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Oct 14, 2022 Assignment of Tangible Personal Property to a Revocable Trust

Deciding how and to whom your financial assets and property will be distributed at the end of your life is a challenging proposition. The process requires a person to consider their relationships, their obligations, the character and personal responsibilities of various beneficiaries, the nature of the property, and other assets being passed on.

In New York, consulting with an experienced trust and estate attorney is an essential step anyone thinking about these issues should take very early in the process—without delay. It’s important that one understands the difference between creating a trust and writing a will. Experienced trust and estate attorneys are extremely knowledgeable about wills and trusts and how each of them function.

To ensure someone makes the most informed decision about the best instrument to use in planning how their own estate will be set up, they should understand how wills and trusts work, how they differ from one another, and what advantages and disadvantages each instrument offers to both the settlor/testator(rix) and the beneficiaries.

In this blog post, we’ll focus on how a revocable trust can serve as a tool to transfer tangible personal property or other assets to the next generation or to other parties you wish to endow.

To find out more about assignment of tangible personal property to a trust, contact the experienced trusts and estate lawyers at Ely J. Rosenzveig & Associates today.

Advantages of Using a Revocable Trust to Transfer Tangible Property

When deciding how to distribute tangible personal property in an estate plan, problems arise that are more efficiently solved through the use of a revocable trust rather than a will.

Taxes: The assets in a decedent’s estate are subject to both federal and New York State estate taxes. If the articles of personal property in the estate are of substantial value, they may cumulatively exceed the level of the respective estate and gift tax exemption levels.

When financial assets or personal property are transferred to a revocable trust, they are still deemed to be owned by the decedent, and while these assets may not become part of the probate estate, they are taken into account for estate tax purposes.  It is important to note that there are certain types of trusts that can be used to reduce or eliminate estate tax liability, however that discussion is a larger one, beyond the purview of this article.

Privacy: Many individuals and families place a high value on privacy. Because probating an estate is a public proceeding, all the documents filed with the New York Surrogate’s Court are publicly available, including descriptions of items of value and the identity of the person receiving them. Revocable trusts are managed privately by a trustee named by the trust settlor or grantor, whose integrity and discretion is relied upon by all parties.

Practicality: A will must be filed in probate court and the executor of the will has the responsibility to distribute the probate estate’s assets as directed in the decedent’s last will and testament. When estate assets include tangible property such as jewelry, art, fine wine collections, or valuable silver or other rare or antique objects, unless the testator included a list identifying to whom each item was to be given, the estate executor has to deal with the issue of distributing these items or their value, if sold, to the named beneficiaries, pursuant to the terms of  the decedent’s last will and testament

Since the nature and value of objects like wine and jewelry are so different, the Will’s stipulations with respect to share distributions to named beneficiaries may require the sale of the property and the distribution of the proceeds to the heirs in line with the Will’s directives. This process can be very time consuming and expensive.

When items of tangible personal property are assigned to a revocable trust, they are transferred into the trustee’s possession and control during the settlor’s lifetime. Proper arrangements for their safe storage and proper conservation can be made immediately.

Special Considerations for Particular Property

Guns: Transferring certain personal property is especially complicated under New York law. For example, a large or expensive collection of firearms cannot simply be transferred to a beneficiary as one would leave someone a diamond ring.

New York State law prohibits any executor of a will to transfer firearms without the explicit approval of the Surrogate’s Court judge. Nor can the trustee of a standard revocable trust receive possession of firearms unless they pass a full background check. The increasingly common solution to this problem is the use of a “gun trust.”

Gun trusts are a special species of trust recognized by state and federal governments that are treated like a corporation in law. The regulations require registration and reporting of the firearms’ serial numbers and description, but the trust can hold the firearms for the use and benefit of family members or even for public exhibition.

Pets: Pets that survive their owners are often subject to uncertain futures. Often, their new residence is left to family or friends to determine, and, oftentimes the financial responsibility involved leads to their abandonment or euthanasia.

New York enacted a law to provide for valid trusts to be created to manage assets intended to be used for the benefit of a decedent’s surviving pets.

N.Y. Est. Powers & Trusts Law § 7-8.1 declares trusts for pets to be valid and authorizes the principal held or the income generated by pet trusts to be used exclusively for the care of the designated pet. The trust terminates upon the death of the pet or pets for whose care the trust was created.

The settlor can name a trustee to carry out the financial responsibility for pet, and any funds remaining in the trust when the covered pet or pets die is then distributed to the residual beneficiary named in the trust. If there is no residual beneficiary identified, then the remaining funds get transferred into the decedent’s estate.

Another special feature of a New York pet trust is a limitation on the amount of assets funding the trust. If the funds held by the pet trust so far exceed what is reasonably necessary for the care of the pet(s), then the surplus funds must be transferred immediately to the residual beneficiary, if there is one. If there is none, then the surplus funds go into the decedent’s estate.

Learn more about assigning tangible personal property to a revocable trust : Contact Ely J. Rosenzveig & Associates Call 1.914.816.2900 or email us at: [email protected]

Ariel Rosenzveig

Ariel S. Rosenzveig received his Juris Doctor from the Benjamin N. Cardozo School of Law in May, 2011, and has been practicing law with the firm since August, 2011. During his summers while in law school, Ariel interned with the United States Commodity Futures Trading Commission in New York and with the Securities & Futures Commission in Hong Kong, China.

While in law school, Ariel served on the staff of the Cardozo Public Law, Policy & Ethics Journal, volunteered with the Cardozo Advocates for Battered Women, and participated in the National Institute for Trial Advocacy’s Intensive Trial Advocacy Program. Prior to attending law school, Ariel worked as an arbitrage trader for a small proprietary trading firm on Wall Street. Ariel graduated summa cum laude from Yeshiva University in 2006.

Ariel is licensed to practice law in the states of New York and New Jersey, and is a member of the New York State Bar Association (NYSBA), NYSBA’s Elder Law section, and the National Academy of Elder Law Attorneys (NAELA). In June, 2015, Ariel successfully completed a certificate program in mediation through the Program on Negotiation at Harvard Law School.

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Tangible Personal Property in Estate Planning

by ACTEC Fellows Elizabeth A. Garlovsky and Tiffany N. McKenzie

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Tangible personal property refers to physical assets that individuals own, such as furniture, vehicles, electronics, and jewelry. Adding tangible personal property provisions to your estate plan ensures smooth inheritance, prevents disputes, and helps distribute sentimental items as you wish.

ACTEC Fellows Elizabeth A. Garlovsky and Tiffany N. McKenzie explain what you’ll want to understand about how to plan for tangible property in your will or trust.

Hello, this is Elizabeth Garlovsky, ACTEC Fellow from Chicago. We are here today to talk about tangible personal property in estate planning. Said differently, when putting your estate plan in place, and once it is in place, what are you supposed to do with your stuff? What options do you have, and what are the best practices to ensure a smooth and efficient transition of your everyday and collectible items, which may have sentimental value, monetary value, or both?

ACTEC Fellow Tiffany McKenzie of Atlanta, Georgia, joins us today to discuss this topic. Thanks for being here, and welcome, Tiffany.

Tiffany McKenzie: Thanks, Lizzy, for having me. Excited to talk about this.

Tangible Personal Property and Your Will or Trust

Elizabeth Garlovsky: Okay, so let’s get right into the questions. So, Tiffany, should you put distributions of tangible personal property in your will, in your trust—or are there other documents to prepare?

Tiffany McKenzie: Lizzy, that’s a great question. You should absolutely put distributions of tangible personal property in your estate planning documents, like your will or your trust. Often, as you said earlier, tangible items come with so much emotional and sentimental value. So, it’s really important that you address them in your estate planning documents.

There are some states that allow you to also include a supplemental amendment, or sometimes a tangible personal property list, that would allow you to more easily distribute your tangible personal property and to amend who it is that you might want to receive certain items and or the items that you put on that list.

Distributing Your Tangible Personal Property

Elizabeth Garlovsky: Thank you, Tiffany. Next, who decides how the property will be distributed, and can I direct the method of distribution?

Tiffany McKenzie: Thanks, Lizzy, for that question. So, you can decide how you want your property to be distributed and to whom you want it to be distributed. And you can absolutely direct the method of distribution in your estate planning documents. So, under your will, your executor will be the person, or your personal representative will be the person, who administers those wishes. And if it’s under your trust, your trustee will be the person who administers those wishes.

We do recommend that you kind of keep it simple, though. Make sure that you are very clear as to the actual item. And sometimes, put some descriptive words around, for example, artwork. So, tell us a little bit about it. Who created the artwork? What does it look like, et cetera? It’s really helpful to your executors, personal representatives, or trustees who actually distribute those assets.

Elizabeth Garlovsky: Great, thank you. And can you use different methods, such as a lottery or drawing straws, to help people decide?

Tiffany McKenzie: Absolutely. So, you can include in your will or trust a lottery provision, or kind of, like you said, picking straws, to decide who gets to pick the items and in what order they pick items. But again, let’s just make sure that you keep it simple in your documents so that your executor or trustee can administer those things easily and efficiently.

Coordinating and Tracking Your Personal Property

Elizabeth Garlovsky: And then, how do you recommend keeping track of the tangible personal property while you’re actually alive?

Tiffany McKenzie: We do recommend that you keep an inventory of some kind and try and update that periodically. You know, realistically, we know it’s hard for people to do this all the time because often, during your life, you’re getting more things, you’re giving things away, you move, you might donate. But it’s very important, especially if you have very valuable property, that you keep track of it and that you get an appraisal to make sure that you’ve got the values appropriately defined. If you get an insurance policy to protect those assets, that’s another great way to keep track of them, because the insurance companies will keep schedules of those assets.

Sometimes, clients take pictures and create catalogs. There are many different ways to keep track of it. But we do recommend that if you’re keeping track, make sure that you update that periodically, and make sure you tell your estate planning advisors as to where those inventories are.

Valuating Your Tangible Personal Property

Elizabeth Garlovsky: And then, how will the property actually be valued at death, and how can you ensure to divide it equally among multiple individuals?

Tiffany McKenzie: When you die, most of the time, the easiest way to value property is to hire a professional. Hire a professional appraiser to value that property. And then, you want to make sure that, according to your documents, if you want to divide them equally, there’s a mechanism to divide assets that are hard to divide.

So, for example, if you’ve got a set of valuable dishware, you might want to give the entire set to one person and then equalize that by giving an asset of equal value, or cash, to another person. So, there are many different ways to equalize, but make sure that if you’re doing that, it’s very clear in your estate planning documents as to how you want to make those types of distributions.

Expenses Associated With Distributing Property

Elizabeth Garlovsky: OK, great. And then, who pays for the cost to store, insure, pack, and ship the property that’s being distributed at death?

Tiffany McKenzie: Most of the time, you can put in your estate planning document provisions around those expenses. So, the storing, the ensuring, packing, shipping—all of those can be expenses of your estate or your trust. And if you don’t have that type of language, sometimes the actual person who was receiving the asset might pay for those expenses directly.

Elizabeth Garlovsky: And then, what if you have a unique, one-of-a-kind item that can’t be divided, such as a baseball signed by Babe Ruth or a special one-of-a-kind or unique piece of jewelry?

Tiffany McKenzie: Consider getting input from the potential takers as to their preferences, or consider giving away those items during life. You can also, as I said earlier, make sure that you equalize, so that if you give a high-value asset to one person, you might give another asset or cash of equal value to a different person. You can also just state that those high-value assets should be sold, and then those proceeds could be divided equally. There are many different things that you can do when it comes to high-value assets.

Coordinating Your Wishes With Your Executor or Trustee

Elizabeth Garlovsky: And then, the final question is: how do I protect my stuff from just disappearing or being taken by family members or other people when I pass away?

Tiffany McKenzie: That’s a great question, Lizzy. We really recommend that you’ve got your estate planning documents in place, so that you arm your executor, your personal representative, or your trustee with the power to really corral your assets and protect those assets. That’s really going to be the main person to ensure that your assets don’t just walk out the door when your family members or loved ones are at your home after your death. We really want to make sure that those people are armed with the power to really protect those assets for your benefit and for the beneficiaries’ benefits.

Elizabeth Garlovsky: OK, great. Well, thank you so much, Tiffany, for answering all those great questions. For more information, please visit actec.org/estate-planning

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