What If No One Wants My Assets?
A critical question to ask yourself when creating an estate plan is who will get your assets when you pass on? While most people think about who they would like to receive the major items—homes, retirement accounts, savings—personal property such as jewelry, clothing, sports equipment, vehicles, and other possessions are often overlooked. The truth is that while some mementos and sentimental items may be very valuable to you, the people that you want to give them to at your death may not need or want them. Who, then, will get your remaining property and possessions if no one wants them?
How Gifts Pass Through Your Will
Your will contains instructions to be carried out by your personal representative for who should receive the money and property that has become part of your estate when you die. Your estate consists of real property (i.e., your house), bank accounts, personal property, and other items that may not have instructions as to who receives them upon your death. Retirement accounts, insurance policies, and other accounts have instructions called beneficiary designations or transfer- or pay-on-death designations and are not controlled by your will—unless the designations on these accounts are not properly filled out or signed by you prior to your death, in which case they become part of your estate. Your will includes specific gifts and residuary gifts of your property and money. Specific gifts are gifts of a particular piece of property (“I give my emerald ring from Grandmother Smith to my daughter Judy”) or a specific amount of money (“I give $5,000 to the American Heart Association”). You can even give away your pets in your will if allowed by state law. Residuary gifts generally mean anything else in your estate that has not specifically been given away. Essentially, everything left in your estate can be given to named individuals, charities, or entities (“I give my residuary estate to my husband, unless he dies before me, then to my son”).
How Gifts Pass Through Your Trust
Your trust also contains instructions to be carried out by your trustee for how to manage the property owned by your trust. This property can include real estate, bank accounts, and personal property during your life—when you are incapacitated (unable to make or communicate your wishes)—and after your death. Only items that are in your trust are covered by the trust instructions. Some people give their property to their trust by signing extra documents with their estate plan, and other property, such as real estate or bank accounts, can be retitled in the name of the trust at any time, thereby avoiding probate at your death. The trustee must follow the trust instructions and gift trust property as you have outlined in the trust agreement. Similar to a will, there can be specific gifts and then gifts of the rest of your trust property (“Anything remaining in my trust shall be given to my wife, but if she is not living, then to my daughters in equal shares”).
Memorandum Distributing Tangible Personal Property
Some states allow for a memorandum distributing tangible personal property in either a will or trust, referenced as “See my memorandum instructing the distribution of certain pieces of tangible personal property.” You must sign this memorandum, though it does not usually need the formalities of a will or trust signing (i.e., a sworn statement, witnesses, and a notary). The benefits of having a memorandum outside of a will and trust are the ease of adding new items, deleting items you get rid of, or changing who you would like to receive property.
Dividing Trust or Estate Property
Following the instructions of the will or trust and any memorandum, the personal representative or trustee must ensure the safe delivery of a specific gift to your beneficiary. However, the beneficiary does not have to accept the gift, they can disclaim it. Disclaim is a legal term meaning to refuse a gift. Depending on the federal or state law that applies, the beneficiary must disclaim the gift, usually within nine months if the disclaimer is also being done for tax purposes, by signing a legal document. The gift will then pass to the next beneficiary in line. Other items of property not specifically dealt with in the trust, will, or memorandum are usually divided up among the beneficiaries of the will or trust. The personal representative or trustee must supervise the process of fairly dividing up any remaining items of property, usually done by lottery or by taking turns choosing items.
But, what if no one wants items from your estate or trust? Some well-drafted estate plans include contingency instructions with your wishes for a beneficiary of last resort, for example, a charity. You can also instruct your personal representative or trustee to inquire among your remaining family members or friends to see if any of them would want the unwanted property. There are also other methods to get rid of the unwanted estate or trust property:
- Estate sale. An estate sale is a method of hiring a company to facilitate the sale of remaining estate (or trust) property, similar to a garage sale. After the selling company’s commission, any sale proceeds are part of the estate or trust and are divided among the beneficiaries as instructed in the will or trust
- Estate auction. An estate auction offers an alternative method of selling remaining items of an estate or trust, in which there is an auctioneer who might set a starting bid for an item but the ultimate price is set by the winning bidder. Similar to an estate sale, any sales proceeds become part of the estate or trust, minus the commission or cost of the auction.
- If you did not name a charity in your will or trust, the beneficiaries of your will or trust can still cooperatively agree on a charity to receive the items they do not want. Any agreement deviating from your specific wishes should be documented in writing and signed by all beneficiaries. The estate usually bears the cost of delivery for all items to the agreed-upon charities.
- Any item not disposed of in any of the manners above can be disposed of by the executor or trustee, usually by putting them in the regular trash, arranging for trash disposal, or having a junk hauling company pick them up.
A complete estate plan should capture your wishes for how all of your property will be given away at your death. This includes specific gifts of property or money as well as residuary gifts of everything else that remains in your estate or trust. It may also include a memorandum that specifies who should receive certain items. Your estate plan should also include a method for dividing other items fairly among your loved ones, as well as a process for the personal representative or trustee to follow if your loved ones do not want certain items. Give us a call today and we can discuss your options over the phone