No, I Want That! – How to Deal With Personal Property in Estate Planning and Estate Administration
Volume 9 • Issue 2 • February 2019
The Counselor is a monthly newsletter of Hallock & Hallock dedicated to providing useful information on estate planning, business succession planning and charitable planning issues. This month’s issue will discuss ways to avoid family conflicts in planning for and distributing personal property in an estate. If you are interested in learning more about the ideas and processes discussed in this newsletter, please contact us for an initial consultation.
When planning for an estate, individuals and couples focus mostly on “the big stuff” – cash, retirement accounts, and homes, to name a few. Far less attention is spent addressing the personal effects – family heirlooms, photographs, journals, jewelry, guns, musical instruments, etc. These items are referred to legally as tangible personal property. Even though far less attention is given to these decisions, according to the University of Minnesota Extension:
Decisions to pass on personal possessions are made within the context of long, complex, and sometimes complicated relationships typically among a variety of family and friends. Inheritance decisions can have powerful consequences for siblings, parents, in-laws, step-siblings, spouses from remarriages, domestic partners, same-sex partners, adopted children, and others who consider themselves family or friends. Such decisions involve dealing with the emotional and potential financial value connected to objects accumulated over a lifetime and across generations of family members.
What Is Tangible Personal Property?
In legal terms, the property that we own falls into two general categories: real and personal. Real property refers to land and improvements that are attached to the land and not readily movable, such as a home or other building. Personal property is basically everything else. Personal property can be further subdivided into tangible and intangible. Tangible personal property can generally be defined as property that can be seen, felt, or touched. While some personal property may appear to be tangible, such as a stock certificate, stock and cash are actually intangible and the paper is just a representation of the property. Other examples of intangible property would include promissory notes and intellectual property, such as copyrights, patents or trademarks. Examples of tangible personal property would include equipment, household goods, guns, jewelry, artwork and the like.
The Personal Property Memorandum
While specific gifts of real property and intangible personal property must be set forth in the Will or Trust, the laws of most states allows for the disposition of tangible personal property by a separate writing that can be changed without revising the Will or Trust. This document is often referred to as a “Tangible Personal Property Memorandum” or “Separate List.” To be effective, the Personal Property Memorandum must be specifically referenced in your Will or Trust. A properly completed Personal Property Memorandum allows you to leave specific items of personal property to a specific individual. For example, you may state: “I leave my wedding ring to my daughter Julie.” While the formality of witnesses or a notary is often unnecessary, it is necessary that you sign the Personal Property Memorandum. It is also extremely important that the Personal Property Memorandum be dated. The Personal Property Memorandum should be revisited regularly as items are lost, sold, added or replaced.
The Personal Property Memorandum provides an easy way to clearly convey your wishes regarding personal property. In completing the Personal Property Memorandum, there are several general rules that should be followed:
Be Consistent. Be careful to avoid undermining this planning by making contrary oral promises or labeling items in a manner that is contrary to what is set forth in the Personal Property Memorandum. While the Personal Property Memorandum will normally control over such contrary expressions, they will nevertheless lead to disharmony.
Be Clear. It is also important to be clear in your description of items so items are not confused. For example, Great Grandma Smith’s family Bible rather than just the family Bible may be more appropriate if you own several Bibles. One effective way to supplement the Personal Property Memorandum is to provide photographs or video that will provide a more certain identification of the property.
If You Give it Away, Give it Away. Many disputes occur because a parent has “given” an item to someone, but has retained possession. This can lead to disputes over whether the gift actually occurred. If you give it away, give it away – do not retain possession.
You Don’t Need to Inventory Everything. In most estates, there is only a small percentage of the tangible personal property that people will actually be interested in. Most of the assets will be sold, donated, or thrown away. Focus on the items that will matter.
Six Factors to Consider
According to Professor Marlene S. Strum of the University of Minnesota, who has written the book Who Gets Grandma's Yellow Pie Plate? Workbook: A Guide to Passing on Personal Possessions, there are six key factors to consider when planning the transfer of personal property. These six factors can affect the transfer of your own personal property and the transfer of the property of someone who has already died. These six factors are:
Understand the sensitivity of the issue of transferring non-titled property.
Determine what you want to accomplish in the transfer.
Decide what is "fair" in the context of your family.
Understand that belongings have different meanings for different individuals.
Consider distribution options and consequences.
Agree to manage conflicts if they arise.
If you would like to learn more about these six factors, please take a look at the resources offered by the University of Minnesota Extension Office here.
What to Do if a Personal Property Memorandum Does Not Exist
If you are administering an estate and a Personal Property Memorandum does not exist or does not include all of the items of personal property owned, what should you do? While there is no right way to do this here are several options:
Get appraisals where appropriate. This will help to understand if there is an economic benefit that should be addressed and can be used to equalize the value of personal property gifts.
Make copies. In many cases, such as photographs and videos, a copy can be as good as the original.
Have people independently identify which items they want. If only one person wants an item, it will go to that person. If more than one person wants the item, it will move to a separate level of determination.
Draw lots and take turns picking items. Consider changing the selection order with each round.
Have an auction, have people bid on items they want with the highest bidder winning. Using real money is fine, but using a fixed amount of Monopoly money per person may be better a way of leveling the playing field. Wealth disparity may exist among the children and may have already created tensions.
In addition to the foregoing, consider involving a mediator. A mediator can help your family heal wounds that are creating some of the problems. Often when problems arise in an estate, it is not the estate that is causing the problem. Rather, it is just a new field to battle on over old grievances.
While often overlooked and under planned for, tangible personal property often provides a battleground for protracted disputes among children. In planning your estate, give sufficient time and thought to this part of the plan. Consider the six factors and how they may impact your family. By taking some time to consider these issues in your planning, the likelihood of maintaining family harmony will be significantly enhanced.
This Newsletter is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.