TRUSTS – ACCOUNTING-
PERSONAL PROPERTY PROCEDURES
By: David L. Crockett, Attorney, CPA
UCLA Law School , J.D. ’69, UC Berkeley ’66
901 Dove St., Ste 120, Newport Beach, CA 92660
7-1-22 Website: TrustandProbateLawyers.com
Definition of: The “personal property” as far as trust administration is concerned means tangible items such as the personal belongings, jewelry, clothing, furniture, household goods, furnishings and collections.
Job of Trustee in general: The Trustee’s responsibility is to do what the trust instructs about the distribution of the personal property. Most trusts have general instructions such as “distribute the personal property in equal shares to my beneficiaries”. Some are more specific and earmark certain items for certain beneficiaries. The trustee powers sections of the trust may allow the trustee to distribute the personal property “in kind” (meaning a physical distribution to specific persons) and some may also allow the trustee to sell the personal property. Thus, the starting point as to how the personal property is to be distributed is what the trust language provides.
Need to act quickly: In trust situations, the personal property can and often does disappear and/or get taken by beneficiaries and relatives who may mean well. Once items are gone, it is difficult to prove their existence or value. Frequently, trust beneficiaries and trustees become involved in lengthy disagreements and even litigation concerning personal property and missing personal property. This often happens when some beneficiaries live far away and others are close by. It also typically happens if the trust beneficiaries are not getting along or are estranged. For the trustee to do his/her job to distribute the personal property, he/she must first secure it so it can be identified and managed. The trustee needs to act quickly on the day of death or shortly thereafter (ore even before if appropriate) to secure all of the personal property. The trustee should consider having locks changed on the house where the personal property is and restrict access.
What to do once secured: List, photo & value. The personal property is just one type of asset that the trustee is legally required to account for. The trustee can be held personally liable for personal property which disappears or is not accounted for. Thus, a detailed written list of “inventory of personal property” must be prepared with estimated values. It is a legal requirement to make such a list. Photos should be taken as well to backup the inventory list. Before anything is sold, given away, or disposed of, the list with photos should be shared with all of the beneficiaries so everyone who is entitled can see what is there. A starting point for determining estimated values would be consignment store or goodwill store prices or e-bay listings. The values can be adjusted later if more information is obtained and/or if there are disputes.
Tips re photos. Having a full set of photos will save potential disputes. If there is a lot of stuff then instead of cell phone photos, you may save a lot of time and expense by hiring a real estate photographer. When real estate brokers list houses for sale, there are detailed photos taken both inside and outside for marketing and internet listing. As a result, there are numerous photographers in every community which can be found with a basic internet search. The cost is typically just a few hundred dollars and the cost is a proper and justifiable expense of trust funds. Just ask for detailed room by room photos of everything. Typical turnaround time is less than a week and you will have high quality photos in digital form that can be shown to beneficiaries along with the inventory list.
Tips re appraisal. There are professional personal property appraisers who can be retained to list and photograph and appraise everything. They are typically hired when there are valuable jewelry or antiques or collections that have more than ordinary value. It is not a legal requirement to get appraisals of personal property, it should be done if there are items of substantial value and/or if there is likely to be disputes about what things are worth. Also, if the estate is large enough to require the filing of a form 706, federal estate tax return, a personal property appraisal may be required. Before hiring a personal property appraiser, it is advisable to send an inventory list with estimated values and photos to all the beneficiaries to determine if there are any serious disagreements.
Form for inventory of personal property. Use a format such as this:
|Inventory of personal property, jewelry, furniture, & furnishings
Trust estate of: Sally Smith, date of death Jan 1, 2022
|#||Description of item||Estimated value
@ date of death
The longer you wait the worse it gets. Personal property disputes are every estate and trust lawyer’s worst nightmare. An unfortunate typical situation is where on the day of the funeral or before, the surviving relatives who live close by go over to the house and help themselves to what they want. Then, when the out of town relatives arrive, they go to the house and see that things are missing and the trust administration is off to a bad start. Delays in securing and inventorying the personal property can result in items going missing. Very little if anything can be done to recover missing items. This is the classic case of once the horse is out of the barn the remedies are few and ineffective. Theoretically, the trustee can file a court petition against people who are suspected of taking things. However, it is up to the trustee and the trustee’s attorneys to prove that items in question were taken and who took them. Also, it will take a year or more to get to trial in the court for a decision and of course cost thousands in attorneys fees and court costs. Unless there are photographs or written evidence created very close to the trustor’s passing, the trustee usually can’t produce evidence to prove (a) what the missing items were and/or (b) that the trustor still owned them at her death or (c) that the accused person actually took the missing items. The person accused of taking items will typically deny any knowledge of anything. If it were money missing, then bank records can be subpoenaed to prove what money was taken and whose account it went into. Not so with personal property, unless the items are of significant value or are put up for sale in something observable such as e-bay. Because the trustor’s personal property is not typically on people’s minds in the trustor’s last days, not a lot of care or record keeping is done to keep track of what there is. Also, there is not any record filed with any government agency about personal property so being able to prove what was and was not there can be nearly impossible.
WARNING-THIS IS A GENERAL DISCUSSION OF ACCOUNTING ISSUES AND IS NOT A COMPLETE DISCUSSION OF ALL ACCOUNTING ASPECTS. WHAT IS STATED HERE SHOULD NOT BE RELIED UPON OR ACTED UPON. A TRUST AND ESTATE ATTORNEY SHOULD REVIEW ANY PROPOSED ACCOUNTING OR DEMAND FOR ACCOUNTING TO MAKE SURE NOTHING IS OVERLOOKED OR INACCURATE.