Originally published in September 2018 and updated and republished May 2021.
Every Estate Plan has to address how to distribute the tangible personal property (“Tangible Personal Property” or “TPP”) that someone owns.
Tangible Personal Property are assets that one can touch and hold – it is basically your “stuff” – furniture, appliances, clothing, jewelry, artwork, automobile, boats, stamp collections, coins, photographs, quilts, etc.
TPP does not include things such as real estate, bank accounts, life insurance policies and other types of assets that you cannot “hold or touch”.
Here are some tips and pointers on how to address your Tangible Personal Property (or your “stuff”) in your Estate Plan:
General Household Items Are Valued at 5-10% of Replacement Value For Estate Planning purposes – the value of your TPP will not be the “Replacement Value” but rather the “Estate Sale” or “Garage Sale” value of those assets. For example, all of your General Household Items might cost $100,000 to replace, but if you had to sell those items to liquidate you will only get 5 - 10% on the dollar.
For that reason, we would value your General Household Items at the $5,000 -- $10,000 Estate Sale Value --- not $100,000 Replacement Value. Sometimes, this difference matters when determining if the total estate would be subject to estate tax or not.
More Valuable Tangible Personal Property Items
TPP items such as artwork, coin collections, etc. may have high monetary value. During our initial meeting, I have clients give a ballpark estimate as to the value of these items – and then, eventually, we may need a formal appraisal to know the value of these items for certain.
Gold and diamond jewelry have a “Retail Value” and a “Wholesale Value”. Executor and Trustee clients I have worked with were only offered Wholesale Value for jewelry they were trying to sell on behalf of an estate – this was usually about 30-50% of the retail value.
Collectables That are Not Valuable Anymore
Beanie Baby collections, Hummels, and Longerberger baskets are not worth much today - in fact – it may be hard to even give these items away.
China dishes and silverware have also substantially dropped in value. Younger generations do not collect or value these items like previous generations.
Vehicles are Considered Tangible Personal Property
Cars, trucks, boats, trailers and recreation vehicles are also classified as Tangible Personal Property for Estate Planning purposes. These vehicles are generally the most expensive TPP items in someone’s estate.
Vehicle ownership is transferred through updating the title of that vehicle through the Illinois Department of Motor Vehicles. General Household Items, jewelry and other TPP items, on the other hand, do not have any title or registration system to track ownership. Ownership of those items are just evidenced by possession.
Tangible Personal Property Items are Probate Assets
For Estate Planning purposes, TPP items are classified as a “Probate Asset” – this is an asset that is owned by one person only and does not have a beneficiary designation.
If something is a “Probate Asset”, then when someone dies – those assets could be required to go through the court process of Probate in order to be transferred to someone’s heirs or legatees. To learn more about the Probate process CLICK HERE.
Because of the time and expense involved, most people want to avoid Probate for their Estate. In Illinois, as long as someone’s total “Probate Assets” are valued at less than $100,000 – a Small Estate Affidavit can be used to transfer those assets and avoid Probate. Be careful so that your “Tangible Personal Property” does not trigger Probate for your Estate -- new cars, jewelry, coins, etc. can all add up and have a combined value of more than $100,000.
Using A Trust The only way to make sure your Tangible Personal Property are a “Non-Probate Asset" is to set up a Trust for your Estate Plan and transfer those assets into the Trust. Any asset held by a Trust is considered a “Non-Probate Asset” and will avoid the probate process.
TPP Items Can Be A Source of Family Conflict
Even though TPP items such as photographs, quilts, tools, furniture, etc. may not have much monetary value, they can have very high sentimental value among family members.
I have seen situations with my clients where they had hundreds of thousands of dollars sitting in an estate checking account waiting to be distributed to the family, but the family members went to court fighting over a few boxes of photographs and other family heirlooms. Because of the emotional attachment to these items, you should thoroughly consider who should inherit these items and how these items should be distributed to your family.
How to Distribute Tangible Personal Property
Every Will or Trust should have a section that deals with how Tangible Personal Property should be distributed. There are three ways to distribute Tangible Personal Property with proper Estate Planning:
Specific Bequests in Wills & Trusts: You can have “specific bequests” in your Will or Trust. A specific bequest specifically states who shall inherit certain pieces of property. Having specific bequests in your Will or Trust is generally reserved for very important TPP items.
Letter or Memorandum: Some people prefer to write a letter or a memorandum that instructs how they want their TPP Items to be distributed. In Illinois, this letter is not a legally binding way to distribute TPP items of your estate; however, many people trust that their heirs, legatees, and Executors will abide by their wishes - even if the instructions are not legally binding and still want to use a Letter or Memorandum in addition to statements in their Wills and Trusts.
General Statements in Wills & Trusts: Even if Specific Bequests and TPP Memorandums are prepared, there will always be a statement in the Will or Trust document that generally distributes TPP items.
For Example, many people leave their TPP Items “to their children in equal shares” and then let the family decide how to divide these items.
Additional language is included that states "in the event there is a dispute regarding how to distribute TPP items, the Executor or Trustee has the final authority to make decisions on TPP distributions."
Your Tangible Personal Property Checklist
It is easy to overlook how your Tangible Personal Property will be distributed as part of your Estate Plan. Here are some final thoughts and tips about the Tangible Personal Property in your Estate:
I recommend everyone do an informal evaluation of their Tangible Personal Property to see what those items are and how much those TPP items are worth.
Are there appraisals for artwork, collectables or jewelry? If so can they be easily located by your Executor or Trustee?
Identify the family heirlooms that you want certain people to have and determine if those items are important enough to have as specific distributions that are written in your Will or Trust.
Do you want to write a letter or memorandum of instruction that is not legally binding on your heirs but gives them insight into what your wishes would be on distributing your Tangible Personal Property?
Finally, if you have over $100,000 in Tangible Personal Property – consider a Trust-Based Estate Plan so that your Estate will avoid Probate.
We help our clients through all of these decisions during our initial Estate Planning consultation we call our “Ritchie Legacy Planning Session” our “RLPS”. CLICK HERE to learn more about our Ritchie Legacy Planning Session.
This article is a service of Attorney Chad A. Ritchie and the Ritchie Law Office, Ltd.
Click Here or call (309) 662-7000 to learn more about Ritchie Law Office, Ltd. and our Estate Planning process, which starts with an initial consultation called our “Ritchie Legacy Planning Session”.
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