The Twelve Virtues of Rationality: Curiosity and Relinquishment in the Protection of Art Collections

Alessio Frateily

Hatched by Alessio Frateily

Oct 12, 2023

5 min read

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The Twelve Virtues of Rationality: Curiosity and Relinquishment in the Protection of Art Collections

"The Twelve Virtues of Rationality" is a thought-provoking piece that emphasizes the importance of curiosity and relinquishment in the pursuit of truth. This concept can also be applied to the world of art collections, where the protection and preservation of valuable artworks require a strategic approach.

When it comes to art collections, a fragmented approach without a clear strategy can lead to a loss of value. Therefore, it is crucial for collectors to consider the management, protection, enhancement, and unity of their collections. Just as the first virtue of rationality is curiosity, a burning itch to know, collectors must have a genuine desire to understand and explore the potential of their artworks.

Curiosity is the driving force behind the quest for knowledge and understanding. It is the catalyst that propels collectors to seek answers and discover new insights. However, curiosity alone is not enough. It must be accompanied by a willingness to relinquish ignorance. This means acknowledging that there is always more to learn and being open to new perspectives and ideas.

In the realm of art collections, the management of these valuable assets plays a significant role. Collectors not only want to maintain the value of their collections but also see them grow. This requires making informed decisions based on the best available information and resources. Two vehicles that are particularly suitable for ensuring the management and conservation of art collections are foundations and trusts.

A foundation, particularly in its philanthropic form regulated by the Third Sector Code, allows for the creation of a heritage aimed at a public utility purpose. This is in line with the pursuit of public interests, such as the promotion of art, culture, and artworks. The creation of a philanthropic foundation is now easier than ever, with simplified requirements and procedures. With a minimum endowment of €30,000 and the necessary legal documentation, a foundation can acquire legal capacity and enjoy various tax benefits associated with the Third Sector.

On the other hand, a trust is an elected instrument for the protection of art collections. It is widely used worldwide to safeguard and preserve the value of both small and large collections, such as those found in renowned institutions like the MOMA in New York. What sets a trust apart from a foundation is its ability to protect assets while still serving a private purpose. This makes it particularly appealing to artists who want to ensure the ongoing appreciation of their work even after their passing.

The duration of a trust can be extended over a long period, during which the assets are shielded from the collector's or artist's estate. The management of the assets is outlined in a trust agreement, providing guidelines for the trustee. This may include provisions for the free use or rental of artworks to art galleries, with any generated income either reinvested in the collection or distributed to the beneficiaries of the trust.

From a tax perspective, choosing to transfer artworks to a trust offers several advantages. Firstly, there are no immediate tax implications, as the assets are not subject to donation or inheritance tax until the termination of the trust, which can span several years or even decades. Additionally, for foreign-held assets, the trust relieves the settlor from the obligation of disclosing them in their personal tax returns, as this responsibility falls on the trust itself.

In terms of direct taxes, the sale of artworks held within a trust is subject to the same provisions as individuals, with a standard tax rate of 24%. Similarly, any capital gains realized by the trust as a non-commercial entity are not subject to taxation. In the case of artworks of recognized historical and artistic interest, there is no inheritance tax at the end of the trust, further enhancing the appeal of this vehicle.

So, when should one choose a trust over a foundation, and vice versa? The flexibility offered by a trust is often favored by major art collectors worldwide. Its ability to protect assets while still allowing for private purposes makes it an attractive option. On the other hand, a foundation, especially in its philanthropic form, aligns with the promotion of public interests and can offer significant tax benefits. Ultimately, the decision should be based on the specific objectives and circumstances of the collector or artist.

In conclusion, the virtues of rationality, curiosity, and relinquishment can be applied to the protection of art collections. By adopting a curious mindset and being open to new ideas, collectors can make informed decisions about the management, preservation, and growth of their collections. Whether through foundations or trusts, it is crucial to choose the right vehicle that aligns with one's objectives and offers the necessary protection and benefits.

Actionable Advice:

  • 1. Cultivate curiosity: Continuously seek knowledge and explore new perspectives in the art world. Attend exhibitions, engage with artists and experts, and stay informed about current trends and developments.
  • 2. Develop a strategic approach: Create a clear plan for the management and preservation of your art collection. Consider the long-term goals and be open to adapt as circumstances change.
  • 3. Seek professional guidance: Consult with experts in the field, such as art advisors, lawyers, and financial planners, who can provide valuable insights and help you navigate the complexities of protecting and enhancing your collection.

By embracing these virtues and following the actionable advice, collectors can ensure the long-term value and enjoyment of their art collections while contributing to the broader world of art and culture.

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