Personal property: who gets which things

What counts as personal property here

Tangible personal property means the things you can pick up and carry: furniture, furnishings, jewellery, tools, art, china, books, a car, a boat. It is distinguished from land, from bank and investment accounts, and from anything the will already disposes of specifically.

Cash and business property are usually outside these rules. California excludes money that is common coin or currency and property used primarily in a trade or business; Arizona excludes money; Florida excludes property used in trade or business. A list that tries to give away the contents of a business does not work.

Everything not specifically given away in the will, and not covered by a valid list, falls into the residue of the estate and passes to whoever the will leaves the remainder to — or, if there is no will, under the state's intestacy rules.

The separate list: the cheapest estate planning there is

Most people believe the only way to direct who gets which object is the will itself — which means a lawyer, witnesses, and a re-execution every time they change their mind about the clock. That is not so in most of the country.

Where the state allows it, a will can refer to a separate written list, and that list then decides who gets which items of tangible personal property. It can be written after the will was signed. It can be rewritten. It needs no witnesses and no notary. In Arizona it does not even need a signature.

The list only works if the will refers to it. A list found in a drawer, with no will pointing at it, is evidence of what the person wanted and is not a disposition. If you are planning rather than administering, that one sentence in the will is the part to get right.

For someone administering an estate, the practical question is the reverse: a list has turned up, and the family wants to know whether it has to be followed. That depends on the state, and on details as small as whether it carries a date.

When there is no list

Most estates have no list, and the contents of a home are then part of the residue — owned collectively by whoever inherits it, until they agree otherwise. In practice families divide objects themselves, and the executor's job is to make the division orderly rather than to impose one.

1. Do nothing irreversible first. Photograph rooms before anything is moved. Objects leave houses quickly after a death, and a photograph is the only record anyone will have of what was there.
2. Separate out anything that may be valuable — jewellery, art, firearms, collections, anything gold — and keep it out of the informal division until it has been looked at. The federal regulation lists exactly what it means by valuable articles, and that list is the best prompt a family will get.
3. Agree a method before anyone chooses anything. Rotating choice in a random order is the method families most often settle on, and agreeing the method before the objects are on the table removes most of the argument.
4. Write down who took what, and have everyone see the list. Disputes years later are almost always about what someone believes happened, not about what anyone agreed.

Executors are entitled to be careful here. Distributing the contents of a house before debts and taxes are settled is a personal risk for the executor, not just an administrative shortcut — the estate's obligations come before its beneficiaries.

What the contents are worth, and who decides

Valuation sounds like a problem for large estates and it is not. Everything a person owned is valued as at the day they died, and that same figure is what the people who inherit are treated as having paid for it. A family that divides a house without recording what anything was worth has not skipped the question — it has left it to be reconstructed years later by whoever sells the ring.

This is the same rule as the step-up in basis. The date-of-death value is the estate's number and the heirs' number at once, which is why writing it down is worth an afternoon even where no tax return will ever be filed.^{Source: 26 U.S.C. §1014 (Basis of property acquired from a decedent) — Legal Information Institute (opens in a new tab)•Source 6}

The standard is retail, and both of the shortcuts families reach for are ruled out in terms. Value is not what a house would clear at a forced sale, and it is not what a dealer would pay. It is what a member of the general public would pay for the same thing in the market where that thing is normally sold. The regulation's own worked example is a car: the value is the retail price of a comparable car, not the trade-in the dealer offers. An assessment for local property tax is not a valuation either, unless it happens to match.

For household contents the mechanics are more forgiving than the formality implies, up to a point. A room-by-room itemization is what is wanted, naming each article and giving each a value — but a number of things in the same room, none worth more than a hundred dollars, may be grouped. Nobody has to list a kitchen drawer. Alternatively the executor may give an aggregate figure appraised by a competent appraiser or a dealer in that class of goods, under a declaration made on penalty of perjury.

The threshold is $3,000 and it is a total, not a per-item figure. Once the articles of marked artistic or intrinsic value add up to more than that, an expert appraisal under oath is required. The regulation names what it has in mind — jewellery, furs, silverware, paintings, etchings, engravings, antiques, books, statuary, vases, oriental rugs, coin or stamp collections — and that list is a better guide to what to set aside from a house clearance than anything else a family is likely to be given.^{Source 9}

There is also a procedure for clearing a house before anyone has looked at it, which is the question every family actually asks. Where an estate wants to distribute or sell household effects in advance of any investigation, it notifies, sends the appraisal under oath and the executor's declaration as to the completeness of the list and the appraiser's independence, and is told whether an inspection is thought necessary. The regulation says what it is for: to save the estate future expense and inconvenience.

One alternative exists and it is narrower than its reputation. An executor may elect to value the whole estate 6 months after the death instead of at the date of death. It applies to everything rather than to the assets that happened to fall, it is available only if it reduces both the size of the estate and the tax, it is made on the return and cannot be undone, and it is lost if the return is more than a year late. Because it must reduce the tax, it can never be used to give the heirs a higher basis — which is what most people are hoping for when they ask about it.^{Source 7}

1. Photograph every room before anything moves, and date the photographs. This is the cheapest evidence of what was there and what condition it was in.
2. Walk the house with the regulation's list in hand — jewellery, furs, silverware, paintings, prints, antiques, books, statuary, vases, oriental rugs, coin and stamp collections — and set those aside from the informal division.
3. Add up what you set aside, roughly. If it is plausibly over the threshold, get one expert appraisal rather than several opinions, and keep the appraiser's statement of qualifications with it.
4. Value the ordinary contents room by room, grouping the small things. An honest list made at the time beats a precise one made two years later.
5. Record the basis for each significant item alongside the value: what it is, how it was valued, and by whom. That page is what an heir will need when they sell.
6. Keep everything with the estate's records rather than with the person who took the object. The record has to outlive the division.