Thursday, March 19, 2015

The Importance of Personal Property

Today's blog examines an often overlooked part of estate planning. Clients often presume that their children will simply sort out personal property, without considering the potential pitfalls of leaving such decisions up to others. Including a Personal Property Memorandum as part of an estate plan is an excellent way to limit those issues. 

     One aspect of estate planning frequently overlooked by clients is the distribution of their tangible personal property. "Tangible personal property" includes all of the clients possessions that do not otherwise have a title or ownership designation. As part of our estate planning we use an Assignment to designate the Living Trust as the owner of all of these items. We also provide the client with the ability to leave a list of specific gift of tangible personal property.This Personal Property Memorandum may be changed at any time, without amending the Trust, and is read as part of the Trust after the client’s death. Unfortunately, when we bring this to the client’s attention, they often give it short shrift, indicating that they do not have anything of value or that they believe their children will not care about the personal property.
     Treating tangible personal property as an afterthought or unimportant is a common source of discord in the administration of a client’s estate or trust. Clients fail to account for the their loved ones attaching significant emotional value to items that lack significant monetary value. As an example, children may fight over which of them inherits their mother’s KitchenAid mixer because one of them has a strong emotional attachment to the mixture as a reminder of all the times he and his mother baked together for the holidays, while the client’s daughter simply would like a mixer for her own home. It never occurs to either sibling to explain to the other why they place such a high value on their mother’s mixer, thus resulting in misunderstandings and hurt feelings.
     Whenever our clients indicate that they feel their tangible personal property is not significant in their estate planning we encourage them to take time to sit down with their loved ones and discuss which items may hold emotional significance. This conversation, as much as any other conversation, can alleviate surprises and problems after the client’s death. In addition, it allows the client and their loved ones to begin a discussion about what will happen after the client’s death without focusing on difficult matters to discuss, such as illness and the money. Not only do clients gain a better understanding of what their children value, they also have the ability to limit any unnecessary conflict that otherwise might have arisen after their death.
     Tangible personal property often carries the most emotional significance to a client’s loved ones after their death. For a client concerned about maintaining familial harmony and ensuring the smooth administration of their estate, taking time to prepare a personal property memorandum can significantly reduce the chance of problems after their death. 
     It is important to remember that while the personal property memorandum is a common tool in estate planning is not universally included in every document. Different documents will treat the memorandum differently, some give it different priority from the other terms of the trust, and some trusts omit this option entirely. Clients should consult an experienced professional to determine under what terms they can make use of a memorandum in their planning.

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