Whenever we buy a work of art, we wrestle with its value and price before we make the purchase. But in short order we disengage from the monetary issues, often not looking at the financial asset we have.

One of the most overlooked financial complications of collecting, or even buying art, is whether or not we actually own the piece we’ve acquired. Tainted provenance — or even worse — is a real problem in the art world.

Part of the art world’s appeal is attributable to the free spirited, unregulated, highly-volatile megabucks that whirl within it and the buyers and sellers who love the art — and the action. Which of course means it is rife with dealers under pressure, incapable of keeping their word (think Larry Salandar), dealers who are fully reputable and don’t know they are selling “dirty” goods (think artwork stolen by the Nazis and now back on the market), as well as crooks. (I know several former disreputable dealers who “went away” and are now back and are, as far as I can tell, still engaged in shady practices.)

What we are talking about are art crimes, which constitutes the third largest category of crime in the world.

The good news is that we, as collectors, have tools at our disposal to protect ourselves. Recent court decisions have returned works of art to former owners even after the statute of limitations has expired.

The Internet offers databases that allow the cross-referencing of art auctions and databases of stolen artworks — tools that make it easier for theft victims to mount court challenges.

The ownership history of artworks has become an increasingly sensitive issue for collectors and the folks they buy from. Just because you paid for it does not mean you own it. Collectors who don’t proceed with due diligence can put their art at risk, especially if they sell the artwork to someone else.

Of the 300,000 or so stolen, missing or looted artworks listed in the Art Loss Register, an international database, more than 15% were created after 1945 – that’s 45,000 works of art, created since WWII that are out there in the world, that if acquired by one of us would make our life miserable.

In the decades I was an art dealer there was more than one occasion where a client made a layaway purchase, made the payments and never ever picked up the artwork, and as far as I knew flat out disappeared. Who owns that art? (I’m still storing some six years after closing.) Or what about important artists who consign work to a gallery and then forget about it? (Do you really think all artists have fastidious records?) The question is: Who owns this treasure? What if a dealer sells you a drawing by a major living artist who was never paid, who died, and over time the $10,000 purchase becomes worth a quarter of a million and the artist’s heir, now in college, decides to track all of Mom or Dad’s sales, and your piece is undocumented? (I see some variation of this almost weekly.) What if an heir does their homework and decides to track down the missing art and knocks on your door? Of course you are innocent(?), but what are you going to do, and what is the impact on you? Or what if the art you acquire was not a victim of shoddy record-keeping, but was actually stolen? Add the wrinkle that the reputable gallery you bought it from didn’t even know. What does this mean to you?

For a collector who has acquired a work of art, having the right to ownership disputed can come as both an emotional and financial shock. Even if the collector has secured a warranty of clear legal title from the seller at the time of purchase, he may not be able to rely on it, says Lawrence Shindell, the CEO of ARIS Corp. The upstream seller may no longer be in business, for instance, or may not have assets to stand behind the prior warranty, or may be hard to pursue if he is located in a foreign country where the warranty is hard to enforce.

Meanwhile, if the collector has become a seller of the work and hasn’t sought a third-party risk transfer solution, i.e. title insurance, and if the upstream seller isn’t around to recover money from, the collector himself can become liable to his or her downstream buyer if the ownership of the work is successfully challenged and the buyer then loses his money. The buyer can then sue the collector for damages, including the price he paid for the work — as well as possible appreciation — and for his legal expenses.

The Chubb Insurance Group has coverage that reimburses legal fees up to $100,000 incurred in a title dispute for scheduled works of art. Unfortunately, this benefit does not extend to the actual value of the work if the owner is required by the courts to forfeit the piece. Courts in the U.S. will generally “balance the equities,” meaning that the due diligence the buyer performed to avoid possession of stolen art will be measured against the steps the former owner made to recover the art. Nonetheless, the burden of discovery will usually weigh more heavily on the purchaser, who, it is assumed, has the sophistication and resources to authenticate the history of a purchase.

“If you wind up on the losing side of an ownership challenge,” says Jonathan Ziss, a partner at the law firm of Margolis Edelstein and a founder of Art Title Advisors, “the result can be perfectly awful: the loss of a valuable asset, the destruction of an estate plan and the loss of a charitable donation or bequest tax deduction, perhaps years after the time for filing an amended [tax] return has timed out.”

Fortunately, there are resources available to help collectors with their investigations into an artwork’s provenance. In their understandable enthusiasm to acquire beautiful works of art, collectors should not lose sight of this sometimes challenging, but fundamental imperative.

Rebecca Woan, of Chartwell Insurance Services in Chicago contributed portions of this article.

Paul Klein works with The Briddge Group, the art succession planning firm and writes and speaks frequently on the subject.