What would possess a man to do such a thing?
Estate taxes, that’s what.
The equity stake Mr. Halper, a New York Yankee limited partner, would receive from the baseball team’s proposed merger with basketball’s New Jersey Nets is a no-brainer from an estate planning standpoint: Were he to pass away his family could easily sell part of their 1% share in the team to pay estate taxes.
But Mr. Halper’s memorabilia are another story. Although widely considered the best and biggest baseball-related collection in the world, it (like other collections) is highly illiquid and requires a buyer to determine its value. In other words, the estate taxes on the collection would be a big burden on the family of the 59-year-old Mr. Halper, who has experienced health problems in recent years.
So to save his family from having to justify the value of the collection and find buyers should he die prematurely, he has sold off a big chunk of his collection — it has its own wing in the Baseball Hall of Fame — and is trying to auction off the remaining 100,000 items through Sotheby’s in New York.
If the first night is any indication, the auction should be a home run. The first of 16 sessions on Thursday, raked in $2,073,763, about 50% above a high estimate. What is not sold at Sotheby’s through this Wednesday will be offered on the auction house’s website.
“While Barry’s alive, he is the expert on the value of his collection, and he’s the person with the contacts to sell it,” says Leon Rose, a certified public accountant at Rose Dratch & Dear in West Caldwell, N.J., who advises Mr. Halper.
Estate planning options for cases like Mr. Halper’s are few, says Peter Calfee, a certified financial planner who runs his own practice in Cleveland. Mr. Calfee says that since these types of collectibles don’t generate revenue, the family would be stuck spending money trying to justify their value. This raises the possibility that the collection could be overvalued, sticking the family with a bigger estate tax.
By selling the items while still alive, Mr. Halper seeks to liquefy the assets so his family can quickly pay the estate taxes, which would be roughly 50% of an estate worth more than $20 million, says Mr. Calfee. “The only way to avoid paying the estate taxes is to give the estate to a charity at death,” he says.
Still, the decision to sell was tough for Mr. Halper. For more than 50 years, the Newark, N.J., native has been hanging around ballparks and collecting items — from uniforms and autographed balls and bats to more monumental artifacts such as the contract to sell Babe Ruth from the Red Sox to the Yankees (catalog estimate $75,000-$125,000).
He kept everything in a temperature-controlled basement in his Livingston, N.J., home. “A love of my life,” Mr. Halper says of his collection.
But when he encountered health problems, he began to consider his family’s future. (He has a wife, Sharon, and a son, Jason.) He decided it was time to sell the collection — on the sole proviso that it be kept together. But there were no prospective buyers, so over a year ago Mr. Halper and Mr. Rose began negotiating with Sotheby’s.
“Selling the collection piecemeal was inconceivable to Barry for years,” says Mr. Rose. “From a sentimental view it hurt him, but then he came to grips with reality and realized this was his opportunity.”
That Mr. Halper was able to keep 20% of the collection’s worth together helped, too. Late last year he sold that chunk–including a bat and uniform of Shoeless Joe Jackson — for $7.5 million to Major League Baseball, which then donated it to the National Baseball Hall of Fame in Cooperstown, N.Y. The Barry Halper Gallery opened this summer.
Mr. Rose says that the money earned from selling the collection will be put into conventional investments such as tax-exempt bonds in order to preserve the estate’s wealth. “Barry’s a conservative guy,” he says.