The Wine Collector’s Estate: Planning for a Wine Cellar

A good estate plan is tailored to fit your needs; a better estate plan also accommodates your passions.  Whether those passions are for wine, art or even stamps, you should think beyond mere insurance, which protects you when the collection is gone but does little protect the collection when you are gone.  Today’s post focuses on the nuances of estate planning for one of the more popular collections: wine.

Just as the estate plans of gun collectors and pet lovers make special considerations, it’s a good idea for wine collectors to do the same.  Because a wine cellar’s contents are especially valuable both sentimentally and financially, the issue of responsible inheritance is particularly important.

Is a potential heir passionate or knowledgeable about wine?  Do you trust them to preserve or augment your collection, or will they simply auction it off to the highest bidder?  How much would they pay in inheritance tax on the wine collection?  Where and how will the wine be stored and transported, how much will those arrangements cost, and how will they be paid for?  

Admittedly, these are not issues for most estates.  For most estates, “wine collection” merely exaggerates a few bottles of merlot and chardonnay stashed away for special occasions, maybe even an emergency bottle of champagne.  My fledgling wine cellar, for example, spans the entire length of one cabinet shelf the width of my refrigerator.  Nevertheless, for some estates wine collections are a serious asset to consider.

I have friends with cellars in excess of 1,000 bottles.  They typically buy bottles “young” and then lay them down to age and serve when appropriate.  (Yes, their house is an “A-list” invitation at holiday time.)

So what do they do with the wine if something takes both of them before the last cork is popped? A Wine Trust? These oenophiles have wine cellars that are going to have to be moved. But by whom? and how?

There are a number of experts out there to help you.   Marc Lazar, at Cellar Advisors, gave some great advice and says experts can be found in any metropolitan area. But he did present some noteworthy caveats.

“Make sure that the mover is insured.  Be sure that the mover has the appropriate transportation  and the right packaging.  You want to know that if the wine moves in the summer that the trucks are refrigerated.  Conversely, if it moves in winter you want to be sure that it doesn’t sit out in the cold and get ruined that way,” Marc added.

Marc recommended special care be taken when the bottles are initially packed for the move.   Hiring professional movers to be gentle with the containers won’t matter if you the wine has been improperly padded or merely shoved into cardboard boxes.

“People get desperate to try to finish.  They aren’t careful at the end.  The wine rattles around scratching up labels and ruining them,” Marc added. “Some of the bottles break, ruining more labels.”  That’s a potentially devastating loss to a wine investment for simply choosing U-Haul over a professional transport service.  How much of a loss?

Well, one friend of mine with 5,000 bottles paid an average of $15 a bottle to acquire each.  That’s a $75,000 investment over 10 years.  Those wines have now increased to an average of $30 a bottle in replacement value.  She and her husband moved the complete cellar across the Atlantic Ocean.  The cost of her making a subsidized move was $10 a bottle.  I’ll leave the math to you.

So what if that kind of move had to be made after the owner’s death?  What if someone had too much to drink much this holiday season, got behind the wheel of a car, and turned that wine-loving couple into an accident statistic?

Well, then a personal property appraiser would inspect the wine cellar and come up with a value (for a 3,000 bottle collection) of roughly $150,000 in personal property, about $2 a bottle to move it 1,000 miles and about $750 to insure the trip.  According to Marc’s formula, that’s roughly $10,000 that would need be covered by the estate, once the appraiser presents his bill.

There’s an old joke out of Washington: “A million here, a million there, and pretty soon you’ve got a real number.”  For someone’s estate, wine-rich or not, this kind of expense quickly becomes a real number.

Could you create a Wine Trust?  Sure.  Would you want to?  Probably not.  If (1) the cellar is somewhere where it could be maintained, (2) you set aside funds in the trust for maintenance and (3) you had the proper trustees, it might work.

But here’s the rub: Every time a beneficiary consumed any they would have to pay tax on an appraised bottle to determine how much capital gains the bottle incurred. Who needs that hassle?

Instead, just be sure you allocate the necessary funds to take care of the wine cellar through your existing estate plan documents, unless you don’t mind it going to auction.

Marc had an important final tip: Give the heir a heads up so they can clear a few thousand square feet before the movers arrive.

“We have occasionally dealt with people that, for one reason or other, didn’t want to tell their family that they had a wine locker or a wine order scheduled for delivery.  Then the wine showed up.  You want to tell someone what you have done.”

It is great advice and it is called PLANNING.  You have to plan for your passions, whether they’re small collectibles or big toys.  But it isn’t Christmas yet.  We’ll talk about the big toys next week.

Until then, good luck and good hunting.

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The Fisher Law Office is renowned for its experience in estate planning, probate administration, asset protection, and business development. Annapolis attorney Randall D. Fisher has practiced for over 20 years, maintains the highest peer review rating for ethics (AV Preeminent) by Martindale-Hubbell, and is a sucker for long walks on the fairways.

Find out how to reach Randy via TheFisherLawOffice.com or find him at Facebook.com/FisherLawOffice, on Twitter @thefisherlawoffice, or at LinkedIn.com/in/FisherLawOffice.

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12 Responses to The Wine Collector’s Estate: Planning for a Wine Cellar

  1. Stephen Brickley says:

    Wine owners or executor/trustee/beneficiary can inventory the collection using online services like Cellartracker. Although not an appraisal, the values are a starting point for insurance or estate value and organizing the inventory. Collectible gain and loss information can be maintained in the database also. The service is free with a suggestion of a donation (I have no affiliation. Just a happy user).

  2. estate law says:

    Wow – I had no idea that there were special considerations for wine collections! Thanks for the information – I’ll know who to refer clients too!

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