We hosted Derek Liang from Lighthouse Legacy for a Legacy Planning “Train the Trainers” boot camp. Hui Ying and I took time off to participate in this boot camp, and it opened up a door that, in my opinion, many have not yet opened.

Derek spoke about different instruments that can help you pass down your legacy, including wills, trusts, and LPAs. These instruments enable the transmission of your desires, assets, money, relationships, and collections.

Gems and jewelry fall under the category of non-bankable products—items that cannot be readily converted into cash and deposited into a bank. Cash is the purest example of a bankable product, while other instruments, such as cashier’s checks, are also considered bankable. Precious metals, gems, and jewelry, however, do not fall into this category.

A recent case illustrates this point. A client visited Far East Gem Lab with a substantial collection of gemstones and diamonds left behind by her late mother a couple of years ago. Although her mother and father had a trust fund in place that paid out to the family, the non-bankable nature of the gemstones and diamonds led her family members to suggest liquidating them and putting the money into the trust fund.

My father, Mr. Tay Thye Sun, and our team spent about 1-2 weeks going through the entire collection—testing authenticity, checking quality, and valuing the items. The client felt assured after receiving the valuation report, which indicated the market price of the collection. She approached me to help liquidate it.

Fortunately, we brokered a deal with a dealer and concluded the sale in just two weeks (although she was prepared to wait six months, so she was satisfied).

Another relative with an extensive collection candidly told me, “If my children or grandchildren don’t like my gems and jewelry, they can always just auction them off!”

From these cases, it seems leaving behind gems and jewelry could burden our families. Is it all about the money, or is there more to it?

It appears there are numerous instruments and processes to pass down money, but what about gems, jewelry, or collectibles? Are selling them the only options?

Here are some thoughts:

Firstly, let’s define Legacy and Estate:

1. Legacy: Your legacy is your life statement. What do people remember you for?
2. Estate: An estate is everything comprising the net worth of an individual, including land, real estate, possessions, financial securities, cash, and other assets.

[Link to Investopedia for estate definition: https://www.investopedia.com/terms/e/estate.asp#:~:text=An%20estate%20is%20everything%20comprising,has%20a%20controlling%20interest%20in.]

There are two ways of treating gems and jewelry:

1. To make them bankable products: Create a company, add these assets to securitize them before adding them to a trust.
2. To continue to treat them as non-bankable products.

To make them bankable products, use the system Hui Ying created: Authenticity, Quality, and Value. To prove these, you need two documents—a gemological certificate for authenticity and an insurance valuation report. Their validity is typically up to 10 years.

Now that you have these two documents, store them with the relevant gemstone or jewelry. To prevent disintegration, consider storing them digitally on a blockchain for tamper-proofing. A secure vault is also needed to store that precious piece.

You need a platform to facilitate the sale of the item—a place where buyers are, a place where buyers can easily check the item virtually, and if interested, visit the place to view the item physically.

This means the vault must have personnel who understand gemology, or a gemologist must be on top of the vaulting personnel to verify the documents and ensure the items are authentic.

If the buyer likes the piece and wants to buy it, someone has to KYC the person to ensure the money comes from legitimate sources. Facilitate the sale (as-is conditions) and delivery of the item.

While a bankable product like cash can be used almost immediately, the process to liquidate a gemstone or jewelry can take a long time, depending on the price. Manage expectations—if the market price far exceeds the previous price, it would be sold instantly.

Here’s what is involved in this process:

1. Jewelry / Gemstone
2. Gemological Reports
3. Valuation Reports
4. Secure Storage
5. Vaulting personnel
6. Gemologist (for Seller / Buyer)
7. Marketing Platform to view the item virtually, attract buyers
8. KYC buyers, source of funds
9. Payment gateway
10. Delivery Logistics Provider
11. Insurance to protect the whole process.

To continue treating them as non-bankable products, besides the ability to be sold for money, what else can a piece of gemstone / jewelry be? I mean, the reason I bought a piece of gemstone / jewelry was that I liked it; I admired its beauty, and the price was within my budget—I wanted to get my wife something that would make her happy.

So, a letter, video, or audio recording would be needed to capture my intent and aspiration for that gemstone / jewelry piece. Together with these, gemological reports and valuation reports are still needed for identification and insurance purposes.

If it’s a loose stone, leave some contacts of jewelers and jewelry designers where your children can go to get it made into a piece of jewelry. Leave behind some gold, platinum, loose diamonds, and some money for the workmanship so that your children don’t have to pay for creating it into a piece of jewelry. Also, leave behind some contacts to re-certify the jewelry piece after it’s made to prove the authenticity of the gold, diamonds, main stone. And also a valuation report to value the jewelry piece as a whole.

Your children can choose to use the piece of jewelry, sell it, or, if it has enough significance (culturally, value, scientifically), see if there are any museums wanting to expand their collection and if there are any government schemes for tax deductions. If there are enough pieces, they could loan the entire collection to museums for a certain sum of money. Even better, the collections have already been curated so museums just have to loan it, follow the instructions to create an exhibition where they can charge entrance fees and further our legacy in a meaningful and businesslike way!

If it is a piece of jewelry, prepare to leave it behind together with the receipt, gemological report, valuation report, any document from the maker of the piece of jewelry, a letter / video / audio recording of the significance of this piece of jewelry to you. Also, leave behind some loose diamonds for replacement if ever any of them drop out, some gold and money for repairs if needed. Also, leave behind a list of names of gemologists / jewelry valuers / jewelers / jewelry designers / auction houses / dealers / museums / in case they wish to find out more about the piece or just wish to sell it.

Costs involved:

1. Storage / Insurance costs would be incurred yearly and would be minimal if it’s just a safe box.
2. Marketing costs like photography / videography / converting to a digital asset.
3. Professional fees like gemologists / jeweler / valuer / curator.
4. Commission fees can be quite high, especially if you send it to an auction house, like 20+%.
5. Logistic fees.
6. Misc Fees.

Leaving behind collectibles will definitely incur costs, so you need to factor that in. Either gift it earlier after death or create a co-payment scheme with your family members. Some form of gemological knowledge would be very helpful, so get your family interested in gems and jewelry from a young age.

Speak to us via email at info@fegj.com.sg for more information.