A Guide to Buying, Holding, and Transferring Collectibles

• It’s important to understand the many variables to consider before you purchase a large toy such as a yacht, car, jet, or other collectibles
• Depending on what you purchase, you may have unique titling, tax, and insurance considerations
• When you’ve had your fun and are ready to pass on your toys, be sure to include specifications in your estate plan

Whether it's for a yacht, aircraft, car collection, or artwork, successful individuals often seek guidance when it comes to financing, owning, and transferring their "toys." This article is intended to be your "assembly guide" to highlight steps to consider when creating a plan for your toys, whatever they may be.

Before you assemble your purchase plan, there are a few initial questions to consider:

While this may seem obvious, planning for the purchase of a yacht requires a different analysis than purchasing an aircraft or a collectible car, for example. Certain state and federal regulatory authorities may be involved, commercial insurance policies and loan underwriting may vary, and tax implications may differ depending on what you are acquiring.

While some may purchase a toy purely as a consumer, others may do so as a collector or as an investor. Which will you be? The answer could inform how your new purchase should be owned and what tax and estate planning strategies should be considered.

Value can be viewed in two ways. There is fair market value—the price a buyer is willing to pay—or sentimental value. Of the two, sentimental or emotional value can be more difficult to quantify but can be equally as important to the individual when considering a new purchase.

As these items often require significant capital outlays, selecting the right structure for your purchase will be critical.

Although an all-cash purchase may avoid incurring debt, that may not be optimal. By using bank financing, you could preserve capital for other purposes, perhaps keeping funds invested in the market.

While bank financing may be advantageous, it is important to understand the current lending landscape, including the rate environment and how that may change over time. An idea of how long you intend to own the toy will also be important to align your financing with your ownership plan. This could inform the structure of your loan, whether fixed or floating rate, repayment schedule, and other financing terms.

In addition to financing costs, you should have a sense of anticipated maintenance expenses. As a general rule, you should budget for annual maintenance of around 10% of the purchase price. Budgeting appropriately for these expenses should avoid adding unnecessary pressure on your financial plan and allow for more years of enjoyment.

This material is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. It is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Note that tax, estate planning, investing, and financial strategies require consideration for suitability of the individual, business, or investor, and there is no assurance that any strategy will be successful.

Wilmington Trust is not authorized to and does not provide legal or tax advice. Our advice and recommendations provided to you are illustrative only and subject to the opinions and advice of your own attorney, tax advisor, or other professional advisor.

The information in this article has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. The opinions, estimates, and projections constitute the judgment of Wilmington Trust and are subject to change without notice.

Note that a few states, including Delaware, have special trust advantages that may not be available under the laws of your state of residence, including asset protection trusts and directed trusts.

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