This post summarizes a Wall Street Journal article, December 15, 2012, by Andrea Coombes.
The Wall Street Journal reported recently that baby boomers and elder Americans say personal keepsakes, family stories and last wishes are more important to their legacy than money.
Most baby boomers (86%) and Americans aged 72 and older (74%) said family stories and keeping their family history alive is the most important piece of their legacy. This was further supported by a 2012 survey conducted for Allianz Insurance, Minneapolis, MN, where 64% of boomers and 58% of elders said family mementos and heirlooms are a key inheritance.
“The things that make your family unique—not money, but stories and personal possessions—those are most important in the legacy discussion,” says Katie Libbe, vice president of consumer insights for Allianz Life, in Minneapolis.
The Journal article reports that while money can be divided equally, disagreements often arise over the sentimental value of personal property and the emotions attached to it. While the family history, if not recorded, may die with an elderly relative, dividing the mementos is a common cause of conflict.
The Journal article suggests 5 steps for the equitable distribution of personal property and the preservation of family history.
We would add a step to address a key practice in estate planning, the use of appraisals to help the family determine value. Completion of a fair market value appraisal will assist you in determining values in preparation for distributing personal property equitably among family members.
1. Talk about requests with family members
-Find out which family members might like specific keepsakes.
-Ask aging parents what they would like to give to whom.
-Take time to tell and record family stories. Identify family members and relationships on the backs of photos.
2. Create a memorandum
-Create a plan to dispose of keepsakes in order to prevent conflict later; create a memorandum along with a will that describes who shall receive specific items.
For example, if a diamond ring should go to a daughter, clarify which diamond ring by attaching photos of the item and referencing each photo in your memorandum.
We suggest that an appraisal also accompany each item so that there is no question about which item is referenced.
-Use a round robin approach to dispose of personal property: each individual selects one item, starting with the oldest child, then going consecutively around the room again.
-Have all the items put up for auction in the case of family disputes. Family members can bid on what they want. The money goes back to the estate to be divided equally.
The downfall with this approach is auction house commissions, which can cost the family up to 45% of value. Another option we have suggested to clients, which avoids auction house commissions, uses a “point” system. This system allows family members to bid on personal property by allocating his or her points to an item according to its sentimental value to them.
3. Avoid discord.
-Give items away before you die.
-Treat family members equally, by giving away items of equal value.
We suggest this can be accomplished with a fair market value appraisal to determine the value of each item to be given away.
4. Consider hiring a professional executor.
-Name a co-executor in cases where there are potential complications in the distribution of assets, such as family polarity or remarriage and step-siblings issues.
-Consider hiring a corporate fiduciary as executor through your bank or trust company. You can name a professional executor in your will, or your chosen executors may opt to hire a professional after your death.
5. Share your values.
-Keep a journal that can be passed on.
We suggest that clients record their stories on permanent media such as a CD, DVD or other type of voice or video recording.
-Create an ethical will, a one-page document, often a letter included with the will, or a bound book that allows you to pass along your life story and values.