Estate Planning, Probate & Elder Law Attorneys

» Tangible Personal Property and edivvyup.com

One of the biggest little problems in probate is how to deal with tangible personal property -- furniture, clothing, furnishings, etc. left by the decedent. Most Wills leave such property "in shares of substantially equal value" to decedents -- that language recognizes that you can't divide tangible personal property in equal shares the way you divide cash equally. But it still fails to address typical problems with this type of property:

1. What if two individuals want the same piece of property?

2. Is equality based on actual value? If so, what about sentimental value?

The problem is even worse if you have an intestacy with unequal shares. I have one of these right now -- three siblings of the decedent (each getting 1/3rd), with the last share being split among 7 children.

There's also a question of how, as a practical matter, to facilitate the distribution. Some people use the hat -- if there are 3 kids, then all 3 names are placed in a hat, and the order in which they come out is the order for the children to pick items they want. If it's Tommy, then Billy, then Alice...

Tommy picks first (choosing one item)
Billy picks second (choosing one item)
Alice picks third (choosing one item)
Tommy picks fourth (choosing one item)
etc. etc. etc.

You can add more certainty (and more complexity) to this process by having all tangible personal property appraised, and then "charging" the fair market value of property taken by each individual against that individual's share of the estate. That addresses what happens if Alice chooses all of mom's (expensive) jewelry and the other two choose only lamps and other less valuable items.

Another idea comes from this new website: edivvyup.com. Basically, the site allows you to create an auction, open only to the estate's beneficiaries. Beneficiaries get points, which they can use to bid on items. Whoever bids the most points on an item gets it.

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» The Reverse Mortgage Probate Problem, and Liquidity

Reverse mortgages have become more popular in recent years. The concept, in a nutshell, is this:

-you (62 years old or older) borrow against the equity in your home
-instead of paying down the mortgage over time, your mortgage grows. But it doesn't have to be paid back until the house is sold or until you die

I've encountered this situation in the probate context a few times recently: mom dies, reverse mortgage is now due, and guess what? The house can't be sold because of the bad real estate market.

The bigger problem, of course, is one of estate liquidity. When a person dies, there are bills that have to be paid. Some of those bills are small, and some of them can be avoided. But certain bills can't be avoided, and are going to cause a real headache for your survivors if you've left them with no liquid assets. There are lots of older people, even those who aren't particularly sophisticated, who take action to prevent their heirs from being stuck with hard-to-pay bills. That's why there's funeral insurance. But you also have to think about the extent to which your assets are in illiquid forms like real estate.

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