A common goal when planning for parents is “I want my kids to get along.” Yet as estate and trust attorneys we know that one of the biggest challenges involves “special stuff.’ By this I mean tangible personal property such as family photos, heirlooms, jewelry, antiques and gun collections.
Transmission of these items is often hindered by communication – or lack thereof. Parents and children often don’t realize what others value. Too often we hear parents say “I don’t have anything that my kids want.” Wow! If they only knew!
The assumption that “I don’t have anything that my kids want” is often based upon monetary value, when really they are talking about sentimental values – the value of memories. While my parents passed away years ago, the things that I value from my father are his wheel barrow and his coal shovel. From my mom – it’s the desk that she used to pay the family bills. For me, these items bring back memories. (Including my Father’s many projects involving sewers and cement driveways where I was the forced laborer.)
That’s really all I have left to remember Dad and Mom– other than occasional visits to their distant graves. Neither of my parents have any idea how much I value these items. (A coal shovel is a square shovel designed to shovel lumps coal through a chute we had on the side of the house to supply the coal furnace.) For me, memories of home, cold mornings and coal soot on my third grade desk reverberate. I remember fondly the school janitor “Old [Mr.] McDonald” and the sound of squeaky coal trains passing along Pigeon Creek every time I see the shovel.
Today, we recognize the importance of planning for these items in two instances. The first is when more than one family member is attached or the second when relationship issues between beneficiaries are “problematic” and one seeks to “hold items hostage” to “tweak” the others. An impasse for either reason is a problem that the decedent, in most cases, wanted to avoid.
When we plan for “special stuff” we suggest to parents that they complete a tangible personal property memorandum (“TPP Memo”) listing items of special significance and who should receive these items and whether they should receive the designated items immediately or only upon death of the surviving spouse. This is particularly important when planning for blended families. It’s important to recognize that the TPP memo cannot be used to convey real estate or cash.
While we recommend that spouses complete the tangible personal property memorandum, we know that many clients do not complete (or partially complete) it. For this reason, it is important to have “default provisions” in the will and trust to specify the disposition of tangible personal property not listed on the memorandum. This is particularly important with “blended families” involving second marriages with children. In those cases we generally recommend that tangible property be designated to a specific individual(s) by memorandum. To avoid conflict, we generally recommend that when planning, undesignated property be left to the surviving spouse to avoid conflicts (i.e., the step kids wanting to take away the “coffee table”).
Often, in designing the default provisions, we recommend that the Trustee or Personal Representative be authorized to divide personal property as the designated beneficiaries may agree. Or if they cannot agree, develop a lottery or rotation system to “draw straws” and take turns in distributing personal property.
In settling many trusts and estates we see the many challenges in distributing the decedent’s personal property. First, as a practical matter, it is the Trustee or Personal Representative’s obligation to secure the premises and property. Then the fiduciary must follow the instructions in the TPP Memo or, if none, the provisions of the will and/or trust. In larger estates, where estate taxes may apply, the fiduciary must seek to have the property appraised. Prior to making any distributions, the Fiduciary must also consider actual and potential claims of the Decedent’s creditors.
Then there is the procrastination challenge. Sometimes after the loss of a loved one, a family fiduciary finds it difficult to move forward with distributing or disposing of personal property. In some instances it relates to the magnitude of the task while in other instances it may involve putting off potential conflicts with siblings or other beneficiaries. (I remember one case where a planning couple spontaneously responded “it will take my spouse at least two years to dispose of my personal stuff”, I can only imagine.)
We encourage Trustees and Personal Representatives to move forward with reasonable promptness in following the Decedent’s instructions. To the extent that the property is not wanted by the beneficiaries, we suggest use of a liquidation firm to inventory and sell the property. Typically, these firms charge 25-35% of the sales value. It is important to review liquidator’s contracts carefully, particularly with respect to the treatment of unsold items.
Then there is the issue of collections. These often present special problems in valuation and disposition. In the current economy for example, stamp collections often do not bring their appraised value at sale. For gun collections there may be additional legal concerns for the fiduciary and legal counsel should be consulted. In sum, the duties and challenges of personal representatives and trustees are often underestimated.