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Helping Clients with Inherited Gemstones and Jewelry

Gem dealers are often their clients' most trusted advisers on gem matters. Learn how to help your clients with inherited gemstones and jewelry.

12 Minute Read

Gem dealers are often the most trusted advisers on gemstone matters for their clients. In this article, you'll learn how to help your clients and their families handle an inherited gemstone collection or investment.
inherited gemstones and jewelry collections
Gemstone collection. Photo © Joel E. Arem, PhD, FGA. Used with permission.

When Your Client's Gem Collection Passes to the Heirs

Antiques Roadshow has long lines of people bringing their art, jewelry, furnishings, and other collectibles for appraisals. The excitement of someone realizing that he or she has inherited an item worth tens, if not hundreds, of thousands of dollars, as well as the agony of watching someone's face crumble after being told a treasured heirloom is junk, are what make the show so interesting to watch.

Most often, you're not watching the people who purchased these items but, rather, those who've inherited them.

Your clients' families experience the same emotions with inherited gemstones and jewelry. They're thrilled but also agonized. They hope the inheritance is worth a fortune but fear it's worthless. Consequently, they don't know what to do next. Often, the family will turn to you for guidance, since you served as the trusted adviser of the collector.

gold, emerald, and diamond ring
An 18kt yellow gold ring, set with one pear-shaped emerald and 12 diamonds. Photo by Mark Somma. Licensed under CC By 2.0.

Inherited Treasures

The Erskine Company specializes in representing collectors and their families. Thus, we've frequently had clients referred to us by their trusted advisers in similar situations. One such client, referred to us by an antiques dealer, had inherited his uncle's Americana collection. This included many fine pieces of furniture. After a proper inventory, we discovered the most valuable piece wasn't the furniture, so highly appraised in the estate. Rather, it proved to be a greenish pot that had always sat on top of the family refrigerator. The client's pot sold for more than twice the valuation of the rest of the collection. We were able to defer income taxes through a like-kind exchange through the antiques dealer.

In another situation, a coin dealer sent us his clients who had inherited their father's coin collection. From this vast collection, only eleven coins exceeded their face or metallic value. However, those eleven were worth many times the value of the entire rest of the collection.

Your clients and, eventually, their families will find that inherited gemstones or other treasures may suddenly represent a significant fraction of the family's net worth. Moreover, this is increasingly likely.

A recent Barclays Wealth Insight report showed treasure-assets becoming a major percentage of mid-tier clients' wealth. This reaches up to 10% in the United States and 20% globally.

Three Steps to Support Your Clients and Their Families

As a gem dealer, you focus on providing the bespoken services to your clients in this niche, along with all the regulatory and specialized knowledge that implies. You provide direct advice on specific gems and manage outside expertise connections to locate buyers and sellers of desired gems. You bring your knowledge to bear on your client's gem collection.

For this service and loyalty, you've earned the respect and loyalty of your clients and, after them, their families.

Your clients' greatest risk and concern is that their families won't know you. As a result, they won't realize the true value of the collectibles your clients now own. Oftentimes, the family may sell the inherited gemstones for a fraction of their worth without your guidance. This may even occur before the administration of an estate properly begins or without expert opinions on each item's value.

To properly support your clients and their families, take these three steps:

  • Inventory the gem collection
  • Simplify the collection through a process of aggregation
  • Lay the groundwork for the management of your client's collection

All of these are necessary to avoid selling a rare piece at a fraction of its value or spending a large amount on an item that has legal ownership or other defects.

Step One: Inventory the Inherited Gemstones

Most collectors don't have a current inventory of their assets. If the inventory does exist, it usually lacks critical information or has an extremely cryptic format. Estate inventories are often geared towards minimizing the estate tax value of the asset. They're rarely complete or sufficiently detailed. In addition, inventories can sometimes be confusing because artists often work in many different media. Thus, determining who created what artworks in the collection may prove difficult. This holds true for gemstones and jewelry, too. (Who cut the gems and who created the piece, for example). Therefore, your client needs your expert assistance to describe assets for the inventory.

At minimum, gemstone collection inventories should include the following:

  • A list of gemstones
  • Their physical descriptions
  • Who cut them
  • Date of cutting
  • Date of acquisition
  • The locations of the items
  • Dealer names and contact information
  • Any paperwork that refers to the gemstones such as catalogs, bills of sale, and so forth

Whether you use a spreadsheet, a software program, or even an old-fashioned card catalog system, beginning the inventory is critical.

Include any reference to contractual relationships that might exist, such as consignment agreements, copyrights, distribution and reproduction rights, etc. Remember that gem ownership doesn't convey the copyright to that gem set in jewelry as a piece of artwork. In some countries, artists retain some rights over the transfer and display of art even after sale.

Step Two: Aggregate the Inherited Gemstones

Even when all the significant gems in a collection have been clearly inventoried, researched, labeled, and stored, your client's family will most likely confront a large number of items. They may not recognize these pieces as valuable or the importance of the associated masses of documents. A single piece of paperwork can be critical for determining the provenance (and, therefore, the value) of the gemstones. Furthermore, each item in a collection may have different tax, provenance, and valuation issues. In order to support your client's family with their new collections, help them simplify.

As a critical first step to simplification, aggregate items and their associated paperwork. Form groups of items with similar characteristics. Then, give these groups certain rules or guidelines based on trends in taxes, recognition, liquidity, and premium, as well as your client's desires.

moonstone - Brazil
Moonstone cabochon, Minas Gerais, Brazil. Photo by Didier Descouens. Licensed under CC By-SA 4.0.


Your client's income from transacting tangible assets is taxed differently than investment or ordinary income. How your client handles the ownership of the collection will control the subsequent income tax treatment of their buying or selling tangible assets. The United States Internal Revenue Service (IRS) recognizes four distinct types of taxpayers, based on the role the taxpayer plays prior to a transaction:

  • Collector
  • Investor
  • Business investor
  • Dealer

The IRS will assume your client to be a collector, thus imposing the highest capital gains tax and allowing the fewest deductions. However, your client may qualify for the more advantageous tax status of an investor. This status allows more deductions as well as techniques such as like-kind exchanges.

Qualifying as an investor isn't as simple as a declaration. It requires a well-documented pattern of behavior by your client. A qualified expert can help your client position himself or herself to obtain the most desirable tax status.


The value of one part of your client's gem collection may be much more susceptible to market forces than other parts. Some of the factors that may come into play here include:

  • General standards of taste
  • Critical acclaim
  • Vagaries of provenance and authenticity
  • The role an item in the collection plays in the culture
  • Changes in laws banning the sale or purchase of certain items

Aggregate the collection in terms of what has the most stable pricing versus what has more volatile pricing, questionable legality, or uncertain provenance.


The ease with which your client can sell a gemstone also factors into aggregation. Rare or unique gems, by themselves, may not be enough to provide liquidity. After all, someone must be seeking them and willing to pay for ownership and control. Your client could easily sell a highly sought gem, even if it was poorly cut or heavily damaged. On the other hand, a well-executed and flawless gem could languish for sale for months or years.

In many cases, your clients will inherit collections containing a few highly liquid gems and many illiquid gems. Your clients' families will look to you for guidance. By aggregating the highly liquid gemstones they want to sell with the more illiquid gemstones they need to sell, you can give your clients' families leverage on negotiating fees, commissions, and other costs on the sale.


Occasionally, your clients will inherit a gem or gem collection they could only hope to own if they're willing to compete at auction with the most well-heeled collectors and institutions. Such items can be key to the preservation of the rest of the collection, especially if they've planned beforehand to allow for some of the estate tax avoidance in the settlement of the estate. These premium items truly belong in a realm of their own. They require the most expert help in managing their preservation, transfer, or sale.

Late Ming Dynasty Jade Bowl
Late Ming dynasty bowl, from the Lillian Turner Jade Collection. Photo © Joel E. Arem, PhD, FGA. Used with permission.

Step Three: Collection Management for Inherited Gemstones

As a gem dealer, you play an active role in buying and selling gems, jewelry, and other collectibles for your clients. You can also help them find professionals with expertise and experience in collection management. To this end, the following questions can guide you in steering your clients in the right direction.

Buy-Sell Discipline

Does your client understand the buy-sell discipline for his or her collection?

As with speculative investments, your clients may own gems that rapidly and permanently decline in value after they purchase or inherit them. On the other hand, gems may also rapidly, if temporarily, increase in value. Gems once out of fashion may come back into style. A market glut of a particular gem at the time of inheritance may end.

To manage a gem collection, your client's family needs to know when to hold gems until their value recovers and when to sell gems to cut their losses. Furthermore, they need to know when to sell some or all of a collection before the market declines. A collection needs to be reviewed with a critical, unbiased eye. Your client may need help understanding when a collection should be sold or how it should be enhanced.

Cultural Executors

Does your client's personal representative readily know how to maintain, and ultimately dispose of, any gem in your client's estate?

In some circumstances, a cultural executor, such as a private curator or expert in the field, may be better equipped to manage the disposition of artwork than family members. In these cases, your client should allocate additional funds for administrative costs.


Does your client have insurance policies or funds from the estate to help alleviate the burden of additional administrative and tax costs for the gem collection?

Life insurance should be held in a specified irrevocable life insurance trust intended to provide liquidity to a collection. It should be drafted specifically to allow investments in, and loans collateralized by, artwork and collectibles. In addition to property and casualty insurance, your client should consider title insurance on high-value gems with questionable provenance.

Provenance and Purchase and Sale Records

Does your client keep purchase and sale inventory records?

Your client's personal representative should keep readily available the names of galleries, dealers, auction houses, and other persons who might have an interest in buying or selling your client's gems, in the event something happens to your client.

In the last decade, provenance has become critically important in the art world. This applies particularly to gems and jewelry coming out of Europe immediately before and after World War II. Items coming out of countries in economic and political turmoil also pose special risks, such as Russia in the 1990s or Myanmar today. Provenance will continue to grow in importance in the valuation of gemstones. For future reference, your clients should retain all ephemera associated with a gemstone collection, such as auction catalogues, notes, etc.

Copyrights for Inherited Gemstones or Jewelry

Has your client specifically addressed the disposition of any copyrights your client may own in his or her will?

Unless the deceased was also an artist, your client likely won't inherit copyrights. However, if the collector and an artist collaborated, such rights may exist. Be aware that copyrights can be created of an image of an object (such as a piece of furniture), which might otherwise be in the public domain. If your client plans to donate a specific item to a charity during his or her lifetime or at death, remember that that donation doesn't carry the copyrights to the object unless specifically mentioned. However, a gift of the same object to an individual beneficiary will carry such rights.

Make sure your client's personal representative finds records of the copyrights. By law, copyright transfers must be in writing and signed by the copyright owner. In addition, the client may need to record the transfer with the US Copyright Office.

Instructions for Use or Licensing Inherited Gemstones or Jewelry?

Does your client have specific instructions or restrictions for using or licensing gemstones or jewelry?

Some clients have a deep emotional attachment to an inherited collection. For example, they may feel a moral obligation that the items shouldn't be sold, that new reference books in the same series shouldn't be commissioned, that music shouldn't be performed at certain venues, and so forth. Dealing with these restrictions will require significant cooperation with the future owners of the gemstone collection or other items. Thus, the client should make these restrictions clear and well-drafted.

Maintenance and Storage Arrangements

Has your client made arrangements for the maintenance and storage of the collection in his or her estate?

Estimate the total cost of your client's planned disposition of gems, equipment, and supplies upon his or her death. Include storage, distribution, and conservation costs, even if only for the most basic items. The beneficiary may not be able to carry those costs without assistance. For example, sending a large mineral sample across the globe may cost much more than the piece's worth.

Long term storage of gems or other items also carries risks. If the storage facility suffers a catastrophe, your client runs the risk of damage or loss. In particular, visual art associated with your client's gem collection requires proper storage. This includes photographs, film, and digital files.

inherited gemstones and jewelry - custom jewelry box
Bespoke jewelry box. Photo by TannerKrolle. Licensed under CC By-SA 3.0.

Trusts and Charitable Foundations

Has your client considered the use of split interest trusts and charitable foundations as helpful vehicles for managing art?

A trust, a limited liability corporation (LLC), or a family limited partnership (FLP) is the best way to manage a gem collection that will be shared by a number of beneficiaries. In addition to management trusts, your client should become familiar with the use of split interest trusts. A charitable remainder trust (CRT), charitable lead trust (CLT), grantor retained interest trust (GRIT), or grantor retained annuity trust (GRAT) can be used to transfer collections between generations.

Inherited Gemstones: Conclusion

By guiding your client now, you're helping your client's family when they become the new owners of the gem collection. Help your client get the expertise and experience to properly plan for the collection. Follow the three steps: take inventory, aggregate the collection, and lay the groundwork for managing the collection when the time comes to pass it on to another generation.

Matthew F. Erskine is principal of The Erskine Company LLC, a strategic advisory firm located in Worcester, Massachusetts. The firm offers expertise in the management of unique family assets, including multi-million dollar family businesses, numismatic collections, fine art and Americana collections, commercial and residential real estate holdings, and family compounds.

Matthew F. Erskine

As a Trust and Estates attorney, my expertise is in avoiding taxes and maintaining control of family wealth. Because I'm a fourth generation T&E attorney, my firm has handled multiple generations of many families. As a gem collector and investor I have experienced first-hand how multiple generations of a family work together — or fight each other — over a family business or a family collection.

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