Separate Lists for Tangible Personal Property: Referencing Lists in Wills, Enforceable and Practical

As a practical matter, many times clients have personal property which, while often not of high extrinsic value, may be of high sentimental value to various family members. This sentimental value may be only in the eyes of the Testator/Settlor, or may be the subject of intense family drama. The following is designed to help ease some of the difficulty in disposing of tangible personal property.

What is “tangible personal property”?

• Property that has a physical presence (household items, jewelry, art work)
• Can be pets and livestock
• Generally not stocks/bonds found in safe deposit boxes
• Airline frequent miles, season tickets
• California Probate Code 6132 includes articles of personal or household use, furniture, automobiles, boats and jewelry, as well as precious metals in tangible form (bullion or coins)

Use of Separate Writing

• Many clients have long lists of items that they wish to distribute among family and friends. If they were to list these items specifically into their Revocable Trust (or Will depending upon estate planning device used) it would cause a number of challenges:
  • The document will become quite lengthy
  • If the Testator/Settlor changes his/her mind as to a bequest, they must then amend their document. With each amendment, feelings can become hurt when beneficiaries learn they lost out of getting a beloved item which can lead a practitioner to suggest Restated Trusts, at a high cost to the client for a sentimental item.

• Upon filing of estate tax returns, or an audit, the IRS will look for appraisals of these listed items, at another large cost to the Estate for appraisals of items again of mostly sentimental value. If this list is part of a Will, then again, the probate referee will seek to value these items.

• As a practitioner, by placing language into a Trust/Will, you can give general guidance on distribution of tangible personal property while giving your client(s) the added flexibility of making their own detailed lists on their own time/terms and by providing them the ability to make changes as needed. If you do this though, it is important to again be clear as to: what constitutes a “writing”, and who has the authority to make such a written memorandum. A good practice is to require the “separate list” to be signed and dated by the Settlor. This will minimize the potential for unauthorized modifications and the date will help with the same item being bequeathed to multiple people over time.
• Furthermore, by incorporating the “writing” into the Estate, the Trustee or Personal Representative will have a fiduciary duty to follow the terms of the document versus just a simple list left lying around for the family to morally enforce.

Methods of Division

• A simple approach is to create a descriptive paragraph which states that the Testator(s)/Settlor(s) leaves all tangible personal property equally among children/ or other such defined class. However, should a Testator/Settlor leave a written document disposing of items of tangible personal property, then such written, signed and dated document will control as to that property.
• Then, you can have clients go into more depth in their thought process as to how the property will be equally divided. The following are some suggestions of methods to get clients thinking:
  • Equal distribution entirely at the discretion of the Personal Representative/Trustee?
  • By agreement of the named class of beneficiaries?
  • By a lottery (i.e.: first beneficiary picks an item, then on to the next, and so on until all items have been chosen?
  • Items sold and proceeds distributed equally?
  • All items not chosen to be donated to charity?

Gift of Specific Items

• Clients should be as detailed as possible in their description of specific items and it may be advisable for them to also put pictures of the items along with their written wishes.

Costs of Delivery/Storage

• With potential beneficiaries all over the country/world, it is important to discuss with the client their wishes about the cost of storage/delivery and insurance on the specifically bequeathed items
• These costs can be deducted as expenses on estate/fiduciary tax returns

Alternative Beneficiaries

• Just as clients should discuss their wishes on survivorship periods for inheriting monetary bequests, so should they give consideration to distribution terms for their tangible personal property. Do they wish for their Great Grandmother’s china set to go to their sister and then possibly on to her kids should she fail to survive, or do they want to distribute to a different family member or friend?

Litigation over Specific Bequests

Clients need to keep in mind that spelling out their wishes does NOT ensure that there will be no grumbling by family when they learn of the terms and there could still be litigation. The best approach is to be as clear as possible as to who, what, when, and where the gifts of tangible personal property are to be made. It is also wise to keep all written memorandum(s), with the Testators/Settlors original estate planning documents and a copy in a separate location. One can imagine how tempting it may be for a beneficiary to find a written memorandum which does NOT provide the desired item to the beneficiary, but a prior one that does, to simply give no regard to the most current writing. To some, they do not see the same legal significance of a written memorandum to a formal witnessed or notarized estate planning document. But, with the correct inclusionary language, the legal effect is the same and a fiduciary will have a legal obligation to enforce the Testators/Settlors wishes.