- By Joe Franklin
Several years ago, a longtime client of mine passed away and left everything to the stepmother of his children. The children were not nearly as concerned about the wife receiving financial assets as they were with her decision to have an estate sale to liquidate the home and furnishings. If these grown kids wanted to retain toys from their childhood or other mementos, they’d just have to bid along with everyone else.
Unresolved inheritance issues like these can cause serious rifts between family members even with relatively simple estates. That’s why good estate planning may include drafting a Letter of Instruction or a formalized version for inheriting just personal property called a Personal Property Memorandum.
Typically, personal assets like jewelry, automobiles, furniture and the like are not included in a will because listing everything can get quite cumbersome. And it doesn’t make sense to pay an attorney every time you think of another item that may need to be included.
What a Personal Property Memorandum Is
A Personal Property Memorandum is a legally binding document that is referred to in the will. It lists all the personal property you wish to leave to your heirs and specifically designates these items. In order to be legally binding, it must be allowed in your state (30 states accept them) and be referred to in the will. The states are: Alaska, Ariz., Ark., Calif., Colo., Del., Fla., Hawaii, Idaho, Ind., Iowa, Kansas, Maine, Mass., Mich., Minn., Mo., Mont., Neb., Nev., N.J., N.M., N.D., S.C., S.D., Utah, Va., Wash., Wis. and Wyo.
Typically, personal assets like jewelry, autos and furniture are not included in a will because listing everything can get quite cumbersome.
However, you don’t have to notarize this document or sign it in front of witnesses, as you would with your will.
So if Jill thinks she should get the entire jewelry collection but your Personal Property Memorandum states that certain items will go to Sue, there’ll be less bickering about these coveted items when they’re distributed.
It is best to clearly describe the items so they won’t be confused with others that are similar. (For instance, “the sterling gravy boat with spoon will go to Amy.”) As with beneficiaries for other assets, be sure your executor or executrix has the correct information, too.
What a Letter of Instruction Is
A Letter of Instruction is a non-legally binding document that will contain all the wishes you would like to communicate. In many cases, you may not be able to create a legally binding document to bequeath personal property, so this letter can be a useful way of spelling things out.
What would you include in a Letter of Instruction that might not be in a Personal Property Memorandum? Many think of Letters of Instruction as “cheat sheets” to estates. Yours might note:
- The location of important legal documents, such as your will, insurance policies, titles to automobiles and deeds to property
- The location of your cemetery plot deed, if you have one
- All pertinent contacts for legal, tax and financial information and advice
- Any prepaid funeral arrangements you’ve made
- Any burial or cremation wishes; you may even wish to specify which hymns or speakers you’d like included in your memorial service
- A list of financial assets including savings and checking accounts, stocks, bonds and retirement accounts with the names of their beneficiaries and account numbers, PINs, usernames and passwords where applicable
- A list of pensions or profit-sharing plans, including the location of their explanatory booklets and statements
- The location of your latest tax return and Social Security statements
- The location of any safe deposit boxes and keys
- A list of instructions for how insurance proceeds are intended for heirs, how beneficiaries can stretch out IRA assets over their life expectancy, trust provision explanations (in terms heirs can understand) and business succession plan summaries
It also may be helpful to leave a list of contact information for people who should be notified in the event of your death.
Simple to Update
Personal Property Memorandums and Letters of Instruction are very easy to change, since you don’t need to consult with an attorney on updates. It’s a good idea to save them on your computer so you can quickly make, sign and date changes and dispose of earlier versions.
Your family will be grateful.