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 up, since they can be turned into cash. Real estate can also be turned into cash or co-owners can share it. The most difficult items to divvy up are personal possessions—silverware, dishes, artwork, furniture, tools, jewelry -- items that are unique and don't have a set resale value. In legal terms, 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 secure the deceased person's residence as soon as possible after death to make sure items do not disappear. Here are a few steps you or the personal representative of your estate can take to make sure splitting up your stuff does not split up your family:
- List the most important or valuable items in your will. 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. You could also consider talking with your children or other family members first to determine who values which items most.
- 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, in 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.
- Write a memorandum. You can write a list of who should receive what item. In Virginia, if your will references the list, it will be enforceable. Be careful about how you describe each item, or include pictures, so that there is no confusion. Unlike your will, this list can be as long as you like, and you can change it without having to go back and redo your will. Send a copy to your lawyer as well as any updates as they occur to ensure the list does not get lost or ignored when the time comes.
- Give everything away now. Well, perhaps not everything, but the more you disburse 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 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 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 or tax accountant first.
- 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 make choices regarding your estate plan, your personal representative may want to set up a lottery system for distributing the tangible assets. The representative can put names or numbers into a hat and someone can draw them out to determine the order in which the family members or other heirs will choose items. In order to inform the process, the personal representative should create a list of the most valuable items, including their appraisal value if one has been obtained. If everyone is in the same location at the same time, they can simply take turns. If that is not possible, the personal representative can add pictures to the list to help identify the items and the beneficiaries can choose online, informing the personal representative of their choices as their turns come up. The order of who chooses can change each round, whether reversing or moving along progressively. Here's the distinction between these two alternatives:
Reversing: 1,2,3,4,5; 5,4,3,2,1; 1,2,3,4,5
Progressive: 1,2,3,4,5; 2,3,4,5,1; 3,4,5,1,2
- Bidding. A more complicated structure would be to provide all of the heirs the same number of tokens or points that they can use to bid on the various items. For instance, someone who really wants one painting or photo album more than anything else could put all the tokens on that. Someone who does not care as much would bid fewer tokens. The complication in this approach is what happens after an item is gone. Certainly, anyone who used up his or her tokens “winning” an item in the first round is out, but can those who lost reallocate their tokens to other items? A variation on this theme would be for everyone to rank the items by preference. When there is no competition, everyone who chose an item first would get that one. When more than one person chose an item as their first choice, they might draw straws, with those losing getting to choose again.
The more you decide who gets what rather than leaving the decisions to your family, the less likely the distribution process will create family strife.
Lastly, consider giving your personal representative the final say with respect to the distribution of your personal possessions. Do not just state that your property is to be divided equally without stating in whose discretion “equal” will be determined. Make it clear under the terms of your will, that your personal representative, or another decision-maker, has the final say with respect to any disputes. Designating a tie-breaker in the event of a dispute over your personal property will go a long way towards ensuring that your personal property is distributed smoothly.
Dividing Your Assets in Virginia
If you are in need of assistance for planning your own will, please contact us. Our firm specializes in estate planning and document preparation. Each situation is so unique and we take special care to do a full review and create a plan that works for your family. It is better not to leave things up to chance. Creating a plan your family is comfortable with and that you can turn to in an emergency is invaluable.
If you find yourself in an emergency situation and need probate services, please reach out. Probate is the official process by which a deceased person's will is proved and recorded as authentic and valid in Virginia. Probate is often complicated, frustrating, and confusing. In certain cases, it is not even necessary. My goal is to help those charged with this important task to determine what you must do to open the deceased's estate (if necessary), distribute the deceased's assets in accordance with Virginia law, keep the peace among those grieving, and to avoid mistakes, which can be costly and prolong the process. If a loved one or friend has named you as the person responsible for this task, please contact us today to learn how I might assist you with probate.