There are many hobbies that people enjoy, both before and during retirement, and collecting valuables is one of them. Some of the items that people might collect are cars, art, jewelry, antiques and fine wines. In Florida it may even be your prized collection of vintage surfboards or rare orchids! But in order to truly enjoy this hobby, it’s important that you are organized and protective over your assets. When it comes to caring for your collections, these five steps can help you to better manage and protect your valuables.
Step #1: Simplify & Organize Your Valuables
Depending on how long and how often you’ve focused on building your collection, it’s possible you may have accumulated a significant amount. If you aren’t already, start to organize and document your collection. Gather any relevant paperwork together, as well as how much you paid for the item and its current market value (if available). If it’s been awhile since the item was originally collected, now may be a good time to work with an appraiser to help determine its worth.
Step #2: Insure Your Valuables
When you have a large number of valuables, you’ll want to make sure you’re taking the proper measures to insure them. To do this, you may be asked to provide information including receipts or proof of purchase, authentication verification and images.
Create an inventory and put details about each into the document, as this will help with organization when you work with your insurer. Most homeowners insurance policies will provide only limited protection for collectible items, so check what your insurance covers when covering valuables.1
Step #3: Increase Your Coverage If Necessary
There are two steps you can take when increasing coverage to protect your collectibles.
Raise the limit of the liability: This is the less expensive option of the two, however, the amounts are still limited for individual pieces and overall losses of the items.
Purchase a floater policy: When you do this, you can “schedule” your individual valuables, and while this is more costly, it offers more protection. This covers losses that your homeowner’s insurance will not cover. But, before you can purchase this type of insurance, your valuables must be appraised by a professional.
Step #4: Understand Tax Obligations
In terms of purchasing and collecting valuables, the IRS recognizes a few different status types that can affect tax status and liabilities.
These different IRS statuses include:
- Business Investor
The IRS presumes that all taxpayers are collectors, unless proven otherwise. Work with an experienced tax professional to understand your potential tax obligations.
Step #5: Determine a Succession Plan
In the event of incapacitation or death, how would you like your collectibles to be passed along to others? Will family members inherit them, or would you like your valuables donated to a museum?
These are questions that will need to be addressed, but your financial professional and estate attorney can help develop a plan. There is often emotional attachment to collectibles, especially those that have been in the family for generations. Working with a professional can help determine what you do with your items before you are no longer of sound mind.
Organizing and preparing your collection of valuables now can help keep them protected and properly cared for when an expected event occurs.
Plan now so that you can enjoy your collections without worrying about the future. When it comes to this type of thing, it is advisable to work with a specialized expert in order to maximize your assets and get the most out of your valuables.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.