Handling Personal Property in Estate Planning, Part 2

05 Dec

Handling Personal Property in Estate Planning: A Visit from the Ghost of Probate to Come – PART 2 of 2

By Attorney Isaiah M. Richie Schloemer Law Firm, S.C.

If you read last month’s blog, you will recall that we talked about what you can do to divide your personal property to your beneficiaries in ways that minimizes conflict and ensures that the property gets to the beneficiary you want to receive it.

But sometimes even well laid plans will not sufficiently determine the distribution of personal property, so in this post we will discuss some of the options available to the heirs or agents of the estate after a person has passed away. So if you are named personal representative of a Wisconsin estate or the successor trustee of a Wisconsin trust, what are some requirements and strategies for dividing personal property among heirs?

How to Divide Personal Property in Probate or Trust Administration

Even if a decedent uses one or more of the methods we discussed last month to gift personal property, some questions still usually come up if you are in charge of administering an estate. The default statutory provision in a basic Wisconsin Will says:

Wis. Stat. § 853.57 Personal, recreational and household items. The following is the full text of paragraph 2.1 of the Wisconsin basic will and the basic will with trust:

If my spouse survives me, I give my spouse all my books, jewelry, clothing, personal automobiles, recreational equipment, household furnishings and effects, and other tangible articles of a household, recreational or personal use, together with all policies of insurance insuring any such items. If my spouse does not survive me, the personal representative shall distribute those items among my children who survive me, and shall distribute those items in as nearly equal shares as feasible in the personal representative’s discretion. If none of my children survive me, the items described in this paragraph shall become part of the residuary estate.

Typically, a Trust or Will also says that the representative can divide such property in any “reasonable manner”. So, the standard provision says that the estate representative should distribute personal property in equal values, and typically the only other direction is that such division should be in some “reasonable manner”. Even with that guidance, there are some common questions that come up when administering personal property in an estate:

Should you get an appraisal of all the personal property?

If you anticipate any conflict among heirs or if you are going to use a method of division that includes reducing an heir’s remaining share by the amount of personal property they receive, then you should get an appraisal done. An appraisal is also helpful in protecting the personal representative from any allegations of self-dealing or preferential treatment.

Should heirs have to pay for any personal property they select?

This is one common method of devising personal property, but it’s not necessary. In this method, each heir selects personal property, and the value of that property is added up. Then the representative reduces that heir’s share of the total estate by the amount of property selected. Keep in mind that if the heir’s share exceeds their total inheritance, the heir will need to pay into the estate to equalize the other heirs.

What do you do if more than one heir wants the same item?

From rock-scissors-paper to drawing straws to bidding wars, there is no set method to determining these disputes. Some people use sticky notes to select items they are interested in, other times you just go room to room making selections. Others use a fantasy football style “snake” draft method in which you select a random “draft” order and then whoever picks last in the first “round” picks first in the second “round”.

Whatever method you implement, it is important from the very outset that a system is established and that you use that system consistently. As a last resort, the personal representative can simply sell the personal property and divide the cash. This avoids any appearance of playing favorites.

What do you do with personal property that no one wants?

It is acceptable for the representative to have an estate sale or an estate sale service to dispose of the remaining property and to donate anything that doesn’t sell.

Who decides how to divide up personal property?

As stated above, this job falls on the personal representative after giving effect to any list left by the decedent.

What method should be used to decide who gets to pick first?

Again, any “reasonable” method that does not show favoritism is acceptable to use. Using a random selection process or a valuation approach is the best way to avoid the appearance of favoritism.

What do you do if someone claims the decedent “told me I could have it” for a particular item.

Whether something was given as a gift is actually a legal question. Courts use a four-part test to determine if a gift has been made, and generally it requires the actual or “constructive” delivery of the item. So unless there is compelling proof of a gift to the person claiming it, you cannot show preference by giving that item to the claimant. If it wasn’t a gift, legally, then it is part of the estate, and if it isn’t in writing as described above the oral statement is not enforceable upon death. The exception here, like most of these, is that if all heirs agree that the decedent wanted a certain person to have it.

What do you do if an heir previously gifted the item to the decedent and now wants it back?

A gift to the decedent becomes the decedent’s property. The heir retains no greater interest in that item than any other heir. Practically speaking, it is nice for the heirs to agree to give back such an item, but legally there is no requirement to do so.

What do you do if, prior to their passing, the decedent gave an item of high value to one of the heirs but didn’t give anything to the others?

Unless memorialized in writing under the Will or Trust, a gift during the decedent’s lifetime does not reduce the value of that heir’s share of the estate. Even if the gift was really a loan, it is hard to enforce any claim against that loan if there is nothing in writing.

What do you do if the decedent told you what they wanted done but they didn’t put it in writing?

Again, if it isn’t in writing, it isn’t legally enforceable. You can try your best to persuade the heirs to follow what is believed to be the decedent’s intent, but you should not expose yourself to potential liability by making those decisions or distributions without the consent of all heirs.

What do you do if the personal property for a specific gift or bequest no longer exists?

This is an area of law that has changed quite a bit over time, and at one time the heir would be entitled to receive compensation for the value of the property. For example, if the Will said that an heir was to receive a vehicle, and that vehicle had been sold, the heir would be entitled to compensation for the value of that vehicle. Fortunately, most estate plans now specify that if the personal property no longer exists, the gift lapses and the heir is not entitled to anything.

Conclusion

If you have been named successor trustee or personal representative of a trust or probate estate, you will be responsible for the reasonable distribution of personal property. It is important to protect yourself from claims of wrongdoing or favoritism, but ultimately the decision will be your as to certain methods of dividing up the items. It is important to seek legal or professional assistance if any claims are made against you during the process.

Next Steps

If you have questions regarding estate planning or trust or probate administration in Wisconsin, or if you would like assistance in administering an estate in West Bend, Slinger, Germantown, Kewaskum, Port Washington, Menomonee Falls, Milwaukee, Washington County, Sheboygan County, Dodge County, Ozaukee County, Waukesha County, or Milwaukee County, Wisconsin, please contact the author of this article, Attorney Isaiah M. Richie, at [email protected] or you can contact Schloemer Law Firm, S.C. at 262-334-3471 or by email at [email protected].

Originally published: December 5, 2023.