage its value?
14:47
[SPEAKER_02]: Yeah, I mean, no great question.
14:48
[SPEAKER_02]: I think if it's quite a valuable wine, they'll want to see the original receipt.
14:54
[SPEAKER_02]: So they know where you got it from.
14:55
[SPEAKER_02]: Usually the best would be to buy X, Chato, they call it.
14:59
[SPEAKER_02]: So directly from the Chato, then if you weren't buying it there, you'd buy it from a maybe an auction house and store it for, you know, twenty years.
15:07
[SPEAKER_02]: So you have the original receipt from whatever auction house you bought it from.
15:11
[SPEAKER_02]: And then you're, they're going to want to see pictures of your seller.
15:14
[SPEAKER_02]: So have you sent pictures in of your seller with
15:18
[SPEAKER_02]: You know, humidity system and and you know, you'll write some kind of know it about it's never gonna service and all these things.
15:25
[SPEAKER_02]: So it's a pretty serious, you know, business on the level.
15:29
[SPEAKER_05]: What's the one on how we're supposed to stir?
15:32
[SPEAKER_02]: The simple checklist of storing wine is keep it away from heat.
15:35
[SPEAKER_02]: Number one, keep it away from light, number two.
15:38
[SPEAKER_02]: Certainly want to keep it relatively humid, so the cork doesn't dry out.
15:43
[SPEAKER_02]: So if you happen to be in a really dry area, for example, you want to make sure the ball is on the side, so that is always the cork is always a little bit wet.
15:50
[SPEAKER_02]: So humidities relevant.
15:52
[SPEAKER_02]: You don't want it to be in an area where it shakes a lot, so you wouldn't put it in a room that was next to a train tracks or something like that, not usually relevant.
16:02
[SPEAKER_02]: old dark humid, and just think of what a sixteenth century, European cave looks like.
16:09
[SPEAKER_02]: That's the ideal spot.
16:10
[SPEAKER_02]: So room temperature is too warm?
16:12
[SPEAKER_02]: Not for most wine, unless you're a long-term storage, I would say room temperature is fine for most things.
16:18
[SPEAKER_02]: But as soon as it's in the kitchen above the oven and it gets, you know, thirty degrees in the summer or regularly warm, I think that's where you get into a little bit of risk.
16:29
[SPEAKER_03]: Do you recommend incorporating unique asset classes into trusts or corporate structures to manage the taxation and liquidity issues?
16:36
[SPEAKER_02]: Yeah, it's a good question.
16:38
[SPEAKER_02]: I rarely see circumstances where these types of unique assets make it into trusts and corporations.
16:45
[SPEAKER_02]: It is common on the testamentary trust side.
16:47
[SPEAKER_02]: So if somebody passes away and good example, would someone pass away prematurely and they had a car collection and you wouldn't want your nineteen year old child inheriting
16:59
[SPEAKER_02]: bunch of vintage Ferrari's and driving things, things around at nineteen years old with their buddies.
17:04
[SPEAKER_02]: So testamentary trust, I would say are highly recommended or wealthy families, especially when the WWE needs assets come into play.
17:12
[SPEAKER_02]: The argument for corporations is a little different.
17:15
[SPEAKER_02]: We have clients that have cash that is stuck in the corporation.
17:18
[SPEAKER_02]: They don't want to pay the personal dividend tax to take it out.
17:21
[SPEAKER_02]: So they will sometimes invest in unique assets, maybe cars or stamps or coins or that kind of thing.
17:29
[SPEAKER_02]: You got to be a little bit careful there because if you're using this asset for your own enjoyment, it could be a shareholder benefit taxation issue.
17:36
[SPEAKER_02]: It's a bit of a gray area.
17:38
[SPEAKER_02]: I don't usually recommend it.
17:40
[SPEAKER_05]: What about this strange relative digital art?
17:44
[SPEAKER_05]: Are people actually purchasing that?
17:45
[SPEAKER_02]: We've seen a little bit of it.
17:48
[SPEAKER_02]: in the younger generation, the wealthy business owner clients, you know, who might be sort of six feet at eight years old aren't touching this stuff.
17:58
[SPEAKER_02]: I haven't seen a single client other than maybe as a bit of a joke, you know, by a small piece or something like that.
18:04
[SPEAKER_02]: But generally, I find the younger generations are buying these things.
18:08
[SPEAKER_02]: It's still so early in the game to see if it's viable as an asset class.
18:13
[SPEAKER_02]: I think some people are sort of hoping that
18:16
[SPEAKER_02]: that are so early into it, it might go up, but it doesn't have the history of returns and the volatility is so wide.
18:22
[SPEAKER_02]: You can see anytime the crypto market is down, these things really take a hit.
18:27
[SPEAKER_02]: It's been very difficult argument to make on these, but you know, ten, twenty years I could be very wrong.
18:32
[SPEAKER_03]: Are there specific insurance or documentation requirements that collectors should have in place to protect these assets during a state administration?
18:42
[SPEAKER_02]: Absolutely.
18:42
[SPEAKER_02]: I go, sort of goes back to the question earlier to secure the assets.
18:47
[SPEAKER_02]: You know, I think we will use wine, for example, again, if you know, you were the executive of a large wine collection, I would call one of the wine storage companies to come in and inventory the assets and keep it off site.
18:59
[SPEAKER_02]: They have all the right temperature control, you know, and safety protocols.
19:03
[SPEAKER_02]: They have all the right correct insurance for these things.
19:06
[SPEAKER_02]: These locally would be
19:08
[SPEAKER_02]: groups like Thirteen Sea or Griffin Wine Storage or the Vancouver Wine Vault.
19:12
[SPEAKER_02]: On the insurance side, there's numerous insurance companies for different assets and better insurance companies for certain asset types.
19:18
[SPEAKER_02]: So one would be Chub would be very good for wine.
19:22
[SPEAKER_02]: Axe is very good for fine art.
19:25
[SPEAKER_02]: His cocks in the UK is very good for range of things.
19:27
[SPEAKER_02]: AIG is very good for art, jewelry, and collectibles.
19:31
[SPEAKER_02]: So, you know, if you're going to be holding onto these things because you're waiting for probate,
19:36
[SPEAKER_02]: or you want to hold these things for minor beneficiaries or in a testamentary trust, you certainly have to think about the insurance and the security side.
19:44
[SPEAKER_02]: But it can be a real pain for the executive because it's a lot of work, a lot of time.
19:50
[SPEAKER_02]: If you had some extremely notable piece of art, could you borrow against it?
19:55
[SPEAKER_02]: That's an interesting question.
19:57
[SPEAKER_02]: I've never seen it in my career.
19:58
[SPEAKER_02]: I think this might be something that an American alternative borrow might entertain.
20:06
[SPEAKER_02]: This, you'd have to get a praisele, you know, you might even have to put it in a location that is, you know, maybe a secured warehouse or something so that they could control the asset or have some kind of guarantee in the asset, but that's a very uncommon scenario, but maybe more common in New York than Canada.
20:26
[SPEAKER_05]: What role do like auction houses and specialty brokers have?
20:31
[SPEAKER_05]: Like I think he mentioned some of them for wine and how do people identify who these specialists might be?
20:39
[SPEAKER_02]: The auction groups are going to be the key groups you're going to look to to liquidate these assets.
20:43
[SPEAKER_02]: It's very hard for an executive to liquidate these types of assets or get full value.
20:48
[SPEAKER_02]: just conceptually high level.
20:51
[SPEAKER_02]: The more buyers you have for an asset, the better price you're going to get generally.
20:55
[SPEAKER_02]: So if you had a private car collection, you're probably not going to sell that link.
21:00
[SPEAKER_02]: You know, especially if there's talking millions of dollars, you're probably going to ship the cars to somewhere like New York, a reasonable shipping place.
21:07
[SPEAKER_02]: You know, you might go to London if you were in Europe, for example, you might go to Hong Kong or Singapore if you were in Asia.
21:13
[SPEAKER_02]: And you're going to put it with one of the big auction houses and have them sell these things for you.
21:20
[SPEAKER_02]: How do you think the tariff situation would come into play there?
21:24
[SPEAKER_02]: Yes, that's such an interesting question.
21:26
[SPEAKER_02]: I think if we are in a broad tariff world, this could be something that's caught under that and certainly would restrict your movement of assets into the United States as a Canadian.
21:38
[SPEAKER_02]: So the executive might have a very difficult choice to say, do I pay this tariff with the hopes that I get a better sale outcome?
21:46
[SPEAKER_02]: Or do I take my chances locally with fewer buyers?
21:50
[SPEAKER_02]: I think it's a very difficult question.
21:52
[SPEAKER_02]: And again, this is why we suggested corporate executives because they have the sophistication handle, these types of things.
21:58
[SPEAKER_02]: I would say you should be engaging the auction house or the auction years before pass away.
22:04
[SPEAKER_02]: A lot of the people that engage in these hobbies, they have friends in the hobby, they have some kind of tie to the auction house or they've been buying at the auction houses for a while.
22:15
[SPEAKER_02]: They know people in these industries, in these specialties in these hobbies, you should be going to them first for the assistance and the person that's the collector should be writing these things down.
22:27
[SPEAKER_02]: They should be introducing their executive or their power of attorney to these individuals at a early stage, I'd say.
22:32
[SPEAKER_03]: It's kind of like with vehicles for originality, you have to get a qualified radar to come in and look under the hood and say, it's eighty-two percent original or it's ninety-five percent and that's completely the value if you take it down to the barred auctions or somewhere down in America.
22:50
[SPEAKER_03]: So for individuals who can do pass down a passion for wine or other collectibles, what are some creative ways for them to structure and to state plan, preserve their legacy?
23:01
[SPEAKER_02]: This is part logistical art, psychological, I think.
23:06
[SPEAKER_02]: We have often seen that the children of the collector are not super excited about their assets.
23:14
[SPEAKER_02]: It's hard to transfer that passion in something through a child who might go away for university, might not even live in the same city as you anymore.
23:23
[SPEAKER_02]: You know, there's a stigma around wine, for example, that it's less healthy than it otherwise could be.
23:31
[SPEAKER_02]: And children or the younger generations aren't drinking as much alcohol.
23:34
[SPEAKER_02]: So that might be something that, you know, another child likes their parents wine collection, for example.
23:40
[SPEAKER_02]: So I would say, have the conversations with your beneficiaries while you're alive.
23:45
[SPEAKER_02]: You don't want to sue anything.
23:46
[SPEAKER_02]: You don't want to.
23:47
[SPEAKER_02]: hope and pray that they're going to like this thing at some point down the road and try to force it into their hands.
23:55
[SPEAKER_02]: We always like to promote transparency though.
23:58
[SPEAKER_02]: We find sometimes the person who passes away will give their assets to their hobby assets to one child or another and that can create a little bit of challenge especially if there's
24:12
[SPEAKER_02]: and disagreement and who should be getting what.
24:14
[SPEAKER_02]: So have a family meeting.
24:15
[SPEAKER_02]: It would be a good suggestion.
24:18
[SPEAKER_02]: Have the discussion before you pass away.
24:20
[SPEAKER_02]: And then understand how you're going to equalize the other beneficiary with liquid acid or real estate.
24:27
[SPEAKER_02]: It's okay to give all of your wine or all your cars or all your watches to the one child.
24:32
[SPEAKER_02]: But you need to be ready to equalize the other child and that might be
24:37
[SPEAKER_02]: Your life insurance strategy might be through investments or real estate and a number of things.
24:43
[SPEAKER_02]: In very rare circumstances, I've seen what I call a draft.
24:49
[SPEAKER_02]: Have you heard of this before?
24:51
[SPEAKER_02]: A draft is sort of where the beneficiaries will come in and they will pick various unique assets in some kind of order.
25:00
[SPEAKER_02]: And so if you're looking at art and there's a hundred pieces of art in someone's collection and there's five beneficiaries,
25:07
[SPEAKER_02]: You might go through in order pick the art of the wall in the order that you want it, not necessarily the dollar value order.
25:17
[SPEAKER_02]: It's uncommon, but for very large collections, I've seen it once or twice.
25:22
[SPEAKER_03]: Right, and that might cause some unique ways the estate would be taxed because a kid could be picking five pieces of art that add up to an half million dollars and somebody else picks five that's at seventy five thousand.
25:35
[SPEAKER_03]: And where does
25:37
[SPEAKER_03]: You know, talking about the thousand dollar limit, where does the tax burden lie in the estate?
25:43
[SPEAKER_02]: Yeah, so a child that makes a higher dollar value item.
25:47
[SPEAKER_02]: If that's the way that the estate is set up, the estate's going to bear the tax and the beneficiaries are going to bear the equally, or based on their ratios of their beneficial interests in the estate.
25:58
[SPEAKER_02]: So there can be an unfairness there as well.
26:00
[SPEAKER_02]: It's very tricky.
26:02
[SPEAKER_02]: We usually say if you're going to do a draft, there has to be some kind of equalizing provision with cash because that solves the
26:10
[SPEAKER_02]: problems.
26:10
[SPEAKER_02]: If you don't have liquidity, it can be a very difficult thing.
26:14
[SPEAKER_02]: I don't know if you've seen the TV show on Apple TV drops of God.
26:20
[SPEAKER_02]: It's almost a show of what not to do.
26:22
[SPEAKER_02]: In this case, it's a show about a man who dies with the most valuable wine collection ever.
26:28
[SPEAKER_02]: And he makes his daughter, and his protege, his wine protege, compete for this thing as their estate gift.
26:38
[SPEAKER_02]: It's a crazy show and quite fantastical, but I'd recommend you watch it.
26:43
[SPEAKER_05]: So you think about a like a renowned collector like Bob Renney for example and he I can't even imagine how many very interesting valuable pieces he has like I wonder what he's thinking about that like there would be enormous logistics around storing it now and then what that looks like in the future.
27:04
[SPEAKER_02]: Yeah, I mean, hopefully he has a good estate plan and he's had the conversations.
27:08
[SPEAKER_02]: He hope he's got good advisors.
27:10
[SPEAKER_02]: For pizzas like art, we find a lot end up in museums or galleries and talking about the donation tax later, but that's a really common way to past things down.
27:23
[SPEAKER_02]: It's uncommon that one beneficiary will want to take thirty pieces of art.
27:29
[SPEAKER_02]: They may not even have space in their home or the residence for these things.
27:33
[SPEAKER_03]: And when we're talking about all these significant collections, I guess, we call them.
27:37
[SPEAKER_03]: Is this mostly in families that would be at the size of a family office?
27:41
[SPEAKER_03]: Because you almost need curators.
27:44
[SPEAKER_03]: If you've got all this stuff in a five different houses scattered over some jurisdictions, it would be too much for the family.
27:51
[SPEAKER_03]: I'm sure it's an inventory, make sure it's insured, make sure it's the right temperature.
27:55
[SPEAKER_02]: Yeah, there's a direct correlation between these expensive hobby, unique assets and wealth.
28:02
[SPEAKER_02]: I think once you start to get into the over a hundred million range, it's likely they're going to have some kind of collection.
28:09
[SPEAKER_02]: It's reasonably likely it's in multiple jurisdictions.
28:13
[SPEAKER_02]: It's often hard to bring
28:15
[SPEAKER_02]: these things from between jurisdictions because of the shipping costs and the taxation of these things and the tariffs.
28:23
[SPEAKER_02]: So we do find that clients will leave certain collections in the jurisdictions that they bought them.
28:30
[SPEAKER_02]: That's not uncommon.
28:32
[SPEAKER_02]: And it gets very complicated when you're dealing with multiple jurisdictions.
28:36
[SPEAKER_02]: And I don't shy and race was on the
28:38
[SPEAKER_02]: podcast recently as a crossbore specialist and we've seen a lot of minds, particularly with their collections in the United States cars and wine for example.
28:47
[SPEAKER_05]: So Michael Adaine created his own gallery.
28:49
[SPEAKER_05]: I think that was the way he solved that issue.
28:52
[SPEAKER_05]: And I mean, that's an incredible legacy.
28:54
[SPEAKER_03]: And I think you've seen many American famous people create autom museums.
28:59
[SPEAKER_03]: You know, they have five warehouses of their own cars there.
29:02
[SPEAKER_03]: And then they just decide, well, it will just make an autom museum.
29:06
[SPEAKER_02]: Yeah, at some point, you know, the question that doesn't make sense to just start your own.
29:10
[SPEAKER_05]: Well, there's a storage facility in Vancouver where you can store luxury cars and then there's a place like where you can hang out with your car.
29:23
[SPEAKER_05]: So there are unique facilities for people that have these special assets.
29:29
[SPEAKER_02]: Yeah, there's a couple of of those for wine as well.
29:31
[SPEAKER_02]: And it's a little tasting rooms are attached to the collectors lockers.
29:36
[SPEAKER_02]: That's pretty common.
29:37
[SPEAKER_02]: And I think this model has been around for a little while and places like London and Hong Kong and New York.
29:43
[SPEAKER_02]: So thank you.
29:44
[SPEAKER_02]: We're starting to catch up.
29:45
[SPEAKER_02]: These things as our wealth grows.
29:47
[SPEAKER_05]: Steve's you recommend that people gift with a warm hand if they've got things that are particularly valuable or special or do you recommend that they make it as part of their state?
29:58
[SPEAKER_05]: Like maybe it's a really special car or jewelry, what are your thoughts?
30:03
[SPEAKER_02]: It's funny to say that because I have that exact quote in my notes here, the talk about.
30:08
[SPEAKER_02]: We always suggest giving it with a warm hand instead of a cold hand.
30:13
[SPEAKER_02]: It is usually something that means a lot more than money to our clients.
30:20
[SPEAKER_02]: So if they're passing something down to their children, they want to give the children the context of that.
30:25
[SPEAKER_02]: They want to see their child enjoy it.
30:27
[SPEAKER_02]: And we'll use cars.
30:28
[SPEAKER_02]: For example, I have a client that
30:30
[SPEAKER_02]: He goes out with his son regularly and they drive the cars together and, you know, he hasn't given any of the cars to the son because he's still in his early twenties, but I think there's a assumption that a lot of these things will go to the son and you can have these memories driving with his dad and enjoying that asset.
30:48
[SPEAKER_02]: The warm hand conversation is always better because it deals with any issues that might arise of front
30:57
[SPEAKER_02]: sometimes people feel entitled to certain collection pieces or assets and you didn't have the conversation with the family before they can lead to a lot of stress.
31:06
[SPEAKER_02]: And oftentimes we're seeing that the assets that get passed down in these collections, they're not the most significant assets in the estate.
31:15
[SPEAKER_02]: There's real estate, there's investment holdings, which from a quantum perspective, usually out
31:22
[SPEAKER_02]: away the elections.
31:24
[SPEAKER_02]: But for some reason, the airs feel very strongly about these things.
31:28
[SPEAKER_02]: So the earlier you can have the conversation or the earlier you can pass it down the easier the conversation and the reduction in estate risk.
31:37
[SPEAKER_03]: How do family dynamics come into play when dividing valuable non-financial assets like art or wine among stairs?
31:45
[SPEAKER_02]: Great question.
31:45
[SPEAKER_02]: I think valuing the assets before death is very important.
31:52
[SPEAKER_02]: There can often be a misunderstanding in the value sum of these things.
31:55
[SPEAKER_02]: And so when good example will be one child will really like a piece of art and another child will like another piece of art, but their values could differ significantly.
32:07
[SPEAKER_02]: So having the conversation of, hey, if you're going to take that valuable piece of art, you're going to get less in the estate.
32:14
[SPEAKER_02]: That's the thing that people should mentally sign off on, especially because we find some of the
32:21
[SPEAKER_02]: airs can be a little bit entitled to these pieces, maybe they grew up playing in the car or looking at that piece of art.
32:29
[SPEAKER_02]: It was in their room or they shared some kind of special moment with their parent.
32:34
[SPEAKER_02]: So you certainly want to have as much transparency over this as possible at the beginning.
32:42
[SPEAKER_02]: I think the other thing to say would be, don't assume anyone wants anything.
32:49
[SPEAKER_02]: We have seen too many times where the person that's preparing their estate documents
32:58
[SPEAKER_02]: is assuming that certain assets are going to certain beneficiaries, but they've never had their conversation.
33:04
[SPEAKER_02]: That can be a big mistake.
33:05
[SPEAKER_02]: It's very hard to know what people are thinking or why they think certain things.
33:09
[SPEAKER_02]: So again, have their conversation, have a family meeting.
33:12
[SPEAKER_02]: I think you've had several people in your podcast that are getting hosting these family meetings.
33:18
[SPEAKER_02]: And these family meetings very early on.
33:21
[SPEAKER_02]: They don't just reduce the risk of bad feelings.
33:24
[SPEAKER_02]: Another point is why even
33:26
[SPEAKER_02]: gather all these things why make all this money if you're gonna leave it in a dog's breakfast at the end of this thing and everyone's gonna fight over it you might as well have just left nothing at the end of the day so I think you want to remember that if you're in the estate planning process
33:41
[SPEAKER_05]: Yeah, it's funny.
33:42
[SPEAKER_05]: One of our guests, Linda Chu, who's an amazing estate organizer, she's got a presentation and she entitles it.
33:49
[SPEAKER_05]: Your kids don't want your stuff.
33:51
[SPEAKER_05]: And so she counsels people to downsize and things.
33:55
[SPEAKER_05]: But you know, every family's unique and we've had heritage trust has had two estates where it was like complete combat over what were regularly like common suburban house items.
34:08
[SPEAKER_05]: Like one, we were in a
34:11
[SPEAKER_05]: Like nice things, but like ordinary sort of suburban house things, we were in that home for seven hours with the children meeting, arbitrating.
34:20
[SPEAKER_05]: And we're talking like ceramic frogs and doilies.
34:23
[SPEAKER_05]: And it was interesting.
34:26
[SPEAKER_05]: And then we had another one with two daughters.
34:28
[SPEAKER_05]: And we were literally, they could not be on the same floor with each other.
34:33
[SPEAKER_05]: or literally running up and down the stairs with like crocker-y and it's distributing.
34:40
[SPEAKER_05]: So, you know, every family has its own unique culture, so I think you're advised to have transparent, open conversations to the extent possible at the outset to try to avoid that.
34:51
[SPEAKER_05]: But if maybe you've got more strained family relations, do sometimes recommend that people practically give things to a museum rather than giving it to children, what are your thoughts about that?
35:02
[SPEAKER_02]: Yeah, I think if there's strange family dynamics, we start with the legal aspect, and we might look at recommending in British Columbia a joint partner trust or an ultra-hotrust.
35:17
[SPEAKER_02]: This is a structure you know very well, obviously, and reduces the ability for a beneficiary to challenge in a state.
35:25
[SPEAKER_02]: So we'll often suggest that anything that could be contentious, go through that entity.
35:33
[SPEAKER_02]: And then aside from that, if you haven't attained the age of sixty five to set that up, but you want to give stuff to charity, I would say, have the conversation regardless, it will be a hard conversation, but list the charity in the estate.
35:47
[SPEAKER_02]: The problem there is that
35:49
[SPEAKER_02]: the estate could still be challenged by the beneficiaries regardless of who it's going to.
35:54
[SPEAKER_02]: So it's not a foolproof example.
35:57
[SPEAKER_02]: I still like the joint partner trust and alter ego trust way of distributing assets or you distribute the assets to the museums and the charities while you're alive.
36:08
[SPEAKER_02]: That is something that's very difficult to contest unless there's a capacity issue.
36:12
[SPEAKER_02]: But if you see this coming and there's a lot of
36:17
[SPEAKER_02]: difficulty in the family, you can always give stuff away while you're alive, and you have capacity.
36:23
[SPEAKER_05]: Misty for our listeners that might not have context.
36:27
[SPEAKER_05]: Tell us why you're getting money or collectibles through a joint partner or alter ego trust is less risky than a general estate.
36:37
[SPEAKER_02]: Yeah, so we like the joint partner, alter your good trust because it doesn't have the same legal mechanism that a beneficiary could challenge through.
36:46
[SPEAKER_02]: And I'm not a trust lawyer, so I'll just recount what I know from them.
36:54
[SPEAKER_02]: My understanding is that through the Willness States, Succession Act, someone can challenge a Will in British Columbia and the people that could challenge a Will, the classes of beneficiaries that could challenge a Will would be a child or a spouse.
37:08
[SPEAKER_02]: So if those are the beneficiaries that might
37:12
[SPEAKER_02]: be the beneficiary to challenge the where the assets go, the liquid assets or the unique assets, then you may want to move your assets into a trust, you specify trust, cannot be challenged under those same rules.
37:31
[SPEAKER_02]: So it's much more difficult for beneficiaries to challenge joint partner trust or an altering a trust under the trust law.
37:39
[SPEAKER_02]: It's a different mechanism and it's a much higher bar.
37:42
[SPEAKER_05]: And if people are thinking this certainly they should get good advice.
37:46
[SPEAKER_05]: Yeah.
37:47
[SPEAKER_02]: Yeah.
37:48
[SPEAKER_03]: Steve, are there any final tips for our listeners?
37:52
[SPEAKER_02]: Certainly, there's a few key tips I would say.
37:55
[SPEAKER_02]: You've heard these themes already today, but don't wait until it's too late.
37:58
[SPEAKER_02]: Don't wait until you're eighty and you sort of assume what people want and put it in your will.
38:05
[SPEAKER_02]: Have the conversations early.
38:06
[SPEAKER_02]: Update your state documents regularly.
38:09
[SPEAKER_02]: Sometimes we find that someone's estate documents are silent on the collections entirely and the collections are in the multi tens of millions of dollars at that point.
38:20
[SPEAKER_02]: That can create problems.
38:22
[SPEAKER_02]: If you have a complex or challenging estate, certainly consider a corporate executor.
38:27
[SPEAKER_02]: It's very difficult for the family to handle these things, especially when the dollars get large and the assets get more complex.
38:36
[SPEAKER_02]: It's a big burden on the family and you can let them know that the corporate executor is going to handle things.
38:42
[SPEAKER_02]: I think it removes some of the potential conflicts of interest of having an executor who might also be beneficiary of these assets.
38:52
[SPEAKER_02]: The other thing I would say is, don't put too many eggs in one basket.
38:56
[SPEAKER_02]: Some people get pretty excited about these hobbies and are tempted to put a lot of money into them.
39:03
[SPEAKER_02]: When we see clients come in with over five percent of their assets and these hobby unique assets, some warning signs, you know, some warning signs flash for us.
39:14
[SPEAKER_02]: When we see over ten percent of their assets and these unique hobbies, we generally tell them they should really reconsider or consider diversification.
39:22
[SPEAKER_02]: You know, these things are very unpredictable.
39:25
[SPEAKER_02]: They're not very liquid.
39:27
[SPEAKER_02]: People don't understand them.
39:29
[SPEAKER_02]: They're hard to sell.
39:30
[SPEAKER_02]: It's a riskier asset than a lot of
39:33
[SPEAKER_02]: things that people can find in public markets.
39:36
[SPEAKER_02]: We've also put together as a firm, this document called a prepared family inventory.
39:41
[SPEAKER_02]: And it is a PDF, but clients can print it and hand right into it.
39:47
[SPEAKER_02]: They're wishes and information about their collections and who to call when certain things went bad.
39:55
[SPEAKER_02]: So that's a really nice thing to have.
39:57
[SPEAKER_02]: And I sure you probably have something in your executive or trustee checklist as well.
40:02
[SPEAKER_05]: I would say one thing to people about is guns.
40:06
[SPEAKER_05]: So if you have firearms, obviously make sure you've got the correct licenses, but keep in mind whoever you're gifting those two has to also have the correct licenses.
40:19
[SPEAKER_05]: So you've got to think through that carefully, and we've had a state where we've had firearms, and there are a lot of considerations around transport and storage.
40:29
[SPEAKER_03]: Yes, and also some of them ones that were collected, and perhaps not reported may now be on a list that you can't actually own them at this time, so you would have to arrange for that.
40:42
[SPEAKER_03]: Understood?
40:43
[UNKNOWN]: Yeah.
40:43
[SPEAKER_02]: We're done common.
40:44
[SPEAKER_02]: Again, you never know what you're going to get, so don't assume you know how to handle these unique asset classes.
40:51
[SPEAKER_05]: Barams actually aren't that uncommon.
40:54
[SPEAKER_03]: In a city more so than in the rural areas, rural areas are certainly
40:59
[SPEAKER_05]: But that is definitely make sure you're getting the correct advice and that you've thought through the storage, the licensing, and the recipient, and don't leave the firearms to people that aren't allowed to have them.
41:16
[SPEAKER_03]: And how can our listeners find you?
41:18
[SPEAKER_02]: You can send me an email at SJOE at Asante.com, or you can go to my website, StevenJolfinancial.com, Steven with a V. So either way, you can get a whole of us.
41:30
[SPEAKER_02]: And we'd be happy to have a complimentary meeting with your clients to understand if there was any benefit of our advice.
41:38
[SPEAKER_05]: And but investments, but possibly wine as well.
41:40
[SPEAKER_05]: Sure.
41:41
[SPEAKER_05]: Why not?
41:43
[SPEAKER_05]: Thank you so much Steve.
41:44
[SPEAKER_00]: Thank you.
41:45
[SPEAKER_00]: Steven Joe is a senior financial planner with a Sonte Financial Management Limited.
41:50
[SPEAKER_00]: The opinions expressed are those of the presenter and financial advisor and not necessarily those of a Sonte Financial Management Limited.
41:58
[SPEAKER_00]: Please obtain professional financial advice or contact Steven Joe at six o'clock four six eight seven seven five two six or visit Steven Joe Financial.com to discuss your particular circumstances prior to acting on the information presented.
42:14
[SPEAKER_05]: This podcast is for informational purposes only and should not be considered individual legal, financial, or tax advice.
42:21
[SPEAKER_05]: Make sure to consult the advisor of your choice to advise you on your own circumstances.
42:28
[SPEAKER_05]: Thank you for joining us for this episode of Your State Matters.
42:32
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42:36
[SPEAKER_03]: Whether you are planning your own estate or you're acting as executive for somebody else's heritage trust can help.
42:42
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42:47
[SPEAKER_05]: If you'd like more information about heritage trust, please visit our website at heritagetrustcompany.ca.
43:00
[SPEAKER_03]: This podcast is produced by PawnFather Creative.