(Source: CNBC): Kelli B. Grant – If you want to avoid family fights over your estate, take a long hard look at your closet, especially that Tweety Bird figurine.
Personal property is something that people often fail to consider when drawing up wills and other estate planning documents, attorney John J. Scroggin told an audience of financial planners last week at the FPA Be conference in Nashville.
“The single biggest point of conflict among family members is not the million dollars over here,” said Scroggin, who is an accredited estate planner and a partner with the Roswell, Georgia-based law firm Scroggin & Co.
“It’s the yellow Tweety Bird [figurine] that sat in mom’s kitchen for 40 years.”
Here are seven of the big mistakes people make when bequeathing their personal property:
1) Underestimating sentimental value
The property your heirs come to blows over may not have financial value as much as sentimental value. Think: Christmas ornaments, Mom’s handwritten recipe cards or old family photographs.
(That Tweety bird, a real contested item in a case Scroggin handled, was worth about $1.50 based on comparable eBay auctions, he said. He offered to buy a duplicate and not tell the feuding siblings who had mom’s. They declined.)
Scroggin recommends clients ask their children and other family for a list of sentimental items they’d like to receive. Then the client can determine who gets what. Detail those bequests in your will, and include pictures of the items in question.JGI/Jamie Grill | Getty Images
2) Making verbal bequests
To head off conflict, put any promised bequests in writing.
Scroggin talked about one case where an elderly woman’s son asked about the family’s heirloom grandfather clock. “It’s yours,” she told him. The problem? The client had said the same thing to her daughter. With no mention of the clock in the will, it’s unclear who she actually intended to inherit it.
“The [son and daughter] got in a fistfight in the front yard and broke the clock,” Scroggin said. “They still aren’t speaking.”Guillaume Souvant | Getty Images
3) Relying on heirs to distribute
Parsing out bequests is your responsibility, not your heirs’. It’s risky to assume they will “do the right thing,” Scroggin said.
Scroggin told the story of one client who bequeathed his second wife all “personal property,” trusting that she would distribute particular family heirlooms to his children from his first marriage. The couple was in a car accident; the husband died immediately and his wife, 13 hours later.
That gap between their deaths meant the husband’s personal property passed to the wife and then in turn to her heirs — who weren’t legally obligated to give anything to their step-siblings. Many of the family heirlooms ended up for sale on eBay, he said.Jeff Greenberg | Getty Images
4) Confusing ownership and access
If you have a safe deposit box, be clear in your will who gets the contents, Scroggin said. A jointly leased box doesn’t necessarily translate to joint ownership, nor does giving an heir official access to the box contents as a signator.
Scroggin told the story of a client who put family heirlooms into a safe deposit box, and gave his daughter authorization to access the box. But when the client died, his second wife — who had inherited all personal property under the terms of the will — successfully argued in court that she, not the daughter, owned the contents of the box.Lester Lefkowitz | Getty Images
5) Forgetting about unusual property
Don’t stop at a home inventory when considering personal property. Some under-the-radar items people often forget about include digital assets like reward program balances and social media accounts, Scroggin said.
“Who controls your Facebook account when you’re gone?” he said.
Another hot-button issue involves unused reproductive assets like embryos, Scroggin said. Your estate plan should spell out ownership and rights of use. Left unaddressed, there could be a legal tangle regarding the rights of a future child to inherit, he said.Lauren Bates | Getty Images
6) Failing to plan for complicated possessions
In some cases, making a bequest requires more consideration than simply writing “so-and-so gets X” into your will.
Transferring ownership of guns, for example, requires navigating an often-complicated mix of federal and state laws governing what kinds of firearms can be passed and who can legally receive them, Scroggin said. Failing to properly plan could mean that property isn’t passed as you intend, or even trigger legal consequences for your heirs. (Consider looking for an estate planner who specializes in such transfers, using so-called gun trusts and other tools.)
Illegal contraband can also raise complications, particularly in a taxable estate, he said.
“There’s a IRS [rule] that says even if an asset is only salable on the black market, it is still an asset and you have to report its fair market value,” said Scroggin.
Scroggin once had to determine the street value of a brick of marijuana a Georgia-based client found while cleaning out his deceased father’s closet. He included that asset on the estate tax return, and then turned the marijuana in to the police.Yuri Arcurs | Getty Images
7) Leaving your home unsecured
Tell your executor to change the locks on your home immediately, Scroggin said. It’s not unusual for family, friends and neighbors who have access to the home to help themselves, he said — especially if you made verbal bequests or have personal possessions that could trigger infighting.