Passion assets: art, watches, collections — inventory and governance

Passion assets — artworks, collectible watches, fine wines, prestige vehicles, musical instruments, jewellery — represent a non-negligible share of the wealth of many high-net-worth families. What these assets have in common is that they are illiquid, difficult to value and often poorly integrated into the overall wealth statement. Sound governance requires a rigorous inventory, adequate insurance coverage and advance succession planning.

The inventory: an indispensable prerequisite

The first step in governing passion assets is establishing a complete, documented inventory. This task is often neglected because these assets are acquired at different times and are rarely centralised in a single location.

A wealth inventory of passion assets includes:

• Precise identification of each item (description, artist or maker, date, dimensions, condition)
• Provenance and authenticity documents (certificates, purchase invoices, expert reports)
• Current location (home, warehouse, freeport, loan to a museum)
• Current replacement value, distinct from insurance value and tax value
• Any encumbrances (pledges, liens)

This inventory is a living document that must be updated with each acquisition, disposal or change of location.

Geneva's role and the freeports

Geneva occupies a central position in the global art and collectibles market. Geneva's freeports — warehouses under customs supervision where goods can be stored without immediate payment of customs duties and VAT — are used by many collectors to store artworks.

Since the 2016 reforms, transparency requirements have been tightened: freeport operators must identify their clients and maintain a register of goods. For collectors using this infrastructure, rigorous documentation is essential.

Switzerland has also ratified several international conventions on the illicit traffic in cultural property, and the Federal Act on the International Transfer of Cultural Property (CPTA) imposes verification obligations when importing artworks.

Insurance: appropriate valuation and coverage

Passion assets require specialist insurance, distinct from standard household policies. Key points include:

• Insured value: this must reflect the current replacement value, which may differ significantly from the purchase price for assets whose value has changed.
• Geographic coverage: an artwork travelling for an exhibition or a museum loan must be covered during transport and at its temporary location.
• Exclusions: standard policies often exclude gradual deterioration, mechanical damage or defects inherent to the object.

Periodic expert valuation — every three to five years — is recommended for items of significant value.

Tax treatment of passion assets in Switzerland

Under Swiss tax law, passion assets are subject to wealth tax at their market value. Capital gains realised on their disposal are in principle tax-exempt for private individuals, provided the collection is not managed in a professional manner. If buying and selling activity takes on a commercial scale, it may be reclassified as independent professional income.

Succession: anticipating difficulties

Passion assets are among the most delicate to handle in a succession:

• Illiquidity: heirs may disagree on the division of an indivisible collection.
• Required expertise: the succession valuation of an art collection requires specialist experts.
• Emotional attachment: passion objects often carry affective value that complicates negotiations between heirs.

Precise testamentary provisions — specific bequests of principal items, family pre-emption rights over the collection, designation of an expert for valuation — can prevent many disputes.

Ridger's role

Ridger is not an art expert or an insurance specialist for collections. Its role is to integrate passion assets into the consolidated wealth statement and ensure documentary governance:

• Maintaining an up-to-date inventory in the reporting system
• Coordinating with specialist insurers and art experts appointed by the family
• Integration into succession planning
• Alerting clients to the tax implications of significant acquisitions or disposals

To discuss the place of passion assets in your wealth, we invite you to a confidential meeting.

References

• FOCBS – Freeports
• Fedlex – CPTA
• ESTV – Wealth tax
• Deloitte Switzerland – Family Office
• UBS – Family Office Solutions