“What Happens to Your Belongings After You Pass Away?” by Attorney Cristol Wagner (Audio)
What happens to all of your belongings after you pass away? Your belongings are also called your Tangible Personal Property. When you create a Revocable Living Trust, you assign all your personal property to the Trust. This means that the person you’ve chosen to administer your Trust at your passing, your Successor Trustee, will be managing your belongings too. This might include giving it to certain beneficiaries, selling certain items, donating, etc.
In your Trust, you will give instructions to your Trustee for your personal property. You will say if you would like your personal property to go to your children, to be divided equally, or if it should be divided up with the “remainder of your estate” which includes all of your beneficiaries. If your children cannot agree on the division of your personal property, your Trustee has the discretion to help divide your things up or sell them if necessary.
If there is something specific that you want to go to a particular person, there are a couple of options to make that wish clear.
- Put a specific distribution in Article 6 of your Trust
The first option is to put a specific distribution, or a particular gift, of the item in your Trust document. You can say who you would like to receive the item, how you would like them to receive it (in Trust, for example), and what should happen if that person predeceases you. This option is very strong, however, if you ever decide to change this gift, you would need to amend your Trust.
- Use your Estate Planning Letter
When you create your Revocable Living Trust with Sinclair Prosser Gasior, you will receive an Estate Planning Portfolio binder. In this binder, there is a section called your Estate Planning Letter. In this letter, there is a place to name a specific item, the specific person you would like that item to go to, and then a place for you to date and sign the letter. This is a legally binding way to leave specific items of personal property to your beneficiaries. It is extremely helpful for items of personal property that have high sentimental value to your family members. For example, is there a certain heirloom diamond ring that you know is going to cause conflict between your two daughters? It is better to make your wishes known so that they can simply follow your instructions.
Something important to note is that there is an inheritance tax on anything someone inherits over $1,000 in Maryland. There are important exemptions to this – so if you are leaving a piece of personal property to your spouse, children, grandchildren, siblings, or registered domestic partners, there is no inheritance tax due. But if you are leaving something to someone else – such as a niece or nephew, cousin, or friend – and the value is over $1,000 there will be an inheritance tax due. This applies whether you use the Estate Planning Letter or an Article 6 specific distribution.
- Gift during the lifetime
Another option is to gift these items during your lifetime. While this is a different strategy, and might not work if you are still connected to and enjoying these items, it is a possible way to avoid the inheritance tax issue. In 2024, you can gift someone up to $18,000 without having to report that gift or it having any gift tax complications. So, if you are planning to give someone something with a value under $18,000, you can gift it during your lifetime and not worry about inheritance or gift tax complications.
These are a few of the strategies we can discuss in planning for your tangible personal property. Oftentimes, families have the largest disagreements over personal belongings after you pass away. Be sure to contact us today so we can help ensure your wishes are respected while minimizing any potential conflicts.
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