For most of us, sitting down to consider our estate plans can be an emotional exercise. Not only is facing our own mortality daunting, but the process of deciding who you want to leave your personal property to can be overwhelming. And understanding differences in generational connections to personal “stuff” is often a rude awakening. What happens if the items you have put importance in throughout your life are just things that your beneficiaries don’t want or need?
Estate planning is not just about money and property. It is about family and relationships. Although estate planning is typically regarded as financial in nature, there is economic value, and then there is sentimental value.
Although each family has its own unique way of dealing with personal property upon the death of a family member, it helps to have an idea of what you want for each of your loved ones and set it out specifically so there are no potential disputes between them.
Having a Discussion
Although these may be awkward conversations at first, knowing what items your family members would like when you’re gone is helpful and may open very meaningful discussions and even render some surprises. These conversations often open a new way to share family history and give your objects new meaning. You may even choose to offer items now instead of waiting.
Wills, Trusts, and Property Memorandums
Once you have insight into family preferences, you still want to ensure the legal transfer of these things after your death. You can use either a will or trust to leave these belongings to your heirs. If you leave personal property through your will, the executor of your estate will be responsible for distributing your property in accordance with your wishes. In the case of a trust, the trustee will fulfill this.
In the state of California, you can also make a list of specific items called a property memorandum that will set out specific items and who you want them to go to. Your memorandum can list tangible items but cannot list money or other intangibles. You can then refer to your property memo in your will or trust. The benefit of adding a property memorandum is that you can change it if you change your mind about anything without the necessity and formality of changing the will or trust document itself.
How Property is Passed Through a Will
Your will contains provisions for how you want your estate to be distributed after your death. Your estate includes all your assets, including real property, personal property, financial and retirement accounts, and other things. Your will can also include instructions on how you want gifts of personal property and money distributed to your beneficiaries. Anything in your estate can be given to specific individuals through your will and will be distributed by your executor according to your instructions.
How Property is Passed Through a Trust
A trust is a bit different in the way that property is passed on to beneficiaries. In the case of a living will, you will fund your trust with assets while you are still alive, in essence giving ownership of them to the trust. This is managed by a trustee, which can be you or another designated trusted individual.
Upon your death, your trustee or successor trustee will distribute the assets in the trust, following instructions that you have outlined in your trust agreement. Similarly to a will, you can specify the personal property held by the trust to be given to specific individuals after your death.
What Can You Leave in a Property Memorandum?
While your will or living trust refers to your entire estate, a property memorandum specifically deals with the distribution of tangible personal possessions.
If you have a property memorandum, your will or trust must reference it to ensure the legal disposition of your personal items. A memorandum does not need to be a formal document, however. In fact, it can even be a handwritten list. It merely needs to refer to specific personal items and the individual you want each item to go to.
Your property memorandum can refer to tangible items such as
- Art
- Jewelry
- Collections
- Family heirlooms
- Furniture
- Household items
And other tangible goods.
Your property memorandum cannot include things like
- Money
- Bank accounts
- Investment accounts, stocks, bonds
- Real estate
Or other things of a financial or intangible nature.
You must sign your memorandum, but it will not need the same formalities as your will or trust, such as witnesses or notarization. Keep your memorandum with your will or trust documents where your executor or trustee will know where they are.
How Will Your Property Be Divided?
Your executor or trustee will follow your instructions that you have left for distributing your personal property upon your death. The beneficiary, however, has the right to refuse or disclaim it. If the property has been disclaimed, it will then move on to the next beneficiary in line.
When items aren’t specifically referenced in the will, trust, or property memorandum, they still must be divided between the beneficiaries. Executors and trustees must take care to supervise the division of property to ensure that it is done fairly. Often they employ the use of a lottery system or allow beneficiaries to take turns choosing what they would like to take.
What Happens to the Items No One Wants?
Sometimes there are personal items from the estate that no one chooses. Estate plans can make contingency arrangements for these items, such as donating them to a charity or asking other family members or friends if they would like any items. These arrangements can include
- Estate sales -- Some contingency plans call for an estate sale to liquidate unclaimed items. A company is hired to value and sell the remaining objects, taking a commission for themselves. Any proceeds above that become part of the estate and will be divided between the beneficiaries.
- Estate auctions -- Like estate sales, an estate auction offers another way of liquidating the remaining items from an estate. In this case, an auctioneer is hired, with each piece going to the highest bidder. Proceeds after paying the auction house will then go to the estate and are divided between beneficiaries.
- Donations -- If a charity was not named in your will or trust, the beneficiaries can get together and decide on a charity to give the remaining items to.
- Disposal -- Any remaining items that cannot be liquidated by sale or auction and cannot be donated will be disposed of.
Getting the Help of a Legal Professional
Estate planning can be emotional and overwhelming, especially when making decisions about things that have personal and sentimental value. Getting the help of a skilled California estate lawyer who can compassionately offer options while considering the financial and legal nuances is critical.
We’re here to help. To schedule a consultation, call Santaella Legal Group, serving San Ramon, Danville, Dublin, Pleasanton, the Tri-Valley and Bay Area at (925) 831-4840.