Allocating your personal possessions can be one of the most difficult tasks when creating an estate plan. To avoid family feuds after you are gone, it is important to have a plan and make your wishes clear.
When passing on possessions to your heirs, savings and investments are easy to divide, since they can be turned into cash.
With careful planning, real estate can also be turned into cash, or co-owners can share it.
The most stressful items to divvy up are personal possessions—silverware, dishes, artwork, furniture, tools, jewelry — items that are unique and may not have a set resale value. In legal speak, these are known as “tangible personal property” and can become the focus of family fights. Often one or more children claim that a parent had promised them a particular item. Things may disappear from a house or an apartment shortly before or after a parent’s death, or a child may claim that her 90-year-old somewhat-demented mother “gave” her a cherished diamond ring during life. These types of situations can create great suspicion and irrevocably split families. Siblings may stop communicating due to their anger and distrust.
Clarity about one’s wishes can go a long way toward avoiding these difficulties. Also, it’s important that the personal representative of an estate (also called an executor) secure the deceased person’s residence as soon as possible after death to make sure items don’t disappear. Here are a few steps you or the personal representative of your estate can take to make sure splitting up your stuff doesn’t split up your family:
- List the most important or valuable items in your will; allow for a written statement to be made at any time after the will has been made. While your will could get very long if you tried to list all of your possessions, you may have a few family heirlooms or valuable artworks that you want to stay in the family. It may be easier for all concerned if you say who should get what. But talk with your children or other family members first to determine who values which items most. Virginia allows you to create a written statement naming what goes to whom. The statement can be in existence when the will is signed, or made (and amended) at any time after the will is signed. It does not have to be witnessed but it’s not a bad idea, nor is it a bad idea to date the statement. Like anything else, it’s no good if nobody knows it’s there, so it’s a great idea to keep the statement with the original of the will.
- Direct that certain items be sold. If you have one or more possessions that have much greater value than others, it can be difficult to make your distributions equal. It may make more sense to sell the items of greatest value and distribute the proceeds. For example, we’ve heard of a family whose parents were able to save one painting by a famous artist when they fled Europe during the Holocaust. The children sold the painting and split the proceeds equally, since it would not have been fair for any one of them to have received the painting and none had the resources to buy out the other two. The painting was auctioned at Christie’s and they were all quite happy with the results.
- Give everything away now. Well, perhaps not everything, but the more you distribute during life, the less that will have to be dealt with at death. When you make gifts, make sure that everyone knows about it so that the person receiving the gift is not suspected of having pilfered your jewelry box, for instance. There may be items that you would like to give away, but still want in your house. This is especially true of artwork and furniture. As long as the new owner is agreeable, you can keep these items around. You can make a deed of gift for tangible personal property retaining the right to keep the things in your home for as long as you live. You might want to tape a note to the back or underside explaining that the Rembrandt, for instance, belongs to your daughter, Jane. (Of course, if it is a Rembrandt, you will probably need to file a gift tax return and a transfer document.) Be aware that for highly-appreciated property, for tax reasons, it may be better not to make gifts during life because they’ll lose the step-up in basis. So check with your estate planning attorney, tax accountant, and if you’ve got a Rembrandt, make sure that your insurance value is good, and that Jane understands how valuable the Old Master really is!
- Get an appraisal. For the tax reasons referenced above and to guide you in deciding who should get what, it can be useful to know the monetary value of the items you’re giving away, whether during life or at death. This can also be very important for your personal representative and for your heirs in making their decisions.
- Use a lottery. If you do not made choices regarding your estate plan, your personal representative may want to set up a lottery system for distributing the tangible assets. It’s not a bad idea for your will or trust to spell out that your executor or trustee can do this, and how. Put names or numbers into a hat, and beneficiaries draw for the order in which to choose items. With social distancing during COVID, a remote, live drawing process (with beneficiaries assigned a number based on cards drawn, etc.) could be useful.
What’s important is this: the more you decide who gets what, the less likely family strife will ruin the most important thing: your family.
*This article is provided for persons interested in elder law issues in Virginia and across the United States. This article has been written by a practitioner in the field of elder law, but unless otherwise noted, the writer is not affiliated with ThompsonMcMullan, P.C. Nothing in the newsletter or the articles is, or is intended to be, legal advice or a substitute for legal advice. If you need legal advice of any kind, please consult an attorney with experience in that area of the law, whether in our firm, or otherwise.