¶ 3401
Overview
Scope of the chapter. Many families keep part of their wealth in things that can be held in the hand: gold and silver bars and coins, paintings, sculpture, works on paper, rare books, jewelry, furniture, wine, stamps and the like. When that property passes into a trust, it brings with it problems that a portfolio of securities does not raise. It pays no income. It must be stored, insured and cared for at a cost. It may be unique, so that its value can be fixed only by opinion. Its title may be clouded by a theft or a forced sale that occurred decades before the settlor acquired it. It can be lost, damaged, stolen or confiscated. It can also be moved across a border in a way that a brokerage account cannot. This chapter examines how a trust should hold such property. It covers the trustee's duties under the prudent investor rule and the duty to take control of and protect trust property; the forms in which precious metals are held and the legal consequences of each; custody, vaulting and the law of bailment and warehousing; the income tax treatment of metals and collectibles; title and provenance, including claims to art lost during the Nazi era and the Holocaust Expropriated Art Recovery Act of 2025; valuation for estate, gift and charitable purposes; insurance, conservation, loans and sale; storage abroad and the anti-money-laundering rules that now reach the art trade; and drafting.
Why families hold tangible property in trust. The reasons are seldom purely financial. A collection assembled over a lifetime has a coherence that the collector wants to keep, and a will that divides it among children usually ends with a sale. A trust can keep the collection together, decide when parts of it are sold or given away, and appoint someone with knowledge of the field to advise on it. Heirlooms such as family portraits, silver and jewelry carry meaning that a sale would destroy, and a trust can hold them for the family's use across generations. Precious metals are held for other reasons: as a store of value that does not depend on any issuer's promise, as a hedge against inflation and currency debasement, and as a reserve outside the banking system. A trust gives each of these assets what an outright owner cannot: continuity beyond one life, management by a fiduciary who answers to the beneficiaries, privacy in the settlement of the owner's estate and, when the trust is properly designed, protection from the beneficiaries' creditors (see infra chs. 36–37).
How tangible property differs from securities. Five characteristics drive the analysis in the rest of the chapter. First, tangible property produces no income. A gold bar or a painting yields return only through a change in price and costs money to keep. Second, it is costly to hold. Storage, insurance, appraisal, conservation and transport are recurring expenses that reduce total return. Third, it is illiquid and hard to value. A unique object has no market price until it is sold, and the price at sale depends on the venue, the season and the presence of competing buyers. Fourth, it carries title risk. A buyer of goods acquires no better title than the seller had, subject to limited exceptions, and a work stolen generations ago may still belong to the heirs of the person from whom it was taken (see infra ¶ 3450). Fifth, it is physically vulnerable. Fire, flood, theft, poor handling and the slow damage of light and humidity can destroy or diminish it, and some of those risks are excluded from ordinary insurance.
Terms used in the chapter. Bullion means gold, silver, platinum or palladium in bars, ingots or coins valued for their metal content. A bullion coin is a coin traded at a price that follows the metal content; a numismatic coin is one whose price reflects rarity, condition and collector demand. Metal is allocated when specific bars or coins, identified by refiner, serial number, weight and fineness, are held for a particular owner, and unallocated when the owner has only a claim against the custodian for a quantity of metal. A depository or vault is a facility that stores property for others for a fee; the Uniform Commercial Code calls such a person a warehouse (see infra ¶ 3430). Provenance is the history of a work's ownership and location from its creation to the present. A freeport is a storage facility within a customs free zone in which goods may be held without paying import duties or taxes until they are removed (see infra ¶ 3480).
Relation to other chapters. Chapter 31 examines concentrated positions and the provisions that relieve a trustee of the duty to diversify when the trust holds a single asset the settlor wishes to keep; those provisions apply to a collection or a metal reserve as they do to stock. Chapter 8 examines advisers who direct the trustee as to specially held assets, and chapters 6, 7, 9 and 10 examine directed trusts and the line between direction and delegation. Chapter 30 examines entities owned by trusts, which are often used to hold a collection. Chapter 33 examines real estate, including the residence in which a collection may hang, and chapter 35 examines digital assets. Chapter 36 examines spendthrift provisions and chapter 37 self-settled trusts. This chapter draws on each and addresses what is particular to physical property.