Dividing Personal Items After Death

Many executors wonder how to distribute personal items after a family member's death.
Many executors wonder how to distribute personal items after a family member’s death.

Sometimes, deciding how to divide a family member’s personal items after death can lead to more conflict and bad feelings than dividing up cash and other property.  Many executors wonder how they can do this without causing rifts in the family.

Minneapolis Tribune’s article entitled “A clever way to divvy up items after a parent’s death” describes an unusual plan one family had to divide their mother’s personal property after her death.

According to the article, after their mother’s death at age 93, the co-executors, a brother and a sister, created an inventory of 724 items in her estate that had monetary or sentimental value. These included things like furniture, artwork, oriental rugs, cutlery, china, a piano and a car. They didn’t include their mother’s jewelry, books or linens, or her silver, gold and collectible coins. The four siblings (including the co-executors) all agreed to sell the coins and to deal with the many books, linens,  jewelry, and other items more informally.

The family decided not to follow the usual process of taking turns to choose items they wanted. With so many items, that could take a while. Instead, the co-executors gave each sibling an inventory of their mother’s personal property, with the request that each sibling indicate on the inventory the items he or she wanted. This resulted in the 724 items of personal property being divided into three groups: (a) items in which no one had an interest; (b) items in which only one person had an interest; and (c) those desired by two or more siblings. The items in which no one had an interest were sold or given away. The items wanted by only one person went to that person.

The co-executors then distributed to the siblings a list of the items in which more than one of them had expressed an interest. Each sibling was “given” 500 virtual poker chips that he or she could use to bid for the contested items. However, prior to the bidding deadline, the siblings could talk with one another about their intentions and whether they could come to an agreement regarding specific items. Several of the siblings had bid for items in a general category, such as family pictures, bookcases and oriental rugs. They were able to agree among themselves who would receive which items from those general categories, thus preserving their virtual poker chips for what they really wanted.

After the final bids were in, the co-executors announced who won each item, but, to avoid possible conflict or disagreement on values, they did not reveal how much was bid for each item.

Finally, when all the allocations were determined, the co-executors calculated the value of all the items of personal property received by the siblings and readjusted the estate’s cash distributions to ensure that everyone came out in the same place financially. The most valuable items were a 1919 Steinway drawing room grand piano valued at $25,000; a 2005 Toyota Camry valued at $4,500; and some oriental rugs with a total value of $13,975. Those who got the more valuable items had to pay their siblings something for them, with a total of $17,500 trading hands.

Though it was time-consuming, the process avoided the tensions that sometimes result when personal property is distributed. The siblings involved believed their system was fair and even brought them closer together.

One thing to remember is that you don’t have to leave it to your executor to decide how to divide your personal property. You can leave your executor written instructions on how you wish certain items of sentimental value to be distributed. See https://galligan-law.com/how-a-letter-to-your-executor-or-trustee-conveys-your-wishes/

Reference: Minneapolis Tribune (Feb. 25, 2020) “A clever way to divvy up items after a parent’s death” 

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What Happens to Savings Bonds When the Owner Dies?

You may find some savings bonds when sorting a deceased person's important papers.
You may find some savings bonds when sorting a deceased person’s important papers.

Because savings bonds often take many years to mature, they may be stashed in a safety deposit box or filing cabinet and forgotten. The Department of the Treasury has provided instructions about what should be done if the owner of a savings bond has died.

Electronic savings bonds. If the savings bonds are electronic, the person who died likely has a TreasuryDirect account. If so, you should contact the Treasury Department’s Bureau of Fiscal Service, which will put a hold on the account and provide instructions for your specific situation.

Paper savings bonds. For paper savings bonds, you must first determine who owns the bond. A savings bond typically prints the names of the owner or owners on the bond. If all owners named on the bond have passed away, the bond is part of the estate of the person who died last. In order to properly handle the savings bond, you must establish that you are entitled to the bond or that you have the authority to act on behalf of the beneficiary of the bond, for example, you are the executor or administrator of the owner’s estate.

If the savings bond is part of the owner’s estate, the Treasury Department has spelled out several procedures:

  • If the bonds are valued at $100,000 or less and the estate was not formally administered through a court process, the beneficiary simply must mail in the bond, an FS Form 5336 that has been signed and notarized, and proof of the owner’s death to the Bureau of Public Debt.
  • If the value of the bonds exceed $100,000 or the estate is being administered by a court, the personal representative (meaning the executor or administrator) of the estate can redeem the bonds by mailing evidence showing his or her appointment as personal representative, a certified copy of the owner’s death certificate, and FS Form 1455, and the bond.
  • In a situation in which the bond is a found long after the owner has died and the owner’s estate has already been administered by a court, the beneficiary must send the bond, proof of death, a notarized affidavit explaining that the bonds belong to named individuals (for small estates) or a final accounting from the estate (for any other estate) to the Bureau of Public Debt. If there is more than one person who may be entitled to inherit the bond, an FS Form 5394 must be mailed in by the heirs, who must all agree with the distribution of the bonds.

If a survivor is named on the savings bond, it does not become part of the deceased person’s estate. Rather, the savings bond belongs to the survivor, who can choose to do nothing, redeem the bond, or have it reissued. If the survivor does nothing, the bond will continue to earn interest until the bond matures. The survivor could also cash a paper bond by going to a financial institution that pays savings bonds and provide the identification and other documentation required by that institution (however, only the Treasury Department can cash HH Series bonds). Alternatively, the survivor can have the bond reissued in his or her name alone. Series EE and I savings bonds are only reissued in electronic form, but Series HH bonds are still reissued in paper form.

Now may be a good time to check to see if you own any savings bonds and if the savings bonds are titled in such a way that they pass to your beneficiaries without the need for probate. An estate planning attorney can advise you on the best way to title your savings bonds so that they are coordinated with your overall estate plan.

For other things to consider when reviewing your estate plan, see https://galligan-law.com/twelve-reasons-to-update-your-estate-plan/.

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Your Children Want You to Have an Estate Plan

Clients often forget that a solid estate plan makes things much easier for their kids. Even the kids want you to have an estate plan!

Many clients delay creating an estate plan.  People don’t want to think about scenarios where they are deceased or incapacitated, and some people delay because they are afraid of costs.  Clients often think of the impact of estate planning on themselves, forgetting that their children want them to have an estate plan too.

After all, it is the adult children who are in charge of aging parents when they need long term care. They are also the ones who settle estates when parents die. Even if they can’t always come out and tell you, the recent article, “Why your children wish you had an Elder Law Estate Plan” from the Times Herald-Record spells out exactly why an elder law estate plan is so important for your loved ones.

Avoid court proceedings while living. In a perfect world, everyone over age 18 will have a financial power of attorney, a medical power of attorney and a living will, as well as other estate planning documents to facilitate their use.  These documents appoint others to make financial, legal, and medical decisions, in case of incapacity. Without them, the children will have to get involved with time-consuming, expensive guardianship proceedings, where a judge appoints a legal guardian to make these decisions. Your life is turned over to a court-appointed guardian, instead of your children or another person of your choosing.  This is an expensive and invasive process.

Avoid court proceedings after you die. If you die and you own assets in your own name that do not pass by contract, you will likely go through the probate process, a court proceeding that can be time consuming and costly. Not having any assets in trusts leaves your kids open to out of pocket costs, time, work and difficulty in gathering assets.

Wills in probate court are public documents. Trusts are private documents. Utilizing trusts can keep the details of your estate out of the public eye.

An elder law estate plan also plans for the possibility of long term care and costs. Nursing home care costs can be extreme, and many clients don’t plan for such a creditor during their life time. If you don’t have long term care insurance, you should consider an estate plan that facilitates long term care government benefits, such as a revocable trust plan.

The “elder law power of attorney” has unlimited gifting powers that could save about half of a single person’s assets from the cost of nursing homes. This can be done on the eve of needing nursing home care, but it is always better to do this planning in advance.  This is one of the main roadblocks to Medicaid planning later in life.  Client’s don’t update their powers of attorney and limited their gifting options.

Having a plan in place decreases stress and anxiety for adult children. They are likely busy with their own lives, working, caring for their children and coping in a challenging world. When a plan is in place, they don’t have to start learning about Medicaid law, navigating their way through the court system, or wondering why their parents did not take advantage of the time they had to plan properly.

You probably don’t want your children remembering you as the parents who left a financial and legal mess behind for the them to clean up. Speak with an elder law estate planning attorney to create a plan for your future. Your children will appreciate it.

And kids, see here for speaking with your parents about estate planning.  https://galligan-law.com/probate-lawyers-say-talk-to-your-parents-about-estate-planning/

Reference: Times Herald-Record (May 23, 2020) “Why your children wish you had an Elder Law Estate Plan”

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