The following information and opinions are provided courtesy of Wells Fargo Bank, N.A.
Tangible Personal Property and Its
Place in the Estate Settlement Process.
Prepared by:
Daniel B. Allen, CTFA,
Vice President and Regional
Fiduciary Manager,
Wells Fargo Bank
Estate Services.
In this white paper
1
Introduction
1
What is tangible personal property?
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Tangible personal property within the estate settlement process
2
How to help avoid fighting heirs
3
Conclusion
Tangible Personal Property and Its
Place in the Estate Settlement Process
Introduction.
Many people worry about what will happen to their
possessions when they pass away. “Who will get the
piano? What will happen to the antique grandfather
clock? Would any of my children want my silver tea
set?” If these questions were not addressed during life
or in estate planning documents, they will need to be
addressed after death. Without clear direction from the
decedent, either residual clauses in estate planning
documents or state law will dictate to whom these
items will go. The answers to these questions will all
be ironed out during the death settlement process.
The death settlement process is the work that is
required to accurately implement a decedent’s estate
plan, handle any disputes with the estate, and ultimately
distribute estate assets to heirs in an efficient manner.
This paper discusses a specific class of assets held
in an estate, namely tangible personal property, and
the process in which those assets are transferred to
their new owner during death settlement. This paper
will also touch on opportunities and offer suggestions
to help alleviate tension among beneficiaries during
the time of this transfer.
It is easy to imagine the
emotional attachment family
members may have with the
photo album or the heirloom
piece of furniture passed
down for generations.
What is tangible personal property?
Tangible personal property is defined by the IRS as
any tangible property that is not real property.1 For
the purposes of this paper, tangible personal property
includes everything from household pets and vehicles
to the artwork hanging on the living room wall and the
contents of the office bookcase. It is easy to imagine the
emotional attachment family members may have with
the photo album or the heirloom piece of furniture
passed down for generations. While many of these items
may not necessarily hold great monetary value, a great
number of battles both inside the courtroom and out are
fought over these knickknacks and household goods.
Both good planning and conversations with family
members prior to death can help avoid many of the
pitfalls surrounding the disposition of tangible personal
property and the conflict that can arise between heirs.
Tangible personal property
within the estate settlement process.
One of the first steps in the death settlement process is
to marshal and secure the decedent’s assets: real estate,
personal property, stocks and bonds, certificate of
deposits, cash, brokerage accounts, retirement accounts,
etc. In regard to tangible personal property, the executor
or trustee is charged with gathering all the tangible
personal property owned at the time of death and
securing (protecting and locking down) it. In addition,
if the decedent’s estate will require a death tax return
filing such as a state death tax return or federal estate
tax return, the items must also be inventoried and
appraised so that they can be attached to those returns.
Generally these items can be easily ascertainable upon
entering a house. With a quick walkthrough, the art,
furniture, and other housewares can be inventoried and
secured. However, depending on the size of the estate,
the number of properties owned at the time of death,
and the information (or lack of information) shared by
the decedent with others, this can be a rather tedious
undertaking. Coins and silver may be locked away in a
safe or safety deposit box; furs may be in storage at the
department store; and valuable jewelry may be hidden
throughout the house.
Also, depending on the decedent’s mental state
prior to death, executors may have to conduct some
investigative work: valuable jewelry has been found
sewn into the seams of curtains and gold buried in the
backyard. In one instance, executors found valuables
stashed in what looked like ordinary cans of green
Tangible Personal Property and Its Place in the Estate Settlement Process
1
beans. The cans had been opened, emptied, filled with
valuables, and re-soldered closed before being replaced
on the pantry shelf.
Once the tangible personal property has been located,
secured, inventoried, and appraised, if necessary, it is
the executor’s duty to properly distribute those items
in accordance with the decedent’s wishes. To achieve
this, the executor reviews the decedent’s estate
planning documents to search out the controlling
articles or paragraphs. There are primarily three ways
these items are distributed:
1)specific bequests
2)separate writings
3)residual bequests
In the case of specific bequests, certain items are named
specifically in the will or trust. The executor or trustee
is directed to hand over a clearly identified item to a
specific individual or entity (for example, “I give my
1952 Concert Grand Piano Serial No. 123456789 to the
San Francisco Ballet.”) Without clear identification, the
decedent’s intent may be difficult to understand and
carry out. For example, imagine the confusion if a will
included language stating, “I give my gold watch to my
son,” and three gold watches were found in the
decedent’s possessions at the time of death.
The separate writing is for those individuals who may
often change their mind over the disposition of the
tangible personal property. The will or trust often will
say, “In regard to tangible personal property, I direct my
Executor to distribute it in the manner set forth in a
separate hand written memo held in my safety deposit
box at the time of my death.” The writing is typically a
list of specific items of tangible personal property next
to the name of the intended beneficiary. In both these
situations, the decedent’s intent is clear. Both the
executor and the heir has a clear understanding of
what goes to whom.
In some situations, the decedent either did not have
specific wishes for household items and heirlooms or
felt like their heirs could divide the tangible personal
property on their own accord. This is normally referred
to as a residual bequest. This article or paragraph is
usually found near the end of an estate planning
document and states, more or less, that “all tangible
personal property not otherwise distributed above is
to be added to the rest and residue of my estate to be
divided equally amongst my heirs.” While this may
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turn into an emotional battlefield (as heirs fight over
the $2 ceramic vase and which heir has a more
significant emotional attachment to the vase), many
estate planning documents have added “stalemate”
or “tie-breaker” language, which creates a dispute
resolution process as a backup when a decision cannot
be made. This may take the form of perhaps drawing
straws or numbers, or assigning ultimate decisionmaking power to one individual or the executor.
How to help avoid fighting heirs.
Although there are no fail-safe means to keep heirs and
loved ones from battling over the tangible personal
property left in an estate, there are several steps one can
take prior to death that may lead to a more amicable
atmosphere during the disposition process.
1) Talk with your heirs. The simplest step is to verify
that all beneficiaries/heirs are on the same page
regarding the disposition of the estate. While certain
family dynamics may not make this possible, having
the conversations and understanding what items have
the most emotional significance to each heir can help
in determining who gets what. It can ultimately lead
to a smooth and agreeable transition after a very
emotional loss. In addition, inform family or a trusted
advisor of tangible personal property. If the executor
has to search for hidden property, it will ultimately be
a cost, whether time or money, to the estate.
2)Preparation of a tangible personal property
inventory. For insurance purposes, many
homeowners and collectors already have inventories
of household items that require extra insurance
coverage. This itemized list or inventory is a great
first step in creating a tangible personal property
memorandum.
3)Specific bequest language. If there are certain items
that hold more meaning, direct your executor to
distribute them to a specific heir with specific
bequest language. It gives clear cut direction and
eliminates all ambiguity.
4)Gifting during life. If possible, distribute the silver
tea set or the heirloom to a family member during
lifetime. Tangible personal property that has been
gifted prior to death may not be included in the
death settlement process.
Tangible Personal Property and Its Place in the Estate Settlement Process
Conclusion.
End notes.
Tangible personal property, on average, makes up only a
small portion of an estate’s monetary value, but it has
the potential to create a very antagonistic relationship
between heirs. The emotional significance the property
holds for each individual is difficult to measure, and
can lead to misunderstandings and anger. While it is
the job of the executor to deal with these issues, several
strategies set up during life can give clear direction
and provide a smooth transition during the estate
settlement process.
1
eal property is defined by Black’s Law Dictionary as “land and anything
R
growing on, attached to, or erected on it, excluding anything that may be
severed without injury to the land.”
Tangible Personal Property and Its Place in the Estate Settlement Process
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Disclosures.
Wells Fargo Wealth Management provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries.
This information is provided for educational and illustration purposes only.
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we consider reliable, but we cannot guarantee their accuracy or completeness. Opinions represent Wells Fargo Wealth Management’s opinion as of the date of this report and are for general information purposes
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