The 'hard assets' side of estate planning

When most of us think about the division of an estate, we tend to focus on assets such as stocks, bonds, real property, the family business and other capital holdings. But when it comes time to distribute belongings, the most passionate discussions may center on hard assets — anything from an antique collection to jewelry to family photographs.

By their very nature, family estate planning discussions are often fraught, as parents struggle to come to terms with their mortality and kids worry about coming off as greedy or insensitive. But valuing and dividing hard assets can be an even more delicate dance. “More often than not, it’s the stuff that isn’t worth as much that causes the problems,” says Colin Korzec, Head of Trust and Estate Settlement Services, Bank of America. Some things, like a Christmas tree topper, might have enormous sentimental value to more than one person and be tricky or impossible to divide; others, like a cabinet-full of Dresden porcelain figurines, may simply feel to heirs like clutter.

That’s when bringing in an objective third party can help, says Jennifer Galvagna, Head of Trust, Estate and Tax Solutions Bank of America. “We can acknowledge the awkwardness of discussing mortality and just be matter of fact,” she says. And when done right, discussing the future of family heirlooms with a professional can provide a gentle springboard to larger conversations about estate planning. The guide below can help get you started.

Determine what your stuff is worth

Upon the passing of an individual, an appraisal is often a routine part of the estate settlement process. But depending on how your will is structured, your heirs may need to choose between hard assets and money, notes Korzec, so get an expert to give you an estimate of the value of all your personal property — artwork, jewelry, furniture, even high-end designer clothing.

In the case of a collection of unknown value, it may be worth hiring a specialist in that area. One of Korzec’s clients had a massive, meticulously preserved seashell collection. But when she passed away, none of the heirs wanted it, so the family hired an appraiser for a natural science museum to come in. Once the value of the seashells was established, Korzec worked with the museum to negotiate a donation, and helped the heirs distribute the tax write-off among them.

Call a family meeting

Next, decide how to divide the items — ideally with the consensus of your heirs. “We encourage all family members to get into one room and honestly but respectfully explain their true wishes,” says Galvagna. Encourage your heirs to create a list of desired items. In some cases, clients have had family members walk around their house, putting stickers on the objects they want. Be sure to explain the importance of items of sentimental value — a childhood book, a set of tools, an old instrument — and why and how these items represent chapters of your family’s collective life. But in doing this exercise, parents need to recognize that the younger generation may not want the burden of large antiques or giant collections, says Korzec. “It may take a little time for a parent to understand that their son or daughter doesn’t have space for the family Steinway, nor does he or she play piano or plan to store it.”

If the parents are no longer living, Korzec suggests that the heirs write a list of all the items that are being passed on and draw straws and pick from the list in rounds. For items that don’t have takers, the group can together determine the fate of the leftovers: donate them and use the tax benefit, host a yard sale or hire an auction house and split the proceeds, or pay a company to cart them away.

But what if items become hotly contested and the conversation reaches an impasse? “Sometimes you have to get creative,” says Korzec. He recalls two sisters who both wanted a family ring and couldn’t find a compromise. His team came up with a novel idea: have the ring duplicated and give one to each sister, without anyone knowing which was the heirloom and which was the copy. The sisters loved the idea.

Document, memorialize and update the selections

If you’ve come to a consensus on who gets certain items, Galvagna advises, talk to your estate planning professional about drafting a separate document — often known as a Personal Property Memorandum — that specifically lists each item and to whom it goes. Unlike wills, these memorandums are not legally binding and can be changed as often as necessary, without cumbersome processes. “If you acquire, say, a piece of jewelry or art, you can add it,” says Galvagna. “Once the memo is written, updating it should be a part of conversations with your advisor at least annually.” 

More than just heirlooms

Both Korzec and Galvagna stress that advisor-led conversations about the goods and collectibles that are part of an estate can help a family address bigger issues. Discussions around something small but beloved can smooth the path to talking about touchy subjects, like selling the 30-foot sailboat that Dad adored, but that’s been sitting unused for years.

“Getting everyone to agree on individual approaches to passing down these sentimental items is the goal,” says Korzec. “Have those conversations early and often and amend the memorandum annually,” agrees Galvagna. “You can’t take your stuff with you — but knowing when and how your heirs might enjoy something you love can bring comfort and even joy.”