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A More Real World Clause for Disposition of Tangibles
Introduction and Background
Ok, we live and learn. Jonathan has been administering estates
for more than 35 years (old isn’t he?) and thought he kind of knew at least almost all there was to know about the basics of that task. But he has just learned in an estate where he is an
executor that he certainly does not.
The problem he faced is that, under the Will he drafted, the
testatrix left her tangible personal property (“tangibles”) in approximate per stirpital shares to her then living descendants. That, of course,
is a standard tangibles disposition provision and one of the ones available under Interactive Legal’s Wealth Transfer Planning (sm). But soon after the testatrix died, it became apparent that
the matter was going to be pretty complicated. For example, the decedent was survived by five children, one of whom died a week after she did, leaving his estate to his third wife. The wife
has not yet offered a Will of the deceased son for probate. Hence, it is not certain that she is entitled to her husband’s share of his mother’s tangibles although she claims that she is.
The decedent had considerable jewelry, including some pieces
inherited from her own grandmother, which are quite old and quite fine. Of course, more than one child (or the child’s spouse) wants some of the same pieces. What to do? Well, an auction
among those who want a particular item might be held with the proceeds being divided among the four children and the widow of the now deceased son. But there are complications. First, there
is a bequest of the tangibles to the children and no authorization for such a sale. It might be that the five of them would consent to such an auction , but that will be time consuming and
leverage for one or more of the five to “get even” for prior perceived wrongs. Second, what auction mechanism should be used? By letter? If so, how many rounds should be allowed. By
telephone? What if the highest bidder doesn’t pay?
One of the children took the jewelry out of the testatrix’s home
soon after she died to safe keep the items. There is no reason to suspect that the child “confiscated” certain items but the decedent never had the jewelry insured and there seem to be no
records of purchases by or gifts or bequests of such items to her. Jonathan took possession of the jewelry from that child. But how does Jonathan know that he received all of the original
jewelry? And more, how could he prove he did not “confiscate” some item or “switch” costume jewelry for the real thing?
Jonathan took possession with his co-executor (a nephew of the
decedent) and a paralegal, who wrote a description of and took a photograph of each item. They then placed the items in a safe deposit box in the names of the co-executors. That should
provide safety until the items are appraised and then either distributed to the descendants or sold. Speaking of that, what should Jonathan and his co-executor do if the children cannot agree
on the disposition among them of the jewelry. Hold an auction among them? That might be sensible but again there is no authority in the Will to do so. Draw straws? Jonathan wishes now he
had placed provisions for a negotiated sale to a third party, or an auction among the beneficiaries in the Will. The simple “to my descendants, per stirpes,” no longer seems as simple as it
once did. Of course, state law may allow for a suit for parition among co-owners, much as it does for co-tenants in real property. But again, costs far outweigh the value in such a remedy.
Perhaps, the jewelry should be permanently placed in safe keeping, with each co-owner having the right to “check out” the piece, much like a library lending system, since co-owners, or at
least co-tenants, have equal rights of possession.
As with many senior citizens, the testatrix, who was nearly 100
years old, accumulated many items, collected over her lifetime, in her home. Several of those items were dear to the decedent, and might be dear to her descendants, although not of
significant market value. Some tangibles (such as plates, utensils, drinking glasses, appliances and tools) have virtually no resale value according to the appraiser. So what should be done
with those? They have been bequeathed to the children, and the executors have no authority under the Will to abandon (throw away) any items. Of course, the children could consent to that but
what should be done if not all will do so?
Also, should these items be insured under a household policy?
Generally, an insurance company will terminate coverage for theft if no one is living at the home. And, in this case, no one is.
Probably, storage, perhaps, long-term storage is in the future of
these items of tangible personal property. The estate likely will pay the first round of storage fees but a complication arises because the deceased son’s children, not his wife, now succeeds
to his interest in the testamentary residuary trust for his benefit. The son’s widow will succeed through her husband to the deceased son’s tangibles but the son’s children share in the
general estate. Hence, the widow benefits from the storage but the children bear part of the cost. (And guess how well they get along.)
Suggestion of Alternate Tangible Personal
Property Provision
Jonathan thinks he has learned an important lesson and suggests
consideration of a provision similar to the following:
“I authorize my Executors to dispose of my tangible personal
property (“tangibles”) in any manner that my Executors, in the exercise of sole and absolute discretion, determine, for the benefit of my estate, including but not limited to distributing one
or more or all of such items of my tangibles to one or more or all of my descendants or the spouses of any my descendants without making or attempting to make any distribution to more than one
be of equal value or of comparable per stirpital value of any distribution to another or other descendants (or any spouse of a descendant);;
provided, however, that no Executor who is a descendant of mine shall participate in any decision to distribute any item of tangibles to himself or herself or to any descendant or spouse of
his or hers. My Executor may but shall not be required (and shall not be liable to anyone or be subject to surcharge or removal for failing to do so) to maintain any theft, casualty or damage
insurance with respect to one or more or all of my tangibles and any such insurance shall be charged to my general estate. Without limiting the sole and absolute nature of the authority
granted by the first sentence of this paragraph, I authorize my Executors to sell one or more or all items of tangibles to anyone, including but not limited to any descendant of mine whether
or not an Executor hereunder, for such prices or prices as the Executors, in the exercise of sole and absolute discretion, determine. The Executors may but shall not be required (and shall
not be liable to anyone or be subject to surcharge or removal for failing to do so) to obtain a formal or informal appraisal of any item or items determined to be so sold and may use any
mechanism and pricing for sale such as a so-called “yard sale” or “garage sale,” using common sense or a “best guess” to determine sale prices of such items. . In making any distribution to
more than one of my descendants, my Executors may use any means including, but not limited to, “drawing straws” or comparable ways to have my descendants choose items of tangibles but my
Executors shall not be required to distribute any item to one or more or all of my descendants. Again, without limiting the sole and absolute nature of the authority granted by the first
sentence of this paragraph, I authorize my Executors to place items of tangible personal property into storage for any period of time for later disposition and/or to advise one or more of my
descendants that any of them may take any of the items or items in storage. Also, again, without limiting the sole and absolute nature of the authority granted by the first sentence of this
paragraph, I authorize my Executors, in the exercise of sole and absolute discretion, to abandon (including, but not limited to, by paying to have tangibles “thrown away” and without
consideration for such items) even if the items may have considerable market value or to donate items to charity even over the objections of one or more or all of my descendants. I
appreciate that the costs of disposing of items of my tangibles relative to their worth may make it unwise to attempt to preserve such items or to distribute them to my descendants. I want my
Executors to dispose of my tangible personal property in a manner that my Executors conclude, in the exercise of sole and absolute discretion, is expedient. No Executor held be held liable
to any person or be surcharged or removed for following any authorization contained in this paragraph.”
Another alternative to the above might be to simply provide as
follows:
“My Executors shall offer to sell, to each of my adult children,
each item of tangible personal property that I own as of my death, under such terms and conditions as my Executors shall decide. My Executors may set a date by which offers for purchase must
be received, and shall sell each item to the highest bidder for that item. To the extent that one or more items is not purchased, I expressly authorize my Executors to dispose of such item by
giving such item(s) to a local charity. I recognize that the foregoing may, under some circumstances, create perceived injustices with respect to my descendants, but I make these provisions
to avoid conflict among my descendants over items that may well have more sentimental value that monetary value. I expressly provide that my Executors shall never have any liability in
connection with these matters, and I expressly provide that if one or more of my Executors are descendants of mine, no common law duty of loyalty, nor any common law or statutory prohibition
on self dealing shall prevent such descendant from bidding upon and purchasing, without liability either individually or in their fiduciary capacity, tangible personal property as provided
above.”
Finally, a third possible provision might be as follows:
“With respect to my tangible personal property, I hereby provide
that my Executors shall marshal and value, either by “best guess” or by appraisal, all such items of mine. Once so marshaled and valued, I hereby provide that, within one year of my death, my
adult living children shall be given the opportunity to select which items they wish to receive. To facilitate such selection, I authorize my Executors to select any method for setting the
order in which such children may select , and the lots in which items shall be grouped. If, as a result of such selection and the application of the values determined above, one child has
received greater value than another, then each such child shall make cash payment to the other children, so that the values received, whether in property or in cash, are equal. I recognize
that the foregoing may, under some circumstances, create perceived injustices with respect to my descendants, but I make these provisions to avoid conflict among my descendants over items that
may well have more sentimental value that monetary value. I expressly provide that my Executors shall never have any liability in connection with these matters, and I expressly provide that
if one or more of my Executors are descendants of mine, no common law duty of loyalty, nor any common law or statutory prohibition on self dealing shall prevent such descendant from bidding
upon and purchasing, without liability either individually or in their fiduciary capacity, tangible personal property as provided above.”
Wealth Transfer Planning (sm) is adding one or more choices to use part or all of the foregoing language in the
comprehensive Will, revocable trust and joint revocable. We invite your comments or special provisions which you have developed; we would be pleased to look at those as well.
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