Failure to plan with respect to your personal property may seem an inconsequential concern. It is not. After death, family disagreements over who receives Grandma’s old teacup happen more often than one would expect, even though the teacup has very little monetary value. Frequently when there are multiple children, each one wants to make sure they receive a “fair” share of the personal property of their deceased parent, down to the penny or item. I see it over and over, and it is sad. Many of these issues can be avoided with proper planning.
Personal property definition
Personal property is sometimes referred to as “personalty.” It includes things like furniture, collections, jewelry, vehicles, boats, books, household items, guns, digital assets, and content of electronic communications, among other things. Interestingly, there is Pennsylvania law in support of lease interests and royalty rights being included as personal property, so it is very important to distinguish those interests from more tangible personal property in your will.
Letter of instructions
You can choose to give everything away during your lifetime. You may find great enjoyment in watching your loved one incorporate your antique dining room set into their home. More often though, personal property is addressed in your will. Typically, personalty goes to your spouse or significant other in your will. When both spouses are deceased, the will may refer to a “letter of instruction” prepared during your lifetime regarding specific items. List the items in one column and the beneficiary of those items in the other column; sign and date the list and keep it with your copy of your will. You can change the list during your lifetime without doing a new will or a codicil to your will.
Others prefer to specifically list an item and the beneficiary in the will – “I give my grandmother’s blue willow teacup to my child, Susan Jones.” However, if you change your mind and want to give the teacup to your friend because you and she have solved many a problem over a cup of tea, you will have to do a new will or codicil to change the recipient.
Lottery system, sale, or donation
Some clients prefer that a selection system be detailed in their will — draw straws or have your children go in age order in selecting items. Often, clients anticipate issues or already know that their children do not want any of their personal items and say that the executor shall have a sale or auction, with the proceeds of the sale going into the estate checking account, to be distributed equally to their beneficiaries. If the children want grandma’s old teacup, they go to the sale and purchase or bid on it. Some clients opt to donate all items of personalty to a charity.
Personal property subject to probate
Probate is the process to wrap up the affairs of a person who passed away in Pennsylvania. In addition to many other things, it involves the date of death valuation, sale/liquidation, and distribution of personal property.
Valuation of personal property
In the past, the Department of Revenue required an itemized appraisal of all items. Thankfully that requirement has changed as estates often paid more to the appraiser than the personal property was worth. Currently, the executor may estimate the value. However, if any individual article is worth more than $3,000.00, or if a collection of articles of one type has a value in excess of $10,000.00, an appraisal from an expert, along with that expert’s qualifications, should be included with the inheritance tax return.
Sale, donation, disposal, or distribution of personal property
The will governs. It is the executor’s job to follow the will and secure the decedent’s property, both real and personal. Items should not be given away before they are valued. Emptying the house out and donating everything or giving the items to the first family members who show up is going to create a future issue for the executor as to the executor’s administration of the estate and real or perceived inequity. If firearms are involved, there is even more complexity and potential exposure for the executor. For example, handguns and other firearms are treated very differently.
Distribution of personal items can be tricky business, but it doesn’t have to be. For more on the probate process, watch Probate Process – What You Need to Know.