By: Shannon Goodwin – Senior Associate Attorney
When you think about your estate and what you are going to leave behind for your loved ones, your mind most likely jumps directly to money or real property – your home, investments, retirement assets, vacation homes, life insurance, and so on. These are all important assets to think about when doing your estate planning, but what about those priceless items that hold more sentimental value than monetary value? That old rolling pin used to bake pies with your grandchildren, that broken fishing rod that went on one too many fishing trips, or that tchotchke that triggers a funny memory from that one family vacation fifteen years ago? Even those items that may hold great monetary value, but hold an even greater sentimental value – your engagement ring or that autographed baseball from the game you went to with your dad? These are often the assets that mean the most to your loved ones, regardless of their monetary value. These items are your tangible personal property – your “stuff.”
There are a few different ways to dictate how your tangible personal property is distributed upon your death. A memorandum or schedule is a separate document attached to your will or trust that allows you to list individual items of tangible personal property and assign each item to a specific person. This supplemental document is referenced in the will or trust but may be filled out after the execution of the will/trust. It can be handwritten or typed, but must be signed and dated to be valid. This allows you to update it or make changes as often as you like without having to update or restate your entire will or trust. Not all states allow these supplemental documents, but Maryland is one of the states that does recognize personal property memorandums as valid estate planning documents.
Any items that are not specifically addressed by the personal property memorandum can be collectively referred to and divided equally amongst multiple beneficiaries. This allows the beneficiaries to choose and divide the items amongst themselves. If there are multiple beneficiaries concerned with ensuring the property is divided as equally as possible based on monetary value, then the property can be appraised and divided based upon each item’s individual cash value. An appraisal is a great tool to help avoid any potential fights amongst beneficiaries. However, most appraisers will not appraise insignificant items such as clothing – unless of course we are dealing with expensive furs or an autographed basketball jersey that holds significant monetary value.
It’s important to keep in mind that inheritance tax does not just apply to cash distributions, but to distributions of tangible personal property as well. Any valuable items of tangible personal property that are bequeathed to an individual not exempt from inheritance tax – such as a niece, nephew, cousin, or friend – will be subject to inheritance tax. The item(s) would first need to be appraised so that the tax could be assessed on its appraisal value at the time of death. Inheritance tax even applies to items of tangible personal property gifted to a non-exempt individual within two years prior to death.
The next time you revisit your estate planning, be sure to consider those items of tangible personal property stuffed away in your closet or attic – whether it holds monetary value or not, the sentimental value grows with each generation it’s passed to until it eventually becomes a family heirloom.
Shannon K. Goodwin is a Senior Associates with Elville and Associates and the leader of the firm’s busy Estate and Trust Administration Department. Through her guidance, she partners with clients as they address the sometimes complex matters of the administration of loved ones’ estates from start to finish, including helping navigate the probate process, inventory and information reports, accountings, and much more. Shannon may be reached at firstname.lastname@example.org, or by phone at 443-393-7696 x116.