Families use a variety of methods to distribute non-titled property. No method is "perfect" or "right" for all families. To help you decide what might be best for you family, here, drawn from materials prepared by the Minnesota Extension Service, is a look at some of the most common methods and the potential consequences of each method:
WillsListing one's personal property in a will can entail pages of detail if every item is listed. When writing a will, owners are often encouraged to prepare a "separate writing identifying bequest of tangible property."
Must be updated as changes occur in ownership or transfer wishes occur.
Frequently use vague wording such as "divide evenly among the children," still leaving the actual decision of who gets what up to the family.
Lists
Most states recognize lists, mentioned in a will, as a legal method of distributing non-titled property. A list such as this must either be in the handwriting of the owner or signed by the owner. Property and people mentioned in the list must be clearly identified.
May be prepared either before or after the will is written.
Must be kept with personal papers, so the personal representative is able to distribute items to intended recipients.
Must be mentioned in the will to be legally valid.
Needs to be dated to ensure it represents the most recent wishes of the property owner.
Can be easily updated.
May be prepared by the owner after receiving input from potential recipients.
Need not be limited to family members and can include friends and other relatives.
Gifts
Property may be transferred to others by gifting it prior to death. Such gifting may occur at birthdays or holidays or at any other time. Gifts of up to $10,000 ($20,000 for married couples), or property equal to that amount, may be given annually without paying gift tax. Gifts may also be given to charities or museums.
Allows you to pass on stories and special memories associated with specific items.
May reduce the size of your estate and possibly the taxes on it.
May require filing of gift tax forms if amount exceeds limit.
Provides for permanent transfer of property. Once a gift is given, it is no longer yours.
Returning gifts to the people that originally gave them to the property owner may be one way of dividing personal property. Remember that not everyone gives gifts they would like to have returned. It does not take into account gifts such as money, clothes or food.
Verbal or "someday" promises
A "someday you will receive this item" promise assumes future transfer of personal property. For example, "After I die, I want you to have my wedding ring."
May cause misunderstandings if more than one person feels he or she has been promised the same item, so desires must be well-known.
May cause problems when items break, are sold or lost or given to another person before "someday" arrives.
Masking tape/labeling items
Many people place masking tape or other labels on items to identify who should receive them.
May fall off, be removed or become illegible.
Are not legally binding unless a valid list is also prepared.
Private auction
Family members buy items in open bidding. Families who choose this method may use real money or "funny money." If real money is used, the money generated will go to the owner or to the estate and may be subject to taxes. If "funny money" (marbles, poker chips, play money) is used, each qualified bidder receives an equal number of units for bidding.
Allows special items to stay in the family and, thus, preserve memories.
May enable wealthier bidders to "outbid" others when real money is used. Hurt feelings and damaged relationships may result.
Allows everyone to have equal purchasing power if "funny money" is used and allows family members to use their resources for the items they most want.
Allows the family to maintain control and privacy.
Silent auction with family
Family members place written bids on items. High bidder gets the item. Money goes to the estate and may be subject to taxes.
Allows more privacy in bidding.
Allows quiet, less assertive people equal opportunity for securing items they want.
Public auction
Family members and the public bid for items. Proceeds from the auction will go to the owner or to the estate. Proceeds may be subject to state taxes.
Allows items of sentimental value to go to individuals outside the family.
May generate income for property owner if he or she is living.
Garage/yard sale
A public sale of this type works well to distribute items of little emotional or financial value. Proceeds go to the owner or the estate and may be subject to taxes.
May require that fees or a percentage of the sale be paid to the liquidator.
May present a challenge to arrive at a "fair market value."
Estate sale
Property is sold to a liquidator and the money goes to the owner or the estate. Proceeds may be subject to taxes.
Items of sentimental value may be transferred to people outside the family.
Allows for an equitable distribution of an estate; proceeds will be divided equally among heirs.
Pilferage
When others aren't looking, heirs quietly remove items of special value.
Can cause hurt feelings and anger that may last for years and generations.
May be contradictory to wishes of the owner.
May result in secrets that are damaging to relationships.
Family distribution
Many families choose to distribute property privately within the family. Distribution may take place item by item, or items may be placed in groups of approximately equal monetary value and then selected as a group. Methods used to determine order of distribution include:
Shake dice: High roller receives first choice. After the first round, the selection order is reversed. After two rounds, family members shake again.
Draw numbers, straws or playing cards.
Birth order preference: Selection goes from oldest to youngest or vice versa.
Gender preference: Selection begins with daughters and then sons or vice versa.
Generation preference: Priority is given to parents, siblings, children, grandchildren or blood kin.
The advantages/disadvantages are:
Allows family to maintain control and privacy.
May give all family members equal chance to receive prized items.
Needs to recognize the difficulty of placing a dollar value on emotionally cherished items.
Is often utilized immediately following a death while family members are still in the grieving process. This may be extremely difficult for some.
Requires family members to be present to make decisions.
May or may not reflect the property owner's wishes.
May not enable stories to be passed on with items if it occurs after the owner's death.
May make it difficult for everyone to agree on how to determine a value (financial or emotional) for items.
Removal of unclaimed property
One or more family members assume responsibility for removing all remaining property. This property may need to be gone through item by item to insure that valuable items aren't discarded.
Once items are disposed of, they are gone forever. Items that may not seem to have value today may be more appreciated tomorrow or next year.
Throwing away
While it may be necessary for some property to be taken to a landfill, you may want to consider donating items to nonprofit groups or thrift shops.
Gets rid of unwanted items.
Donations may qualify you or the estate for a tax benefit.
Intestate transfers
If you own property at the time of your death and have not made a will, the state, through intestate succession laws, dictates how your titled and non-titled property will be distributed. Although states may differ, there is a planned, legal succession of levels of heirs documented in each state's statues.
Gives equal amounts to heirs at the same level (such as siblings) regardless of owner's wishes or intentions.
Does not allow for any special bequests.