Protecting Your Wine Collection
If you buy wine as an investment, be aware that a homeowners' policy is not adequate for wine collection coverage. Most homeowners' policies specifically exclude coverage for perishables and fragile goods, such as wine.
In fact, according to Robb Frees, a licensed Pennsylvania property casualty insurance agent, "Wine collections are excluded under homeowners' policies and must be scheduled on a separate policy."
He also advises his high end insurance clients to consider an agreed upon insurance value and to keep records of the collection purchases, sales, and consumption to avoid insurance disputes in the event of a loss.
Finally, according to Frees, "Setting the deductible is one of the best ways to manage the cost of insurance, to keep it reasonable, but to have a coverage directly coordinated with your risk aversion and balanced with the cost of coverage."
Wine market experts confirm long term value. Thomas Jenkins, brokering manager at Justerini & Brooks, one of London's oldest wine merchants, believes that growing global demand and a fall in production by some leading chateaux should help maintain prices.
Wine value is transparent. There is a high level of transparency in the market price for investment-grade wine due to the accessibility of retail and auction prices. Web sites such as vinfolio.com and cellartracker.com allow collectors to check the retail value of their wine. In addition, major wine auction houses such as Zachy's, Acker Merrall & Condit and Hart Davis Hart release their results. Access to information makes it easier for collectors to know and track the value of their collections.
New buyers are entering the market. Lower prices have encouraged new buyers to invest in wine.
Ideal Storage conditions include: Stable temperatures of 50-60°F. Stable humidity, preferably between 50-80%.
Odor and Vibration-free environment (do not store in a garage or laundry room).
Proper security: locks, key codes
Thanks to Doug MacGray ([email protected]) for allowing us to republish his newsletter article and the information above.
Here are a few more pointers from my perspective:
Check with a specialty lines or high end property casualty agent to see if your collection can be insured under a rider to your homeowner's policy or under a separate policy for such collections and for limited risks.
When, if ever, should a collection be owned by an entity such as an LLC rather than as personal property? (Only when the ownership and sale is for investment purposes and the wine is no longer for personal use. That would be sad.)
Make sure that your collection is properly mentioned in your estate planning documents. For example, should it be the subject of an informal memorandum or should it be specifically mentioned in your will or trust?
Should your wine collection be sold?
If it is to be sold, who should the executor consult, and to whom would the proceeds go to?
If your wine collection is being divided are the recipients able to afford to properly store and deal with the collection?
Should you advise them of dealers and where to get expert advice and information about sales or retention of the collection?
For now, enjoy your wine. But, if your collection has become a major asset, it should be treated like one and some planning might protect it for you and as a legacy to those who matter.
For an appointment with an advisor experienced in these matters or to update your estate planning documents to handle your current assets and those you might aquire in the future, please call our office at (610) 933-8069.
