When anyone dies, they’re likely to leave tangible personal property, which is what lawyers call anything you can touch, such as furniture, dishes, silverware, artwork, and photo albums. The problem with distributing this property is that you cannot do so exactly equally. In addition, many items may have little or no monetary value but significant sentimental value. So how can you be fair? Here are four methods you might use, or in some instances, you might use a combination.
- Sell. When the estate includes a few items of significant financial worth that can’t be equally distributed among heirs, the property might be sold and the proceeds distributed equally as cash. This is what the family of a friend did. His parents had rescued one valuable painting when fleeing Europe before the Holocaust, which he and his sister sold at auction at Sotheby’s.
- Leave Instructions. It can help a lot if the decedent decides who will get what. This can be done in her will or in a side memorandum. We generally advise that the will be used if there are a few items to designate, whether because of their financial or sentimental value, but for items of less significance, a side memorandum makes more sense. It doesn’t have to involve a lawyer and can be changed and updated as you wish. It’s best to start by asking your children or other beneficiaries what they may want. That way you can maximize the value of what each person receives, rather than making assumptions that may be inaccurate.
- Take Turns. Most personal representatives use some form of taking turns for heirs to choose items from the estate. This can simply be drawing lots to see who goes first, second, third, etc., and continuing to circle through the list, or people who went first go last in the second round, or a progression from round to round. These choices look as follows when there are three beneficiaries who we will name A, B, C and D:
- A, B, C, D, A, B, C, D, A, B, C, D
- A, B, C, D, D, C, B, A, A, B, C, D
- A, B, C, D, B, C, D, A, C, D, A, B
It can help to facilitate the process if the personal representative makes a list of the items with their appraised or estimated monetary values, if any. The choices can then be made in-person, online with people taking turns, perhaps using a Google doc, or by video conference or conference call.
- Bidding. Another approach is to give all the beneficiaries a certain number of points which they can apply towards various items on the list, so that everyone maximizes the value of what she gets. This could be done blindly with each person making bids and the personal representative simply awarding the items at the end. The problem with this is that the beneficiaries may be more or less lucky or astute in their bidding—one person getting most of what she wants and another getting virtually nothing. Another approach would be more like a silent auction, where the items are all on a Google doc permitting beneficiaries to adjust their bids right up to a set deadline.
- Financial Adjustment? What happens if one person ends up getting items with a total market value of $1,000 and someone else $4,000? You could say that that doesn’t matter because everyone still was able to maximize what is of most value to him. Or you could equalize the valuations at the end with the first person receiving an extra $3,000 from the estate.That way, no one keeps choosing items just to get the best market value. It may be that one person really only wants a few items and someone else is selecting items to give to his children. Should the first person, who may not have children, be compensated in some way? There’s no or right answer that applies in all cases. It’s worth polling the beneficiaries to see if anyone cares.
A Truly Complex Case
A friend of mine who is co-executor of her mother’s rather large estate conceived of a rather elaborate plan. She and her co-executor listed 700 separate items with the appraised values of each and asked the four beneficiaries to name the items in which they had an interest. This resulted in three lists: (a) items with a single bidder, (b) those with no bidders, and (c) those with more than one bidder. The items on the first list went to their sole bidders and those on the second list were given away.
The co-executors then divided the third group further, letting everyone know who else bid on the items of interest to them. Each was given 500 points to use to bid on the items on their lists. This was followed by a period of horse trading, since it turned out that many of them had bid on several similar items – for instance, on photographs of their parents – when they really just wanted to make sure that they got one. So they agreed among them who would receive which of these. Then they all met a deadline to allocate their points to the more contested items, with the items ultimately being distributed to the winning bidders.
Whichever plan you choose, just be transparent so that all beneficiaries know how it works.
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