The Personal Property Memorandum: An Estate Planning Tool

A recent Wall Street Journal article entitled "How to Avoid Estate Fights Among Your Heirs" (Andrea Coombes, Dec. 15, 2013), highlighted one useful tool available in estate planning, a personal property memorandum:

[G]iven that family heirlooms can spark fiery conflicts, create a memorandum that details how you want to divvy up your personal property. ....

The memorandum describes who shall receive specific items. The will then references the memorandum; for example, "I direct my executor to distribute my tangible personal property in accordance with a signed and dated memorandum to be found with this will." ...

Make sure your executor knows where to find the memorandum, and be specific about items. In one example, a woman said her diamond ring should go to a daughter, but she didn't clarify which diamond ring, says Ms. Olsavsky. Attaching photos of the item and referencing each photo in your memorandum can help.

Another way to prevent arguments after you're gone: Give items away before you die.

2014 Estate & Gift Tax Exclusion Amount Increases

The lifetime estate tax and gift tax exclusion amount (also referred to as the unified credit amount, exemption amount, and applicable exclusion amount) increases from $5.25 to $5.34 million per person, effective January 1, 2014. The annual gifting exclusion amount will remain at $14,000 per person per recipient.

Why You Need an Estate Plan, Not a Will or a Trust

This short FOXBusiness article, published September 4, 2013, may help you to understand the difference between what clients often think they need, "a will" or "a trust", and what they likely need instead: an estate plan. (From which the phrase estate planning comes, of course.)

What is a Trust Protector?

Jay Adkisson, Esq. offers a simple explanation of the estate planning concept of a trust protector, which has gained traction in recent decades:

"The idea behind [a Trust] Protector is to have somebody who can watch over the Trustee, and terminate the Trustee for any misconduct....

[In a revocable living trust, y]ou are the Trustee of your own Trust, and the beneficiary of your own Trust. You get to control and use the Trust assets freely while you are alive. So why would a living trust need a Protector?

The problem is, you will eventually die. When you die, your heirs then become the beneficiary of the Trust, and whoever you have appointed as the successor Trustee in your trust document will become the acting Trustee. It is this Trustee that you have to worry about — now that your dead, this new Trustee can start to milk the Trust for fees, etc., as described above, and the beneficiaries have no recourse except to engage in expensive litigation against the Trustee, spending their dollars to fight the Trustee, and your dollars to defend the Trustee. That’s a lose-lose as far as your intention in creating the Trust is concerned. By contrast, with a Protector, the misbehaving Trustee can be fired.

But let’s assume that instead of appointed some third-person as the Trustee, you simply make one of your heirs/beneficiaries the Trustee. The problem here is that you can’t predict the future. Maybe by the time you die the new Trustee has developed a drug problem, or maybe the Trustee harbored a grudge against one of the other heirs/beneficiaries and now wants them to get nothing (even though you wanted them to get their share). Without a Protector, the situation is bad. But with a Protector, the new Trustee can be fired.

Forbes, August 25, 2012