It is interesting how sometimes the small things can have the
biggest meaning to some people. While much of our estate planning practice
focuses on managing the real estate a person has left or will leave behind, many
of our clients are just as concerned about what will happen to their personal belongings.
It makes sense, when one spends a lifetime accruing items, some given a special
meaning or a personal attachment, it is natural to want to give those things to
someone who will see those meanings as well. It is natural to think: “what
about all of my stuff?”
This is a fascinating area of the law, because how personal
property (your stuff) is dealt with in the realm of estates is more
amorphous than with real property. The purpose of this article is to provide
some background information to personal property’s role in probate and estate
planning.
What is personal property?
Sometimes, the easiest way to describe something is to say
what it is not. Very roughly, personal property is most things that are NOT
real property (i.e. your land and the house sitting on it). A slightly more detailed
definition is that personal property is a right or interest in “movable things.”
Cash, cars, chairs, collectibles, clothes, computers (and
many other things that do not begin with the letter “C”) are all examples of
personal property. However, investment accounts, insurance accounts, and stocks
are not considered personal property. Additionally, things that were at one
time movable, but have now become affixed to a house or a piece of land (called
“fixtures”), cease to be personal property. It is important to know the distinction
of whether your property is on the real property side of the line, or the
personal property side. What side of the
line property is on can change how the property will be handled in your estate.
Your Will will affect your personal property
The reason why managing personal property is sometimes
difficult is that while real property or insurance can be set up to transfer
automatically outside of probate, personal property rarely (if ever) transfers
outside of the scope of a will. Further, most people do not go and specify to
whom each little thing she owns will be distributed. That would take forever!
Your will determines what will happen to the rest of your stuff when you pass
away.
Specifically, how you designate your beneficiaries will
determine how your personal property gets distributed to your descendants (or “heirs”).
Option one: decide to split your estate into percentage shares between your
heirs. That will mean that your heirs will be responsible for divvying up the
property among themselves. Option two: you can delineate to whom certain
pieces of property will be distributed, and then
distribute the rest of the property (the “residual shares”) to your heirs to
divvy up. There are more ways to distribute personal property, but these are
two common ways it is done.
If you pick the first option, when you pass away, your
lawyer (hopefully one from our office) will then sit down with your heirs, who
will all have to agree on which items are going to whom. If they disagree, then
the Court becomes involved. If the Court becomes involved, an appraiser will be
appointed to try and determine the value of the property, and then the Court
will order the property sold and distributed to the heirs by their percentage
share. What a nightmare!
However, if a will is clear that person A gets property Z,
then the executor must comply with
the will and distribute that property according to the will. Even if the other
heirs don’t want person A to have property Z. There are other issues which may
prevent the executor from distributing the property as the will directs, but
that is for a future article.
Things aren’t always as they seem…
While it might now seem like a good idea to be more specific
about who you want to get your personal property, there are considerations with
that strategy as well. For instance, let’s say you forget that you left a piece
of property, a lamp, to your daughter in your will, and before you die, you
accidentally give away your lamp to someone else. Your executor will have to
treat the provision in your will about the lamp as though it never existed. Your
will will say that your daughter should get the lamp, but there’s no lamp to
give!
Generally, in probate matters, a rule of thumb is that what
is best is what the person who made the will intended. If the lamp is gone, but
your will says it should go to your daughter, we already know things are not
going to be how you intended when you made your will. As lawyers we think —
what else might you have changed your mind about? Although a lawyer or executor
should always act in accordance with your will alone, and should only inquire
into matters extrinsic to the will in extreme situations, questions of intent
are still sometimes causes for concern.
So, when dealing with your personal property, you should ask
yourself whether your heirs will be able to divide your property amongst
themselves amicably. Also, you should ask whether your estate is fairly stable,
and if you decide to allocate to whom specific items should go, make sure those
items are going to be around until after you pass away. Schedule a consultation
with us if you have specific questions as to which situation is best for your estate. Visit our website at veleylaw.com for more information.
What should I take away from this?
When you are planning your estate (or when you are the
executor of someone else’s) it is important to know how your possessions are
going to be distributed. Many times, the rules that apply to one type of
property do not apply to another. This article should help you make a more
informed decision with your attorney on how you would like your property
distributed.
For the next article on this topic, I will go into more
detail about the different pitfalls of making a will, expand upon the above information,
and add more things you should keep in mind when making your will. I will also
go into some of today’s hot button topics such as what to do with your Facebook
photos, or how you can provide for your pets after you pass away. Stay tuned!
