Personal Property: How to Divide Up Your Stuff
One of the biggest problems in winding up estates is the “stuff”—all the furniture, garage contents, collections, family photos, and so forth. It is a time-consuming job, and if there are multiple heirs, disagreements and hard feelings can create long-lasting family problems. I have had to litigate personal property divisions because people can get stubborn over items that have seemingly little cash value. A couple of examples:Dad died. Mom had predeceased him. The two children did not get along at all. The primary problem was the family photos. They were in two cardboard boxes in the possession of the son. He was willing to give his sister some of them, but only the few that he chose. She wanted half and wanted her choice. After lots of fruitless negotiation, I finally brought it in front of a judge. I explained my client’s thinking, and the other attorney reiterated that of his client. Being a judge can sometimes be simple. He did the King Solomon solution. His words, which caused the siblings to decide to solve the problem themselves, were as follows:
That’s why we have judges. This was some time ago—nowadays I think the judge would order them digitized so two copies would be easily available.
Here is a sample of what I put in trusts to cover this situation:
Trustee Powers
The section of a trust spelling out specific powers of a trustee typically runs to several pages as written by most attorneys and as found in form books. However, in carrying out actions on behalf of the trust, banks, brokers, and title insurance companies usually require a notarized form specifying the trustee’s authorization to carry out the particular transaction they are dealing with. For example, in selling real estate, the title company will want an affidavit stating that the trustee has the power to sell real estate owned by the trust. The affidavit generally has to be dated close to the date of the proposed sale so that the title company is satisfied that the trust document has not been amended in such a way as to limit that power. Some title companies and banks want to be given an entire copy of the trust, including all amendments.Two things are problematic about that. The first is privacy. The title company does not need to see to whom you are leaving your assets at your death and any restrictions or limits on the inheritances. That’s your business and has nothing to do with the sale of the property. The second is that trusts are often thirty or forty pages long, and the full document will likely have to be recorded as evidence of the trustee’s power to make a legitimate and insurable sale.
What I do is include a separate all-inclusive paragraph spelling out a laundry list of specific trustee powers to cover the most likely kinds of transactions in which the trustee might engage. By including this single paragraph in a one- or two-page Affidavit of Trust (also sometimes called a Trust Certificate), you will have provided the necessary information in a concise manner that will not give out unnecessary information and will be inexpensive to record. Title companies often have their own forms for this purpose.
Here is a sample of this general statement of powers (this is not a complete list of all powers contained in the document) that usually satisfies those with whom you are transacting business:
Early or Partial Distributions of Assets to Heirs
The short-form description of the duties of a trustee after the death of the grantor is to identify and gather the assets and debts of the grantor and distribute them as instructed in the trust. Sometimes this takes a while and heirs don’t want to wait. Also, a trustee has a duty to manage the assets responsibly, which may include investing as appropriate to earn available interest on cash accounts.The usual cause for delay is being unable to liquidate assets quickly. Often there is real estate that needs to be sold so that the money can be distributed to the heirs. But it might take many months or even years to find a buyer. In the meantime, the other trust assets will be on deposit somewhere earning taxable interest, which leads to accounting fees and taxable income.
Having a paragraph in the trust that allows the trustee to make early distributions to the heirs eliminates some of the beneficiary unrest and allows them to get at least some of their inheritance right away. The trustee needs to hold back a reserve to cover expenses that might be incurred while waiting for a real estate sale, since if she distributes everything except the real estate then it might be difficult to collect the pro-rata shares of future expenses from them, such as property taxes, utilities, insurance, and repairs.
As to specific bequests of personal property, there would be no reason to wait on handing those out. If the grantor designated things like an automobile to a particular person or specific items listed on an attachment to the trust that are to go to a particular person, the trustee would likely be safe in handing out those things.
Here is a sample of what I put in trusts to cover this situation:
(To be continued...)
This excerpt is taken from “How to Avoid Probate for Everyone: Protecting Your Estate for Your Loved Ones” by Ronald Farrington Sharp. To read other articles of this book, click here. To buy this book, click here.
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