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Wednesday, June 10, 2020

Is there a dollar value on items that may be left in a Memorandum of Personal Effects?

I have to say, between my clients and the readers of this blog, I am constantly kept hopping with interesting questions. Today a caller spoke with Matthew of my office about whether there is a dollar limit on items that can be listed on a Memorandum of Personal Effects.

A Memorandum of Personal Effects is a list of items that a testator wishes to give to specific beneficiaries. It accompanies a will, but is not itself a will. There are some restrictions on what can be listed in a Memorandum of Personal Effects, as you can probably guess from the name of the document. It is intended to list tangible items that would normally be located in a person's home, cabin, or workshop. They can be small, valuable items such as jewelry, or large items of lower value such as pieces of furniture. They can even include large assets such as vehicles or equipment.

You cannot leave certain types of assets to anyone in a Memorandum of Personal Effects. In particular, you cannot leave money, shares of a company, or real estate. Once you include those items,  you have in effect created a will which will cancel any other will you already have in place. This means you do have to be careful about what sort of thing you include, but does not relate to the value of the asset.

There is neither a lower nor an upper dollar value limit for the items that may be included. In fact, when it comes to items having a low dollar value, many items may have no market value at all, but are important to the testator for sentimental reasons. Those are exactly the right items to include in a Memorandum of Personal Effects because if left in the residue of an estate, they might well be overlooked or under-appreciated.

When it comes to items with high dollar values, most can be left safely in a Memorandum. However, it might be a good idea to leave them to beneficiaries using the will rather than a Memorandum. This is especially true if they are items that are going to trigger capital gains tax when you dispose of them, such as an art collection that has increased in value. The will contains specific instructions about the payment of tax from the residue of the estate, and it may be better to ensure that major gifts are framed within that structure.

For most of us, dollar value considerations have no effect on the items we choose to include in a Memorandum of Personal Effects.

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