There are many assets that are managed after someone dies: stocks, bonds, real estate and of course, personal property. By definition, personal property is anything that is not real estate, cash, stocks or bonds. Basically, it’s all your stuff.
Most personal property is worthless. No one wants that lamp you bought in Marrakech during your gap year or the ticket stub from your first concert. In fact, personal property can be some of the most challenging items to handle when someone dies. If you’re administering an estate or trust, you are charged with disposing of, selling or otherwise handling your loved one’s stuff. This comes with some conflict as the reality is that your stuff is worthless (or not worth much).
This brings me to the bane of my existence. Collections. If I may ask, can everyone stop collecting stuff!? My clients collect stamps, Egyptian tapestries, antique firearms, comic books, rare cars, glassware, Coca-Cola items and many, many more (and frankly too weird to discuss) items.
So here’s the problem, unless you are collecting marketable securities, i.e. stocks, it is impossible to value a collection for tax and sale purposes. What a collection of something is worth is highly subjective. Add in the fact that we do not have the luxury of selling it over time (estates and trusts really need to be liquidated and distributed in a timely manner) and this creates a terrible hardship for the person (and attorney) handling the estate or trust.
The easiest way out is to sell the collection while you’re alive. Heresy? No, just be practical. You know the value of your collection, you know the reputable dealers, and you have the luxury to sell at your leisure. Most collectors keep records that are often cryptic and sometimes misleading as to what they paid or how they value the collection.This is due to a very practical phenomenon: most collectors don’t want to admit to their spouses, or themselves for that matter, what they actually paid for it. Records are often useless when it comes to actual liquidation value.
The second easiest route is to specifically gift the entire collection to one person. As the responsible party for a trust or estate, you are charged with selling the collection at the best price possible. However, if the collection is gifted to a person or organization as a whole, this issue is eliminated. Be careful, though — some beneficiaries won’t want the collection, so it is often discarded. One example is when someone leaves an art collection to a museum, but the museum rejects it.
So what happens when the collection was not disposed of during life, was not specifically gifted, and is now your problem? We have some solutions.
The first trick is the one we use most often. There are typically “experts” or specialty shops for just about everything. The problem is that these “experts” are usually your foes. They have a tendency to take advantage of people when they don’t know what they are dealing with. So we divide and conquer. One expert is hired on an hourly basis to value the collection and consult on the sale to a separate and independent expert. This way, the hourly expert doesn’t care what the collection is sold for and the person selling the collection can’t pull a fast one on us. This is expense, though.
The second option is the easiest – you enter into an agreement with the beneficiary(ies) to liquidate the collection over an expanded timeline and memorialize your understanding in writing. This can be a simple or complex writing depending on the nature and size of the collection. But what it does is, it sets the expectations of all parties and alleviates potential conflict in the future.
So sell those beanie babies now, before it’s too late, and save your loved ones the hassle!