The Minefield of Planning for “Stuff” — Part Two
By Barry Zimmer on May 30th, 2012 in Elder Law, Estate Planning, Inheritance Planning, Wills & Trusts
Part One explained some “landmines” in estate planning for “stuff” – the personal effects, household furnishings, jewelry, family photos, music, collectibles, etc., that can often have more value to heirs than money. Today I will suggest some ideas to help.
Be clear about what you want. Write it down! Clients often say the kids will work it out, as an excuse to bury their heads in the sand. This may be true for some, but itinvites dissension and animosity among family members.
Don’t’ leave your wishes to guesswork or interpretation. Name specific gifts in your will or trust for the most significant items. Name who inherits if the “primary beneficiary” who is your first choice, were to die before you.
What if you aren’t sure what you want to do about specific personal property items when you make your will or trust? I use an Estate Planning Letter. Even though it’s not legally binding unless it is executed like a will, clients like it because they feel their family will honor their written wishes. This document can be created or modified any time without a lawyer. But caution – gifts of really important and economically or emotionally high value items should be spelled out in the will or trust. Also, protect this document like it was a legal document, and make sure your executor or Trustee knows where to find it.
I occasionally see clients who talk about parents or grandparents who left stickers on items in the house with names of who should inherit the labeled item. This sounds cute but stickers can be lost or switched.
Be Sensitive to What Matters Most. Money is important, but family may find meaning and significance in the most unlikely things, such as the chrome breadbox that I mentioned in Part One. Talk to your children, but try to avoid promises until you understand what everyone wants. Then work out a plan that is fair.
Helping Your Trustee or Executor be Fair. When items are left to more than one beneficiary, your Trustee or Executor may have a hard choice of how to divide the indivisible, or how to make the shares of equal value. Or to avoid appearing to favor one or more heirs over others. Every case is different, but here’s a few ideas that have worked in my practice.
Parents can direct unbiased division of assets by the draw, where heirs draw straws and then choose from among personal effects and reverse the order of selection until all items are taken. Allow the fiduciary alternatives to choose so that she can resolve disputes. One example is to offer contested items for sale through sealed bids. Heirs can apply inherited cash from the residue of the estate, so it is really just a “paper” sale. Where the heirs need to put their money up (figuratively speaking), then the true value they each put on an item becomes apparent and the item goes to the person who values it most. Appraisals may also be appropriate, depending on estate taxation and the method of division and distribution. Ultimate fiduciary authority to sell everything for cash may influence heirs to scale down unreasonable demands.
The more specific your wishes the less likelihood for family infighting. On the other hand, specificity makes it tougher to make everyone happy. But the parents’ wishes are what count because after all, it’s their “stuff”. Following these recommendations should make the task easier. Advice from experience legal counsel is recommended. The next and final installment will cover what to do with the stuff loved ones leave behind.