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Estate Planning for Sentimental Items

Posted on: January 22nd, 2016
bequeathing heirloomsDuring an estate planning review, discussion often focuses on disposition of property such as real property, retirement accounts, and life insurance. Thoughtful titling of assets, use of trusts, and tax planning can help to preserve these assets for surviving loved ones. How should individuals address sentimental items, which may have a greater emotional value than financial?

One might initially feel inclined to include a carefully crafted provision in a will describing the item(s) one wishes to bequeath. However, relying on a will for distribution of one’s assets raises several issues. Wills are filed with the court as part of the probate process and, thus, become part of the public record. Furthermore, probate court allows an opportunity for the will to be contested. This creates a risk that items may pass against provisions in a will. A letter of wishes may accompany a will to document the testator’s wishes and provide instructions on how to ensure their requests are satisfied. However, letters of wishes are not legally enforceable and, although they can help to share the testator’s sentiments, surviving family have no legal obligation to follow them. If the testator hopes to preserve privacy and ensure control, a trust can offer confidentiality and clear instructions to the Trustee in distributing assets. 

A testator does not necessarily need to wait until they die to pass on a sentimental item. Depending on their goals, it might be more beneficial for the testator to gift items during their lifetime. This option not only offers an opportunity to directly instruct the recipient regarding the item’s personal value and care, but it also allows for tax advantages. Up to $14,000 may be gifted from one person to another annually without triggering income tax. The value of personal items falls under this rule. Appraising items can help to maintain records of value and asset transfer should they need to be referenced at a later date for tax purposes. Choosing to gift during one’s lifetime offers a yearly opportunity to transfer assets gift tax-free while reducing the value of one’s estate, which might be an attractive strategy for those whose estates exceed the lifetime estate tax exemption of $5.45 million.

Passing sentimental items to family members can produce the legal issues above, and it can also create family conflicts. Regular estate plan reviews and family discussions help prevent heirs’ surprise and disappointment upon learning of one’s testamentary wishes. Read our tips for avoiding family conflicts in estate planning

By Attorney Samantha Reichle

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