Much ink has been spilled discussing asset allocation in an investment portfolio or asset class performance in the economy. Even tangible assets like land or gold get the spotlight now and then. We tend to pay less attention, however, to tangible assets without an obvious market value.
But whether you’re talking about protecting current wealth or estate planning, your assets extend far beyond numbers on a spreadsheet. To this end, understanding their valuation and protection plays a crucial role in sound financial decision-making.
Tangible assets may best be understood as concrete things you can see and touch. Some categories easily enter conversations about asset valuation and investing. These discussions swirl around long-term value and liquidity. In many portfolios, they serve as an excellent source of diversification.
But these assets are not the only types of tangible investments you may have made. Perhaps you have heirloom family jewelry passed down from generation to generation. You might have sunk years into building up the world’s best comic book collection. Perhaps you’ve carefully cultivated a specialty wine collection. All of these offer value beyond sentiment, and that should be part of your calculations.
Intangible assets exist, too. These items present value that can’t necessarily be seen, such as secret recipes or business plans. Think of these items as intellectual property that can contribute towards your wealth, which, if stolen, could give others some sort of advantage.
We frequently discuss sentimental assets in the context of family gifting or estate planning. That might be a good start, but it certainly falls short of prudent guidance. If your assets hold any sort of value for you now, you should start treating them like everything else you value now. Here’s how to get started.
Insuring your home or other real estate investments seems like a given to most. Sentimental assets like jewelry, however, deserve that protection as well. Your homeowner’s policy will only cover up to a certain amount of potential losses. If you have more expensive pieces, it would behoove you to add an endorsement to your policy specifically for those items.
In the case of your unlikely and untimely death, you’ll want to list out your assets, “with a detailed description of each item and its fair market value.” This includes listing intangible assets as well as your valuables and collections that are special to you, such as comic books, heirlooms, and so on.
This process will require that you have your collections formally appraised. This is good practice in general, as having items appraised regularly keeps counterfeiting at bay.
If a tree falls in the forest and no one hears it, does it make a sound? Well, ask anyone who has tried to prove the existence or value of a sentimental asset too late, and they’ll tell you exactly what it sounds like to scream into a similar abyss. The best way to protect the assets you love is to make sure you have documentation to prove their value.
The documentation process for sentimental assets might include taking photos or videos of your items to record the condition they were in at a certain point in time. Then you must decide exactly how to store these documents. This could include a bank in a safe deposit box or at home.
The FDIC recommends carefully planning what to put in your safe deposit box. You won’t want to include anything you might need at a moment’s notice or if the bank is closed. Home safes are a good option for things like passports and birth certificates, for instance. However, the FDIC also states that “no safe deposit box or home safe is completely protected from theft, fire, flood or other loss or damage.” As such, vulnerable items should likely be protected from the elements in fireproof and waterproof containers.
It’s common sense that once you put your money toward any conventional tangible asset, you’re going to take good care of those items. You’ll monitor or cultivate the land you own. You have to keep up with repairs on your home or other structures you’ve acquired.
In other cases, you might not view protective measures as a form of protecting intangible assets. Those treasured comics? No chance they aren’t carefully stored using best practices. Rare coins, likewise, may be displayed by proud collectors in protective plexiglass. You might protect your antiques in climate-controlled environments.
Some types of sentimental assets require similar considerations… with a catch. When it comes to fine wine, for instance, it’s all about temperature. Storing wine between 45 and 65 degrees is best. But unlike most climate-controlled storage methods, humidity must be maintained. According to Cellaraiders:
Without [humidity], your corks could dry out, and air will get into the bottle, ruining your wine. On the other hand, you don’t want to store your wine in an extremely damp location, as it can promote mold.” Ideally, your wine should be stored at 70% humidity, but if that’s not possible, consider a professional and insured wine storage facility.
For things like gold or jewelry, determining the best storage method might not even be that straightforward due to misconceptions. Storing gold, for instance, might not require specialty sealing. Storing it in a safe at home, however, is probably wiser than stashing it under the bed. This particularly holds true if your home insurance covers a loss.
Though using a bank safe deposit box might seem safer still, the choice may present some often overlooked consequences. As the U.S. Money Reserve points out:
The bank doesn’t insure precious metals that are stored in a safe deposit box. That’s up to you. Purchasing insurance on your own can be costly, and that could minimize the financial strength of these assets. Plus, it can be hard to find an insurer willing to cover precious metals that are being kept at a bank. Oh, and don’t forget the expense of renting the safe deposit box.
All told, different sentimental assets require special considerations. Taking the time to thoughtfully address potential concerns could save you money today and later down the road.
Grandma’s broach, your special edition Batman figure, or the old painting you acquired at an estate sale might not be the first thing that comes to mind when you hear the term “asset.” Perhaps they should. With proper planning and protection, their value may extend further than you ever imagined.
Sentimental or not, asset protection is tricky business. This is especially true in a world where you’re looking toward the future, whether for yourself or your business. Fortunately, our on-demand Estate Planning & Asset Protection in an Hour webinar offers you an excellent crash course. You’ll learn:
For more information about our other on-demand webinar series, click here.
This is an updated version of an article from 2020. ©2023. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
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