Life is short. Art is long.
That is the long and the short of it that guides and drives Michael Mendelsohn in the art succession planning business he founded and heads and this year expanded in Westchester County.
Mendelsohn and his wife, Gael, are long-time collectors of American folk art. Their singularly eclectic collection, which includes a floor-to-ceiling kitchen assemblage of lunch boxes and framed shelves of Pez candy dispensers, sculptures, paintings, photos, carved wooden figures, musical instruments and furniture, animates the rooms of their town house on the gated grounds of the St. Andrew”™s Golf Club in Hastings-on-Hudson. The collection has earned the couple a place among the top 100 collectors in America by Art & Antiques magazine. In the three-tiered reflexive system of art grading adopted by Mendelsohn ”“ Oh, Oh My and Oh My God ”“ their pieces most often receive the top two grades from folk art experts. Â
“About 20 years ago I had one of those aha moments in the middle of the night,” Mendelsohn said, “when I said, so many of our assets are in this art collection.” He began thinking about what would become of those cherished and valuable assets after the deaths of the couple, who have three children.
A financial adviser, Mendelsohn had never heard colleagues in estate planning talk about art works. Soliciting their advice, he heard a recommendation that has been standard practice: sell off the art at a Sotheby”™s or Christie”™s auction. Proceeds from those art auction sales often are used to pay estate taxes. Â
“Why do art collections have to be sold to pay estate taxes?” Mendelsohn asked. “That means kids will lose about 70 to 80 percent of the value” of the collection. “And any chance of any art legacy by the parents has been lost.”
Seeing a void in art succession planning, “I realized something had to be done, a., for the Mendelsohn collection and b., for the world.” Â
That aha moment led Mendelsohn to found Briddge Art Strategies Ltd., a fee-based service designed as “one-stop planning for collectors, their heirs, advisers and the charities they support.” Â That planning serves as a bridge “between kids”™ desire for cash and collectors”™ desire to create a legacy” with the art that survives them, Mendelsohn said.
“My mission is to turn art holdings into philanthropic capital,” he said.        Â
The extra ”˜d”™ in the company”™s name represents “the denial of the collectors and advisers to talk about this asset,” he said. “Most collectors don”™t see that it”™s an asset. It”™s a love.” And most advisers have failed to capitalize on art assets as a source of added business.
For the estate planning team, “It increases their bottom line,” Mendelsohn said. “From a business perspective, knowing what your clients own will create more business.” Â Â Â Â Â Â
The scale of that business opportunity is suggested by a Boston College study cited by Mendelsohn, which found that as much as $76 billion in art holdings on average may be transferred between generations each year. And the value of privately owned art in the United States is estimated at $4 trillion to $6 trillion, he said.
Mendelsohn in January took on business partners in his planning services with the opening of The Briddge Group L.L.C. They include Peter H. Falk, a Connecticut-based art reference publisher and art adviser and appraiser; David Frohman, a Florida-based financial adviser to high net-worth individuals and their families; and Daniel Waintrup, a philanthropy expert and art collector in Boston. The Briddge companies recently moved their five-employee office to 800 Westchester Ave. in Rye Brook. The partners plan to open offices in Boston, Palm Beach, Los Angeles and possibly Chicago in the next six to 18 months.
Working with a team that typically includes attorneys, financial planners, appraisers, collectors and heirs, “We kind of are like the quarterback to get these things flowing,” said The Briddge Group president.
“Estate planning very rarely includes tangible personal property,” said Mendelsohn, whose guide book to maximizing estate planning strategies for collectors is titled, “Life Is Short, Art Is Long.” “It”™s usually under ”˜other.”™” Planners should include a category for art holdings in estate questionnaires, he said. “If they don”™t ask, they don”™t know.”
Among alternatives to the art auction route, Mendelsohn said a collector can give the bottom third of the collection ”“ the “ohs” ”“ to a nonprofit organization and reduce taxable income with the charitable donation. The tax savings can be used to supplement living expenses or to build up one”™s estate for heirs. With that strategy, “Charity wins; collector wins,” he said, while accountants, financial planners and lawyers all get work.
Mendelsohn said collectors can avoid the 28 percent capital gains tax on the sale of tangible personal property by putting art works in a charitable remainder trust, for which they earn an income tax deduction. The entire art asset must be designated to a charity and will be sold by the trust after the collector”™s death. The disadvantage, Mendelsohn said, is that “the children are disinherited from the sale of that piece,” though they will avoid estate taxes.
If a collector wants his children to have the collection, “We have Family Art Day, where the children are now presented the full story of the collection, including what”™s perhaps most important to them ”“ what it”™s worth under current art conditions. You have to develop plans how to get it to the right organization, when to get it to them.” Heirs could save on taxes by turning some of the collection into an endowment fund for a nonprofit group such as the Westchester Arts Council, he said.       Â
Mendelsohn also advocates what he calls a “philanthropic museum without walls, a family art lending library” that allows collections to be shown in museums and other public venues while the art remains in a private family foundation. That creates a lasting legacy for a collector in place of “a soft-covered sale book from Sotheby”™s.”
The Mendelsohn collection might be combined with two other folk art collections to create such a museum without walls. The couple also is considering distributing their pieces among a few museums that include the Smithsonian Institution, American Folk Art Museum in New York and Philadelphia Folk Art Museum.
 “Our Pez collection should be, and it will be, in a children”™s hospital some day. The same with our lunch boxes ”“ although I may give it to the Ronald McDonald House and let them tour it,” Mendelsohn said.
 “A lot of people in their fifties and sixties really need to take a look at what they have,” he said. “The worst thing a collector can do is nothing. The most treacherous thing the adviser can do is aiding and abetting that.”
In Mendelsohn”™s view, estate attorneys who cling to “the conventional wisdom” and ship valuable art collections to the auction houses to be sold are guilty of malpractice. Increasingly they are being held accountable. The firm of a prominent art law attorney in Chicago with whom Mendelsohn has worked, Bryan Cave L.L.P., has created an art litigation division.
“The next prairie of lawsuits will be angry heirs versus planners,” Mendelsohn predicted. “That”™s happening and it”™s going to happen more and more because art holdings are more prominent with wealthy people and they”™re worth more ”“ especially with what you have happening in the real estate market, with people getting clobbered.”
“The adviser should never have to tell the heirs, ”˜I promise to do a better job planning your art holdings the next time they die.”™”
