For estate planning purposes, all of a person’s property can be divided into two general categories: real property and personal property. Real property includes any fixed area of land and anything attached to it that is immovable, such as buildings, ponds, and roads. Personal property is everything else. It is an umbrella term that can mean anything from watches, to cars, to stocks and bonds, money, and many other items that do not carry the rights and restrictions that come with real property.
So how does this distinction affect the estate planning process, especially when you are in the process of writing a will? Let’s take a deeper look at personal property and to deal with it in an estate planning context.
As stated above, the legal term personal property is essentially a catch-all phrase for anything that isn’t real estate or about land usage. The most commonly thought of items are ones that the testator (person making the will) used every day like clothing, jewelry, and other household items. These items may not be worth a whole lot, but usually have nostalgic meaning for their family members.
Personal property also includes bigger, more expensive items as well, like cars, trucks, tractors, and other machinery. Financial assets like bank accounts, stocks, bonds, and anything that isn’t non-probate property (for example, passes by contract) are also classified as personal property.
In some wills, personal property is explicitly defined. But the broad meaning of the term can sometimes create contests between family members concerning what specific personal property is meant to go to who. In these cases, courts will look at the accompanying language to help determine the testator’s intent to make the best guess at meaning.
For example, if a person leaves all their “personal property” to a child, but then says they want to gift their 1968 Ford Mustang to a sibling, the court will be more likely to award the car to the latter. The specificity of the gift clearly shows the testator’s intent, even though the car would fall into the category of “all personal property.”
Courts will also look at qualifying terms to help determine intent. “Personal property in my house” is an easy way to determine intent, for example. Words limiting location of property, type of property, or specificity of property are the most common ways that a judge will divide up the testator’s assets if there are any conflicts.
One of the best ways to help avoid conflicts and misunderstandings when dealing with distribution of personal property is to be as specific and detailed as possible in your will. Many people include lists of personal property/items within the will itself specifying which items go to which family member. But of course, this is not always a reasonable option. People’s personal property changes vastly throughout the course of their lives, and it is hard to predict which exact items will be in your estate when you pass.
Because of this, a much easier option is to attach a separate document to your will commonly called a “personal property memorandum.” This is essentially a letter to your executor detailing where specific items will go once the will is executed. You can tear up and rewrite this as many times as you want to.
Although it does not need to be witnessed and notarized, it is probably a good idea to do so if you think there is going to be any confusion or argument over any part of the will. It is important to note that you can only do this with personal tangible things, though, like clothes, jewelry, furniture, paintings or other pieces of art, electronics, etc. Specific gifts of money must be put in the will itself, and real estate must be transferred either through the will or another document, such as a Lady Bird Deed or a Transfer on Death Deed.
Living trusts are becoming a popular alternative to the traditional will. After establishing the trust, you then execute a bill of sale (which can be for a nominal amount). This states that all of your personal property is owned by you during your lifetime as a trustee. After you die, everything then transfers automatically to the beneficiaries named in the trust with no need for probate.
Estate planning can be an emotional process. You want to make sure that all of your wishes are carried out in a proper legal manner with as little stress on your family as possible. That’s why it is important to hire an estate lawyer to help you draw up the most effective estate planning documents possible.