We often see siblings litigate in California over the allocation of tangible personal property held in the family trust. When Mom and Dad have passed, the tug of war may involve jewelry, paintings, photos, firearms, furniture, saddles, vehicles, table settings – and yes, even a bobble head!
My colleague Kim McGhee recently hosted a fun and informative podcast on the challenges of divvying up tangible property that got me thinking about the topic. While each situation is different, a trustee who holds tangible property might consider the following steps.
Step 1: Secure the property.
Tangible property often goes missing, leading to questions and accusations. Why is the safe empty? Did Mom or Dad give away the item? Was it taken by a caregiver or family member?
Family members should work together to inventory and secure items for eventual allocation. If the property is held in a trust, the acting trustee has a duty to take prudent steps to protect it from theft or loss. As stated in Probate Code section 16006, the trustee “has a duty to take reasonable steps under the circumstances to take and keep control of and to preserve the trust property.”
Step 2: Read and follow will and trust terms regarding asset distribution.
Review both the decedent’s last will and the decedent’s trust documents, preferably with help from a lawyer, to determine the rules to follow as to tangible property. To the extent the property is held outside of the trust, the will dictates how the property will pass. When parents create a trust, it’s common for them to have a “pourover will” that leaves the tangible property to the trustee of the trust to be distributed per the terms of the trust.
Mom or Dad may have specified an allocation process for tangible property or perhaps made specific bequests of certain items to particular people.
Trust documents often state that Mom and Dad, as the settlors who created the trust, may provide for the allocation of tangible property in a separate writing, but they often fail to do so or perhaps the writing cannot be found.
Firearms are subject to special federal and state laws such that the trustee, depending on the circumstances, may need to involve a licensed gun dealer. A trustee should consult a lawyer before allocating firearms.
Step 3: Give all eligible beneficiaries the chance to request and receive items.
While a trustee may have discretion to decide who gets what, the trustee is not the omnipotent “lord of the rings.” A trustee has a duty to treat all beneficiaries fairly and impartially. Hence, a trustee who is also a beneficiary generally should not cherry pick the items they want and leave the rest to their siblings.
Instead, for any items that Mom and Dad did not specifically allocate in the trust documents, all beneficiaries should get a reasonable chance to request items. If beneficiaries are remote, circulating photographs of the items along with an inventory will help beneficiaries make informed choices.
It may be necessary to obtain written appraisals on items with significant economic value. A collection of rings might be valued by a gemologist while an equipment appraiser can help with tractors and other farm equipment.
Before the remaining contents of a home are donated or discarded, the beneficiaries might be given a chance to pick up what they want.
Step 4: Negotiate a distribution agreement and confirm it in writing.
The best way to resolve tangible property allocation is by written agreement.
A sibling who wants nothing from the family home should confirm that in writing. If any recipient is to have the value of the property they will receive charged against their share of the trust, everyone should agree on the amount of that charge.
A clear agreement should protect the trustee from claims of improper conduct.
Step 5: If disputes remain, seek guidance from the court.
If conflicts persist over who gets what, the Superior Court can resolve them. A trustee may file a petition under Probate Code section 17200(b)(4), asking a judge to approve a plan of distribution of tangible property. The trustee must serve the petition on all interested beneficiaries at least 30 days before the hearing date. Likewise, a beneficiary may initiate a petition to have the court oversee the allocation of property.
Note: many California courts are backed up such that the petition will not be heard for four or more months.
Under Breslin v. Breslin (2021) 62 Cal.App.5th 801, discussed in a prior post, a judge may order the trustee and beneficiaries to participate in mediation over the allocation of trust property. Hence, the parties should consider mediating before initiating litigation.
The court might approve a process to allocate the items, such as a round robin draw, the submission of sealed bids, a coin flip, or the sale of items on the open market.
If the items have significant economic value, the judge may require submission of appraisals before ruling on the petition.
Parents can reduce the potential for acrimony after their passing by setting forth their wishes as to the allocation of cherished items. Disputes, however, sometimes arise over seemingly ordinary items. One sibling’s trash could be another’s treasure.
A trustee should not underestimate the potential for conflict. An attorney can help the trustee develop a plan of allocation of tangible property that may avoid a claim from the beneficiary who did not get the Thomas Kincade print, Lladró figurine or 1997 Oldsmobile.