Making Cents: Planning for valuables, collectables or family heirlooms
By: John P. Napolitano, CFP®, CPA, PFS, MST
When most folks think about their estate plan, little attention is paid to the personal property in your estate. That may include Mom’s engagement ring, Dad’s 1969 Camaro, or anything else of sentimental or monetary value. The most common and least effective way of dealing with this is often a clause in the will which states that all of your personal property shall be divided equally between your stated beneficiaries. Sometimes, there are specific references to certain items with clearer direction to the appointed person with regard to who gets what.
The first problem with leaving this issue unclear is that frequently the first one in the house gets what they want. This ‘first in’ sometimes makes arbitrary judgements about what equally means and simply takes what they like or feel entitled to take. This situation is exacerbated if there was one beneficiary in particular who devoted the most attention to the care and nurturing of the loved one.
The second issue of defining equally is different beneficiaries will define equally in their own way. One may want offsetting ‘stuff’ because the older sister took the valuable stuff and other times it’s based on conversations had with the elders prior to their passing – without the other beneficiaries having had the opportunity to know about these promised bequests until the bickering starts. Again, ambiguity easily lead to a rat’s nest of issues that may leave one or more beneficiary feeling slighted in the process.
The two best ways to deal with this are either to begin gifting some of these items before passing or to have more specific guidance in your estate documents. But just beware that if the guidance becomes a part of your will that this may create an expensive and elongated probate process. Truth be known, most estates do become subject to an expensive and prolonged probate period because the estate plan was lousy to begin with. If you are a reader of these words weekly, you know that I am a big advocate of a trust based estate plan.
To get personal property into a trust and out of your probate estate, a simple memorandum stored with your estate documents that you have transferred all ownership of personal property to your trust will eliminate the probate issue, but still doesn’t solve the family division of that personal property.
To best divide the personal property, everyone should have an assignment of personal property note or clause in the trust that is very detailed and specific.
If your stuff is extremely valuable, a few other issues arise. First is equalization. If child number one gets the painting worth $25,000, do the others get equalized with the remainder of the stuff or financial assets? Second may be death taxes. If your collection is extremely valuable, be aware that these illiquid assets may add to the ultimate death tax bill. And third, if the property is that valuable, consider placing a rider on your insurance policy to see that they would be covered in the event of a total loss.
This information is not intended to be a substitute for individualized legal advice.
John Napolitano, US Financial Advisors, US Wealth Management and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.
John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.