In estate planning, personal effects should be handled with care Leanne Kaufman: Even with something as seemingly simple as personal effects, executors must exercise their judgment carefully and prudently, as beneficiaries can have strong emotional attachment to them and the items may become a point of disagreement Special to Financial Post
Full Answer
How are personal effects divided in an estate?
Personal effects include collectibles. Options include dividing the assets equally among the beneficiaries of the estate, or selling the items (publicly through auction or privately) and adding the proceeds back to the residue of the estate.
Can personal items affect the distribution of a deceased estate?
However personal items can lead to problems for executors or administrators in distributing a deceased estate even if a will was left. Personal effects can be at the centre of disputes, sometimes ending up in court although usually in conjunction with other issues.
Is the estate settlement process really that difficult?
The estate settlement process can be long, and it’s often confusing for those going through it for the first time. But when you have a solid checklist, with a timeline that details what to expect and when to expect it, you may find it's actually not as complicated as you first thought.
What do you need to know about estate settling?
Especially if you’ve been named Executor, you need to understand the estate settling process so you can ensure that an estate is settled properly and timely and that all heirs receive their share of the estate as intended. Use the following checklist to feel confident you’ve done everything you need, in this order, to properly settle an estate.
What are personal effects in an estate?
Under the law, the term “personal effects” generally refers “to articles bearing intimate relation or association to the person of the testator” such as clothing, jewelry, toiletries, glasses, dentures, and luggage.
What assets are considered part of an estate?
An estate asset is property that was owned by the deceased at the time of death. Examples include bank accounts, investments, retirement savings, real estate, artwork, jewellery, a business, a corporation, household furnishings, vehicles, computers, smartphones, and any debts owed to the deceased.
What are considered personal effects?
The term “personal effects” refers to a person's personal property, usually items of particular significance that are carried or worn. According to the Revised Code of Washington, personal effects normally include jewelry, clothing, toiletries, or other such items.
Are liabilities included in an estate?
No, when someone dies owing a debt, the debt does not go away. Generally, the deceased person's estate is responsible for paying any unpaid debts. When a person dies, their assets pass to their estate.
What assets do not form part of the estate?
What assets do not form part of an estate?Jointly owned assets. If owned as joint tenants, property will pass automatically to the other joint owner upon their death. ... Discretionary trusts. Assets that are structured into discretionary trusts will not become part of your estate. ... Life insurance. ... Superannuation.
Can personal possessions be distributed before probate?
Probate law doesn't stipulate how personal items should be divided among beneficiaries unless they've been specifically named in the Will. Such things are called specific legacies. A mother, for example, might wish her eldest daughter to receive her wedding and engagement rings.
Is a car personal effects?
He is correct that there is a difference between “personal property” and “real property”. Lawyers often use specific words of art to indicate special meaning, the question is whether, for the purposes of a Will, automobiles (which are personal property) also qualify as “personal effects”.
Is a purse personal effects?
Examples of Personal Effects Purses. Handbags (including what's in your handbag like makeup or perfume, but excluding documents)
What are household contents and personal effects?
For asset test purposes, personal effects and household contents include; clothing; jewellery; hobby collections (such as stamps and coins); furniture; paintings and works of art; soft furnishings (curtains etc.); and electrical appliances other than fixtures (such as stoves, light fittings etc).
What are considered debts of an estate?
This person is commonly called the executor. But the official term in Quebec law is liquidator....1. There's enough money in the estate to pay all amounts owed.the debts of the deceased (e.g., electricity bills, mortgage loans, taxes),the debts of the estate (e.g., funeral expenses, notarial fees, taxes), and.More items...
Are insurance policies part of an estate?
Unless payable to your own estate, death benefits payable under your life insurance policies are NOT estate assets, which means they do not go according to your Will and which sometimes means they go to the “wrong people.”
Is life insurance considered part of an estate?
The life insurance death benefit is not intended to be part of your estate because it is payable on death — it goes directly to the beneficiaries named in your policy when you die, avoiding the probate process. However, life insurance proceeds are considered part of an estate for tax purposes.
What is classed as assets when someone dies?
whether the deceased was the beneficiary of any trusts. Assets include the full market value of houses, flats or other property, the value of household goods, jewellery and belongings at the sum for which they could be sold, including assets held jointly with another person. value of the assets, seek legal advice.
Is 401k part of estate?
When a person dies, his or her 401k becomes part of his or her taxable estate. However, a beneficiary generally won't have to wait until probate is completed to receive the account balance.
Is life insurance considered part of an estate?
The life insurance death benefit is not intended to be part of your estate because it is payable on death — it goes directly to the beneficiaries named in your policy when you die, avoiding the probate process. However, life insurance proceeds are considered part of an estate for tax purposes.
What forms part of a deceased estate?
A deceased estate comes into existence when a person dies and leaves property or a will. Such an estate must then be administered and distributed in terms of the deceased's will or, if there is no valid will, in terms of the Intestate Succession Act (Act 81 of 1987) [PDF].
What is personal effects?
According to the Social Security Administration (SSA) personal effects are such items that are personal property to the beneficiary that are worn or carried by the individual, or that have an intimate relation to the individual. The Social Security Administration (SSA) does not count personal effects as resources to an individual ...
Is a wheelchair considered personal effects?
Prosthetic devices or wheelchairs that a beneficiary requires. “Items that an individual acquires or holds because of their value, or as an investment, are not personal effects; even if they otherwise meet the definition of personal effects in SI 01130.430C.2. ”.
Why is it important to safeguard your compensation?
It’s important to safeguard this hard-won asset proactively so that the value of that compensation isn’t placed at risk of becoming compromised unnecessarily by tax burdens and the probate process. In addition to speaking with a financial planner regarding how best to safeguard your compensation for the remainder of your life, ...
Do debts dissolve when someone dies?
When individuals pass away, their debts don’t usually dissolve as a matter of course. The estate of a deceased individual therefore must settle relevant debts before the remaining value of the estate can be distributed according to the wishes of the deceased.
Is a personal injury settlement tax free?
Most elements of personal injury settlement awards are afforded to injury victims on a tax-free basis. However, this doesn’t mean that a settlement will remain immune from taxation if it is transferred, gifted, or distributed as part of an estate plan. As a result, it is important to speak with an attorney about whether your particular settlement ...
Is a settlement award subject to estate taxes?
As a result, it is important to speak with an attorney about whether your particular settlement award is significant enough that it may be subjected to estate taxes in the event of your death. If so, you’ll want to consider structuring your estate plan in specific ways in order to safeguard its value to the best of your ability.
What does "personal effects" mean in a will?
The meaning of personal effects in a will – the context. Under the general (common) law, the courts have said that the meaning of the words personal effects, or whatever equivalent expression is used in a will, takes its meaning from the will. In other words, the meaning of such words is drawn from by the context in which they appear in that will.
What is a personal item in a deceased estate?
Personal items or chattels in a deceased estate. Personal items otherwise referred to as chattels in deceased estates can have important sentimental value. For example family heirlooms with unique stories are passed down within the family. Personal items may have much sentimental value but little commercial value.
What if you don’t leave a will – who is entitled to your personal items?
There are some differences between them. A brief outline follows with links. You should seek legal professional assistance if you have a loved one who has passed and not left a will.
Why do you need to set out specific personal items in a will?
For example if they want particular personal items to go to certain beneficiaries, then they need to set this out clearly in their will so that their executors are not left in any doubt about their intentions. In this way the will document itself sets the circumstances in which the personal items are to be distributed. It contains a ‘controlling context’ to the meaning of the willmaker’s personal effects.
What is included in a will?
Personal items of particular value and/or sentimentality may be included a will. Or listed in a separate document which might be referred to in the will.
Which court case referred to personal effects as physical chattels?
The Judge cited the leading authority on “personal effects”, Joseph v Phillips [1934] AC 348 which characterised “effects” as “physical chattels”; excluding money in bank accounts.
Can executors distribute personal items in a will?
Sometimes a statement may be made in the will that it is the willmaker’s wish that their executor distribute their personal items in accordance with any list prepared by the willmaker, signed by them and stored with the will or among their private papers.
How to Settle an Estate without a Will?
When it happens, the resolution of the estate will depend on how big it is, how complex it is and how many heirs claim to have rights to a piece of it. State law comes heavily into play in these cases, and the courts would determine who should be appointed to administer and settle the estate.
How Long Does an Executor of a Will have to Settle an Estate?
In short, an Executor generally has as long as he or she needs to settle an estate, provided all statutory deadlines are met.
What happens if a deceased person has a will?
If the deceased only had a Will, it’s likely the estate will have to go through what’s known as probate. What is probate? Probate is the court proceeding that validates a Will. Keep in mind, not all estates will need to go through probate - probate laws can vary significantly depending on what state you’re in and the size of the estate. If there was a Trust set up, or if the estate is very small in value, it may avoid probate all together.
How much is a probate estate worth?
The baseline number to qualify for a simplified probate can range anywhere from $20,000 to up to $150,000 or more.
What is the first step in settling an estate?
The first step (and one of the most important ones) in the process of settling an estate is getting organized . You’ll want to keep track of both your expenses and all the time you spend working on settling the estate, as you’re entitled to be compensated. You should look for a Will.
What to do if you don't live with the deceased?
There are other, practical things to do, too. If you didn’t live with the deceased and there is now an empty property, you should secure it by changing the locks. You want to take a detailed inventory of all his or her belongings. We’ll go more into detail about this below below, but you’re going to need to open a checking account that’s in the estate’s name - you’ll be paying for things like final bills, court costs, potential lawyer’s fees and more from this account.
Can you distribute assets after a deceased person dies?
After debts and taxes are paid, and if probate is closed (if the estate needed to go through the probate process), then you can distribute assets according to the deceased party’s final wishes.
What is the first step in probating an estate?
The first step in probating an estate is to locate all of the decedent's estate planning documents and other important papers, even before being appointed to serve as the personal representative or executor.
Who should work closely with the executor of an estate?
The executor should work closely with the estate lawyer and accountant to plan for setting enough assets aside to pay the ongoing estate expenses if administration of the estate is expected to take more than a year. Distributions to the estate's beneficiaries might be made in multiple stages.
What is the job of executor of a business?
It is the executor's job to figure out what bills the decedent owed at the time of death.
What does a personal representative have to do before making a distribution?
The personal representative or executor must be certain that every single expense of administering the estate and all taxes have been paid before making any distributions, or that enough assets have been set aside to pay the final bills and taxes.
What is the executor responsible for?
The executor will also be responsible for paying the ongoing expenses of administering the estate, including legal fees, accounting fees, utility bills, insurance premiums, and mortgage payments.
What are the requirements for probate?
The probate court will only require a date-of-death value for the decedent's probate assets to be listed on the estate inventory. If the decedent's estate is taxable—on the federal or state level—then the date-of-death values will also need to be established for the decedent's non-probate assets. These assets will include those owned as: 1 Tenants by the entirety 2 Joint tenants with right of survivorship 3 Payable-on-death accounts 4 Transfer-on-death accounts 5 Life insurance 6 Retirement accounts, including IRAs and 401 (k)s 7 Annuities 3
What is included in a decedent's inventory?
This inventory will also include information about the decedent's debts, such as utility bills, credit card bills, mortgages, personal loans, medical bills, and the funeral bill.
What is estate valuation?
Estate valuation is the process of calculating the estate's value for federal and state estate tax purposes. It's not only the major component of determining whether an estate is liable for the tax, but it can be an invaluable tool in estate planning as well. You can take steps during your lifetime to prevent an estate tax, or, ...
What is considered an asset in an estate?
Assets. Assets in the estate include properties that are wholly owned by the decedent, as well as those in which the decedent held only a partial equity interest, such as jointly-owned property held with a spouse. In this case, 50% of the property's value would be attributable to the decedent's estate.
How long after death can you use an alternate valuation date?
Using the alternate valuation date can reduce the value of the estate if assets are expected to depreciate for any reason during the six months after death. The estate tax bill can thereby be reduced or eliminated entirely.
What is gross estate?
The term "gross estate" refers to the value of assets and properties before taxes and debts are subtracted. However, the estate tax is based on the net value of an estate—the amount remaining after accounting for all available deductions, credits, and payment of liabilities into consideration. 1 .
What is the beneficiary's cost basis?
A beneficiary's cost basis in an asset is either the date of death value or the alternate valuation date value, whichever is elected when the estate settles. 4 . A taxpayer's basis in an asset is normally the dollar amount paid for an asset plus the cost of capital improvements.
How much estate tax is due in Maryland in 2020?
Maryland levies both estate and inheritance taxes. Only estates with net values of more than $11.58 million are subject to the estate tax in the 2020 tax year. Estate taxes will be paid on the value beyond $11.58 million. In tax year 2021, that exclusion threshold increases to $11.7 million.
How many states have estate taxes?
Available deductions, credits, and exemptions can differ between federal estate taxes and state-level taxes. As of Nov. 30, 2020, 12 states and the District of Columbia impose an estate tax. 2 There are also seven states that impose a similar—but different—"inheritance tax." Maryland levies both estate and inheritance taxes.
What is considered personal property?
Typical personal property includes items from safety deposit boxes, perishables, and depending on state laws, this may even include airplanes, cars, art or valuable collections, and clothing. None of the preceding goals should, if approached and managed correctly by the Executor, cause any bruised feelings.
What does it mean when an executor of a will is personally responsible for a beneficiary?
Executors may face responsibilities in the will that are not otherwise required by state law, but deviation from the will may cause the executor of a will to be personally responsible for claims by a beneficiary. Things may become enmeshed in acrimony when an executor of a will determines it’s necessary to sell some personal items to, for example, pay some debts of the estate.
How to be executor of a will?
There are a few simple rules that can help an executor of a will be successful: 1 Follow the dictates of the will concerning personal property, 2 Establish good communication early. 3 Avoid emotional biases. 4 Be a good detective: use credit card statements, interviews, diaries, and receipts to identify personal items.
What is the role of executor in a family?
In a very real sense, an executor moves into a position of being a confidant to the family, finding clues to where personal items may go by having frank, but sincere and discrete conversations about these items. On occasion, the difficulties in determining the best options for distributing personal property are virtually impossible to resolve.
How to be successful executor of a will?
There are a few simple rules that can help an executor of a will be successful: Follow the dictates of the will concerning personal property, Establish good communication early. Avoid emotional biases. Be a good detective: use credit card statements, interviews, diaries, and receipts to identify personal items.
Do wills address property division?
Wills often address the most significant issues of property division, but individuals often tend to ignore the will when considering the value of small items of personal property, almost as though they are ‘entitled’ to those assets. Then, they gear up for battle over the personal items.
Can executors settle a disputed property distribution?
On occasion, the difficulties in determining the best options for distributing personal property are virtually impossible to resolve. In this case, executors have an option not available to the deceased. They can hire a professional (e.g., attorney, mediator, counselor) to help finally settle the disputed distribution of personal property, or even ask the court to make a decision.
