Estates & Attorneys: OTE at Heckerling 2015

OTE’s first year at the Heckerling Institute on Estate Planning was full of talk of Art Leasing and Fractional Discounting. That we offered these services seemed to surprise attendees who tended to be more familiar with business valuation.

It was probably the first time that any of the attorneys or financial planners discovered that an art appraisal firm was capable of complex valuations outside of the usual insurance, resale or donation practice.

One conference highlight for OTE representatives was the chance to speak with some of the attorneys involved in the recent Elkins case. When the Fifth Circuit awarded the Elkins family a $14.4 million estate tax refund and allowed for the use of fractional interest discounts for artworks, it was a great thing for collectors and OTE.  This was exciting for us as, more than twenty years ago, OTE was the first firm to successfully win a substantial discount for our client in an estate that contained works of art.

This was also the first time the OTE unveiled our new brand image and we were proud to have a clean new aesthetic to bring with us to Heckerling.

We were extremely happy with the positive response we received from the people we met at the conference and we are excited about participating again in 2016. See you there!

Piano Restoration: A Sound Investment

When you own something as melodiously beautiful and expensive as a Steinway piano there are factors to be aware of in the event of water damage. From a pipe leak to hurricane Sandy, OTE appraisers have found that water and moisture are among the most common and harmful types of damage to pianos.  Piano cases are made of wood and are particularly susceptible but then so are most of the parts:  the felts, keys, soundboard, pin-block, tuning pins and strings, etc. Prolonged exposure to water can even lead to corrosion and rust in the metal components.

There is, however, a solution. When Alanna Butera, an OTE specialist appraiser, visited the original Steinway factory in Queens, she saw firsthand how Steinway pianos are built and restored.   

Steinway Grand Piano,   Photo: © Copyright Steinway & Sons via Wikimedia Commons

Steinway & Sons, one of America’s leading piano manufactures, was founded in 1853 by German immigrant Henry Engelhard Steinway who began as a master cabinet maker.  By 1900 the factory had moved to Long Island City in Queens which is still in operation today and where pianos are built and repairs take place.

A Steinway Grand Piano can take over a year to build through handcrafting. Not only does a Steinway piano produce beautiful music, it is an excellent investment.   According to Reuters: “A 10 year old Steinway in good condition, usually sells for about 75 percent of the current retail price, which goes up about 4 percent each year;” that’s a lot better than your car. Steinway even issues a five year warranty on their repaired pianos, the same warranty they give to new pianos.

From an appraisal standpoint, a damaged Steinway piano repaired by Steinway can be valued at 85% of the current retail price of a new one. But restoration isn’t cheap. In our experience the cost for a restoration caused by water damage is approximately $30,000 to $40,000 for a single grand piano.

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Close up of a piano in progress at the Steinway factory

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A peak into Steinway's factory in Queens

On the positive side, what our appraiser observed at the Steinway factory is that you can be certain time and care is taken in restoration efforts.  When Steinway restores pianos they keep the cast iron block and original case, barring any extensive damage to either. They then refinish, re-guild and replace all the hardware with Steinway parts, entirely by hand. Steinway still continues to provide hand rubbed finishes. To maintain the value of a Steinway piano, restoration and replacements should be done solely by Steinway, using only their authentic parts. Steinway restorations come with a certificate, so if you are thinking of selling make sure to hold onto it. 

Steinway calls their pianos a “sound investment” and we happen to agree.

Gold, Fine China, and the Truth About Tarnishing

Have you ever wondered what the word “gilding” means? It’s an ultra-sensitive and very beautiful decorative treatment that turns a surface into gold without actually creating something made of gold.

Gilding generally refers to the liquid gold applied through paint or other techniques to porcelain and other ceramics. The good news is that it looks lustrous and lovely when first applied.  The bad news is that it shows wear when used frequently and is sensitive to its environment. In fact, after working with a recent client an O’Toole-Ewald appraiser found that it doesn't always require heavy usage to cause distress to gilding and that the saying that gold never tarnishes can be disproven.

Porcelain saucer with gilding

About 20 years ago the client bought a beautiful bone china set decorated with extensive and intricate gilding. It had been placed in storage and when she recently retrieved it from the box in which it had been resting for two decades she found that the 24 carat gilding had taken on a red/black discoloration. Tarnishing film often looks red or black in appearance depending on what base metal is used, copper or silver respectively. However, it is extremely rare for high carats of gold to tarnish, so this case was at first a bit of a mystery.

While pure gold is not susceptible to tarnishing, almost all gold is mixed with some small percentage of other alloys, which can be vulnerable to tarnishing would only seen below 14 carats. In some cases 14 and 18 carats or even occasionally higher carats can tarnish, but it is extremely rare in gold as high as 24 carats.

If the base metals, in particular copper or silver, are exposed to corrosive agents, especially sulfur and oxygen compounds, tarnishing is entirely possible. Moisture, perspiration, perfumes, how you wash it, the water in which it is washed and even some foodstuffs can be responsible for the corrosion of gilding. But because the china in this case had never been used, it was unlikely that any of these were the culprits.

Through expertise, persistence and considerable in-depth research, OTE was able to determine the prolonged exposure to the organic sulfur containing compounds in the storage bags, in combination to the oxygen and sulfur in the atmosphere, had caused the gilding to discolor. The damage was determined to be inherent vice resulting from the chemical reaction of the gilding in its storage containers.

 This case is a rarity. In India and the Middle East, especially, there have been more incidents of the tarnishing of higher carat gold, which appears to be a problem more specifically linked to the region. In Europe and North America tarnishing in higher carats of gold is much more unusual. In the past 30 years, there has been only one other instance, filed with the manufacturer of this china, of red and copper discoloration occurring on the gilding. Without the persistent research efforts of OTE appraisers combined with scientific sleuthing, this case may not have been solved.

Why It Is Important To Insure Your Art

In New York City Hurricane Sandy was a wake-up call for many art enthusiasts to insure their art but there is still a lot of uninsured or underinsured art out there. According to Kathryn Tully in 2012 article for Forbes “the premium value of insured art globally was somewhere between $500 million and $1 billion. If those estimates are right, there’s a lot of uninsured art out there.”

Many people have collections of art, or perhaps just one valuable piece but rarely know exactly what they are worth.  It is surprisingly easy for a painting, sculpture or even a more experimental piece of art to be damaged due to some unforeseen event, which is why it is important to be aware of its value. This summer alone there has been a significant amount of flooding in the tri-state area, and this has resulted in thousands of dollars in damages. 

To protect your investment obtaining an appraisal of the retail replacement value means that you will be sure you have the right insurance coverage. The majority of standard home-owners insurance policies have limitations in regards to what can be reimbursed in the event of damage or loss to art and antiques.  So it is a good idea to look closely at your policy if you are not exactly sure what your insurance covers. 

If you are a serious collector you will probably need a more specialized policy tailored specifically to your collection. Insurance companies that are particularly qualified for this are: AXA, Chubb, and AIG.  However, it is still important to be aware of your art’s value as the years progress.

The art market is continually fluctuating which is why it is a good idea to update these appraisals every couple of years. The value of your art will probably change with the shifting market. Unlike other luxury goods, such as a Chanel handbag or a BMW, a work of art is unique and difficult to replace.  This is why using an appraiser who is USPAP (Uniform Standards of Professional Appraisal Practice) certified and a member of the ASA, RICS, or ISA, is essential.  An appraisal by a qualified appraiser will be fully researched and legally sound. And always make certain, no matter who the appraiser is, that he or she has the right experience to evaluate the specific piece you own.

Damage/Loss/Fraud Appraisals and How They Grew

A Bitter Beginning

It was enough years ago so that I don’t want to even mention the date, but I was an intern in the office of the 80-year-old dean of fine art appraisers, James St. Lawrence O’Toole. He was at the stage of life in which he loved to visit with clients while his protégé  went about examining, measuring and, in our case at least, photographing the objects of our appraisals.

I’d only been out on a few jobs with my mentor, but the first of them had been the appraisal of everything in a small city museum, so I had a bit more confidence than perhaps I should have had after successfully researching colonial portraits and Chippendale chairs. I saw no trouble when we were called in to prepare a report for an English couple just come to the States where they’d found several of their antiques had been severely damaged in the crossing.

After turning in the appraisal to my boss, who checked it favorably, we were certain the clients would be pleased with our report. They were not. Politely, but quite firmly we were informed that the report did them no good because it was based on insurance replacement value only, but no mention of the damage or what they were to do about it. We were embarrassed and bewildered. We had failed, but neither understood how and what we were to do to remedy it.

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The above is an excerpt from an article by Elin Lake-Ewald, Ph.D, ASA, RICS.

To read the complete article please click here:

Damage-Loss-Fraud Appraisals and How They Grew

Damage/Loss Appraisals: Part II - From Average to Aberrational

The “silly question” is sometimes the first step towards understanding and solving a problem in the field of damage/loss. Never be afraid to ask, never apologize for asking. Let them think you’re naïve if it results in getting the information you seek. A late nineteenth century table has been exposed to water damage. The company responsible for the sprinklers that caused the damage agrees to only pay for refinishing the top, the only part affected by the water.

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The above is an excerpt from an article by Elin Lake-Ewald, Ph.D, ASA, RICS, published in the ASA Personal Property Journal, Autumn 2006.

To read the complete article please click here:

PPJ Vol 16 (3) 2006 Fall DAMAGE LOSS APPRAISALS - PART II - FROM AVERAGE TO ABERRATIONAL

What’s the Matter with Mold? Claims and Counterclaims

 When a New York Supreme Court judge issued an important decision in September 2006 regarding mold claims, I realized that I had over recent years unwittingly become a mold junkie. My scattered file drawers coughed up dozens of articles and multiple clippings on the subject, a collection begun about six or seven years ago when this office was hit with a flurry of assignments to determine losses relating to mold damage.  These were invariably coupled with health claims cited as being caused by the same environmental problem.

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The above is an excerpt from an article by Elin Lake-Ewald, Ph.D, ASA, RICS, published in the ASA Personal Property Journal, Winter 2006-2007.

To read the complete article please click here:

PPJ Vol 16 (4) Winter 2006 2007 What's the Matter with Mold - Claims and Counterclaims

How to Strategize Loss When Art is Damaged—A Very Tricky Business

A Picasso print is stolen from a collector's home. A nineteenth century painting by Monet suffers a gash when being unloaded from its wooden crate. During a coast-to-coast trip, an antique George III table falls on a fragile Giacometti sculpture inside a moving company van. The thin bronze sculpture snaps in two and one of the table legs breaks at the knee. An Andy Warhol silkscreen on canvas portrait is rained on for days when a leak in the apartment ceiling above it causes mischief during the owners' absence. What usually happens next is that a representative from the owners' insurance company arrives to assess damages. This person is usually not informed about paintings or antiques and readily admits this because he or she will be calling in a damage/loss specialist, a professional with the background and experience to assess and determine the loss.

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The above is an excerpt from an article by Elin Lake-Ewald, Ph.D, ASA, RICS, published in Valuation Strategies (WG&L), May/June 2005.

To read the complete article please click here:

HOW TO STRATEGIZE LOSS WHEN ART IS DAMAGED- A VERY TRICKY BUSINESS Valuation Strategies (WG-L) May-Jun 2005