Planning for clients' collectibles — if they're actually valuable

Financial advisors with clients who have extensive or potentially valuable collections — such as trading cards, coins, stamps, sneakers or stuffed animals — must guide them through an array of estate planning, insurance and behavioral challenges.

While they are much different from works of fine art, which usually carry far higher price tags and the luxury appeal of exclusive gatherings in locales like Paris and Miami, hobby collections raise niche-focused questions that may stump the uninitiated or beg for some correction of investor delusion. 

The planning strategies for collectibles start with the same basic query as for art: Is this a valuable asset? If the client can definitively — and verifiably — answer "yes," then their advisor can help them through how to plan for the financial and emotional process entailed by either selling the collectibles or transferring them to heirs, experts told Financial Planning.

"With any collectible, no matter what it is, the only way you make money is by finding someone who's more excited about it than you are, and that's the challenge when you have these types of items," Craig DuVarney, the founder of Acton, Massachusetts-based Craig DuVarney, CFP and the former owner of a baseball card business, said in an interview. "Eventually they're not rebuying their childhood anymore. They're reselling their childhood all at once."

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DuVarney and other planners point to companies that can assign a grade to the collectibles' condition and resources such as the prices that items have sold for on eBay, Amazon or other online marketplaces — rather than simply looking at their listed prices. 

While clients are not likely to possess a highly valued collectible simply based on statistical probability, hobbyists in, say, trading cards can cite some price tags that would attract anyone's attention. In 2022, the famous "T-206" Honus Wagner card sold for $7.25 million, a 1952 Topps Mickey Mantle changed hands for $12.6 million and YouTube influencer Logan Paul purchased a Pikachu "Illustrator" card for $5.3 million.

Despite those eye-popping prices, collectibles represent "highly illiquid" assets that are "really volatile" based on timing, according to Jack Elder, the senior vice president of advanced markets with Shakopee, Minnesota-based wealth management firm CBS Brokerage. For example, an "Iron Man" comic book could see a rise in value around the time one of the movies hits box offices, according to Elder, who noted that estate planning conferences always have kiosks for "probably more than one company that provides valuations for collectibles." 

To address the illiquid, volatile nature of collectible assets and the possible estate taxes coming due nine months after their owner's death, life insurance that is "liquid at the time you need it" could provide their beneficiaries with a wider window to consider their options rather than finding themselves "in a situation where you're selling them at an inopportune time," Elder said.

"The family may still want to and choose to sell whatever collectibles they have, but at least they're not in a fire-sale situation," he said. "They're not going to be emotionally attached to their life insurance proceeds, but they might be emotionally attached to their Jackie Robinson card."

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As a retired former player with the New York Yankees and the Oakland A's, planner Kevin Thompson of Fort Worth, Texas-based 9i Capital Group receives three or four cards with requests for his autograph from collectors each month, he said. The topic of planning for collectibles reminded Thompson of a baseball card collector who lost his entire collection in a house fire — which speaks to the use of safety lockboxes or potential insurance tied to the asset that could at least provide compensation in the event of catastrophe. 

Since the value of collectibles revolves so much around "what someone's willing to pay for it," Thompson said he recommends that hobbyists give their heirs a detailed explanation of their assets and designate a specific beneficiary for the items in their last will and testament.

"I would say take care of that for them," he said. "You're giving it to a person who has no idea what this actually is."

DuVarney agreed that "getting as much knowledge from that parent as possible" about any collection they have is important for clients, since "you don't want to lose that knowledge when the person has passed away," he said. The clients should also take into account the time of taking on the project themselves when liquidating the assets or the expense of hiring an outside specialty company. 

Marketing, packaging, shipping and, yes, insuring against any potential damage in the process of selling an item can extract a toll in dollars and hours, DuVarney said. Dealing with the collection may not rank with the myriad other issues that come up after the death of a loved one.

Sara Stathas/Bloomberg News

One of DuVarney's clients recently sold their late father's collection of metal toys through auctions and antique dealers, he noted. DuVarney's father maintains a collection of radios from the 1940s that DuVarney said he's not attached to "whatsoever," and the planner and his wife have "come to the realization that our kids don't care about our stuff," he said. Some market research could serve as an aide to advisors in discussing collectibles with clients.

"The emotional connection is what drives the market, and the next generation doesn't many times have that same connection," DuVarney said. "You have people who are not realistic about the value of their asset. And that's where searching eBay history becomes valuable. If you're not seeing a lot of items sold, or they're not selling for the value that you thought they were worth, how do you argue with that? … You can ask anybody to pay whatever you want for it. The question is whether anybody's going to buy. The free market is going to speak."

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Whether the clients collect trading cards, cars, jewelry or any other item, advisors can assist them in considering their future course of action. If there is a scenario in which one beneficiary does express particular interest in keeping the collection in the family, the insurance might provide a way to "equalize the wealth" passed down by the estate at death, Elder noted.

Collectibles are a "small market" that is "growing for sure" but doesn't much resemble stocks in the S&P 500 or real estate assets, he said.

"It's still a niche market," Elder said. "It's still highly volatile, and it's not a great way to transfer wealth. So you've got to have a source of liquidity around it."