Acquiring artworks, antiques, and other collectibles is a common pastimeof private clients, for reasons that can vary greatly from profit-making tomaintaining cultural ties, or simply as a general reflection of their interests.It is also a pastime that is on the rise: having weathered global financial crisesin recent times, and perhaps anticipating market volatility in the future, manyprivate clients are increasingly looking to invest in "real assets" that areknown to maintain or increase in value in the long term. Art very much fitsthat profile and, with trusts being a favoured vehicle in which to hold suchassets, trustees are more frequently being asked to acquire and manageartworks as part of their trusteeship.
Most commonly, artworks forming part of the assets of a trust comprise awell-established family art collection, with the trust itself having beenestablished to protect and preserve that collection for the enjoyment offuture generations of the family. However, in modern times, trustees maybe required by the terms of the trust deed to do more than simply hold andprotect family artworks: trustees may have duties to actively build an artcollection for the benefit of the beneficiaries of the trust, they may be askedto manage artworks for philanthropic purposes, or they may find themselvesappointed as trustee of a trust, established with the express objective toinvest in an emerging artist in order to fund and promote further works.
From a Cayman Islands perspective, the most effective trust structures usedsolely for holding and actively administering and managing artworks inaccordance with the settlor's objectives are STAR trusts and reserved powerstrusts. The trust deeds for both forms of trust structure can be tailored tooffer the settlor greater involvement in the succession planning process,and to carefully prescribe arrangements for the management of the particularcategories of artworks settled on the trust. Practically speaking, housingartworks in a trust can also allow for a clear and easier administration andmanagement process: provisions can be included to allow for the trustee todelegate tasks to specialist advisors or curators who can make the necessaryarrangements for matters such as transportation, insurance, storage, anddisplay or exhibition of the artworks.
There are a number of important considerations for trustees who are taskedwith administering a trust which has, or is to have, artworks included as part ofits corpus:
While managing artworks as trust assets can seem a daunting task for a trusteemore used to 'run of the mill' assets such as cash and shares, with carefulattention and the assistance of specialist advisors, the risks can be greatlyminimised and the settlor's legacy preserved.
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