During an estate or trust administration, financial assets (i.e. bank accounts, brokerage accounts) are easy to divide and distribute in certain percentages based upon a person’s testamentary wishes. Distributing tangible personal property (i.e. jewelry, artwork, collections, automobiles) can be much more difficult. In the overall context of an estate or trust administration, tangible personal property is usually worth far less than the financial assets, but due to sentimental and emotional reasons, this property can be extremely difficult to divide amongst family members.
Many estate attorneys will recommend that clients consider distributing tangible personal property during their lifetimes. This assures that ownership of the item or collection will be assumed by the family member of the client’s choice. Whether the client is readily accepting of giving away tangible personal property during their lifetime or not, it is always important to craft specifically how this property is to be inherited in a Will or Trust Agreement.
It is rare due to sentimentality, but one approach would be to direct your Executor or Trustee to sell your tangible personal property and split the sale proceeds amongst a class of beneficiaries, such as children. If there are certain items or a collection that you would like a particular person to inherit, you can include definitive paragraphs in your Will or Trust known as specific bequests. For example, “I give and bequeath my diamond wedding ring to my daughter, Joan Thomas, if she survives me.” If there is nothing specific under consideration, then you can address your tangible personal property as a whole, in a number of different ways.
One approach is to include a memorandum clause in your Will. This clause indicates that the person has prepared a memorandum which lists specific items of tangible personal property and directs the specific person who is to inherit each item. Although not legally binding, typically an Executor and family members are amenable to splitting the property in this fashion, showing respect for the client’s wishes.
If the client would like to avoid choosing family members to inherit tangible personal property, they may choose to allow a class of family, such as their children, to select which items of property they want. If there is a disagreement amongst the family members over a specific item, then the Executor decides who is to keep that item. This lends itself more to the “work it out amongst the family” approach.
As opposed to having a class of family members select items, another option is to include language indicating that the client would like a class of family members to inherit their tangible personal property equally. Equal, in this context, is a subjective term because of the sentimental and emotional value of certain property. This language lends itself more to the “draft pick” approach. The Executor is responsible for appraising each item of tangible personal property. Then, each beneficiary draws straws to see who selects an item first. Each beneficiary selects an item one at a time until all of the tangible personal property has been selected. This can create problems when one item is of much higher value than the others, leaving some beneficiaries feeling slighted. The Executor may have to determine if there is a high-value item that may need to be sold, with the sale proceeds distributed equally to the beneficiaries in order to leave everyone equal.
An additional method of distributing tangible personal property is by auction. Tangible personal property is appraised and then selected by the beneficiaries. If there is more than one beneficiary interested in a certain item, then they would have to bid against one another for the item. The amount inherited as determined by the appraisals would be subtracted from the beneficiary’s share of the trust or estate’s financial assets. This method can benefit wealthier beneficiaries who can outbid the others if they choose and be much more complicated to execute.
According to the language in a Will or Trust, it usually falls upon the Executor or Trustee to choose a distribution approach that will work well given the dynamics amongst the beneficiaries. Given the dynamics, the Executor or Trustee will have to carefully choose a method to avoid conflict, bad feelings, and the worst case scenario of litigation. Although it is natural to want to avoid the cost of appraisals, in certain estates it is necessary for estate tax reasons, or if the tangible personal property needs to be sold to pay estate debts. Every client needs to consider these considerations when deciding how to distribute their tangible personal property.
For assistance with these matters, please contact a member of our Wills, Trusts & Estates practice.
This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.
McConville Considine Cooman & Morin, P.C. is a full service law firm based in Rochester, New York, providing high quality legal services to businesses and individuals since 1979. With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.
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