Assembly Required: A Guide to Buying, Holding, and Transferring “Toys”

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.

Step 1: Make sure all the pieces are there

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

What are you acquiring? 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.

What are your goals? 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.

What is the toy’s “value?” 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.

Step 2: Determine the best way to pay for the toy

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.

Download the full article to continue reading the important steps involved in obtaining your new toy.

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Please see important disclosures at the end of the article.