Selling off assets in a garage sale risky for executors

I remember when, a couple of years ago, a story hit the news about how a woman holding a garage sale for an estate sold a painting for $2. She later found out that the painting might have been painted by Picasso and was possibly worth millions of dollars.

I suppose people would react to this story in different ways. Most were probably thinking about her bad luck in letting something so valuable slip away. Being an estate lawyer as I am, my thoughts were more about her duty to the estate and whether she might end up being personally liable for the loss to the estate. After all, if she had placed the correct value on the painting, the money would have gone to the beneficiaries of the estate.

This point was recently made in a blog post at www.estatedebate.com. Click here to read their comments and, if you like, read the original news story about the "possible Picasso" as well.

I don't want you to think that the moral of this story is that you should never hold a garage sale for an estate. Many, many executors successfully hold garage sales without any problems, and it's still a viable solution. The important thing to remember is that if you are an executor, you must be careful to place proper values on items. If the deceased collected paintings or sculpture, even on a small scale, get an appraiser to take a look before you decide to put items on that sale table. Same goes for almost any kind of collection, from baseball cards to antique furniture.

Failure to place proper values on items can lead to lawsuits against the executor by the people who would have inherited the money had the item been sold for its proper value.

Make Things Easier for Your Family and Executor(s)...Designate Personal Effects in Your Will

This article from Mark Goodfield, aka The Blunt Bean Counter, is a must-read for anyone planning their wills. I'd also recommend it to executors who are wondering how on earth they are supposed to divide up personal effects with no guidance from the will.

The article covers the area of personal effects and household goods of the deceased, a mine field of problems and struggles if not properly covered in the will.

Click here to read the article.

Another tool that we can use to help out our families and executors is a Memorandum of Personal Effects, or as most people refer to it, a "list". I am referring to a hand-written list of names of family members together with the items you would like them to receive upon your death. This is a popular idea, but has its drawbacks, so you must make sure you are doing yours correctly if you want it to be a help and not a further cause of strife.

A Memorandum is often confusing because the deceased forgot that it was going to be read by someone who isn't a mind-reader. Some of the most common causes of confusion are:
- referring to "my favourite ring" or "my mother's earrings" or some other characteristic of an item that nobody will be able to identify;
- referring to "my necklace" when there are several necklaces;
- referring to the beneficiary as "Joe", when the deceased has an uncle named Joseph, a cousin named Joseph Jr., and a nephew named Joey;
- including items that cannot be included in a Memorandum, such as sums of money or real estate. Including these items may turn your Memorandum into a will, may revoke your current will, and definitely cause even more confusion for your family.

The best idea is to ask your lawyer about the Memorandum at the time you are making your wills, and to receive some instructions and ideas from him or her.

Are items that were borrrowed and not returned part of the estate?

You readers come up with the most interesting questions for me to answer! This one has to do with items that were borrowed by a family member and not yet returned when their mother passed away.

Here's the question:

Prior to my mother's death, one of my sisters took all of my mother's personal papers, documents and old photographs related to our family history. My mother told me that my sister just took these items to make copies and distribute them to the entire family. A couple of times my mother mentioned her worry that the items hadn't been returned. When my mother passed away  they still had not been returned. I asked the executor to ask her to return them as I considered them to be part of the estate but he said if I want them then I should do the asking. I then asked my lawyer's legal assistant the question and she said that anything that was not in my mother's house would not be considered part of the estate. Is my sister under any legal obligation to return them to the estate?

Before I answer the question asked by this reader, I have to comment on the fact that the legal assistant in this case is giving legal advice. Never ask legal advice from anyone but a lawyer. Legal assistants haven't been to law school. Their role is not to know the law; it's to know the paperwork and procedures for court applications and legal files.

Highly experienced legal assistants know better than to give legal advice. They know their area of expertise and they stick with it. They can give information about processes and procedures, but never the substance of the law. They know they can lose their jobs for giving legal advice.

Look at it this way. If you needed surgery and the doctor was busy, would you ask the nurse to do the surgery instead? Of course not, because they do different jobs. The nurse helps the doctor do the surgery but hasn't been trained to operate on people. Lawyers and legal assistants do different jobs too.

Ok, with that rant out of the way, let's turn to the question the reader asked. The items borrowed by the sister still belong to the mother. The fact that they were temporarily not on the mother's premises is totally irrelevant. They are part of the estate. According to the facts we have, at no time did the mother transfer ownership of the items to the sister, or intend to transfer ownership. The essence of the transaction was that ownership remained with the mother and the intention of both parties was that the items would be returned within a reasonable time.

The executor in this case is obligated to gather in all of the mother's assets, including these items.

Uncluttering seven decades of life

Are you always trying to get your parents to free their home from those boxes of old papers and recycled scraps of everything from aluminum foil to used clothing? Many executors tell me that on the death of a parent, it takes days if not weeks to go through all of the boxes and closets and drawers to decide what to keep and what to discard. And this is not necessarily the extraordinary amount of stuff kept by the people we might consider "hoarders"; most of the time they are just people like you and me.

I remember the jolt of concern I felt a few months after my father passed away, when my Mom called to ask whether there was anything I wanted from the house. She was "getting rid of things" she told me. Of course I wondered whether there was anything she wasn't telling me about her own state of health, but as it turned out she just felt in the mood to clean things out a bit. Everyone has his or her own reason for keeping personal items or discarding them, despite any hidden meanings the rest of us might apply to them.

If you are encouraging your parent to de-clutter, take a look at this article from www.timegoesby.net that thoughtfully discusses what it feels like for a senior to unclutter his or her home, and the reasons it can be tough to do so. It might help you to realize why it's hard for some people to do. Click here to read it.

How to cash in your heirlooms

Have you inherited a few things you really don't have a use (or room) for? Or perhaps you're trying to decide whether to sell those family heirlooms or leave them to the kids. Either way, click here to read an article from www.investopedia.com about valuating and selling heirloom gold, jewelry, antiques and collectibles. It has some good advice for those of us who are new at selling these items.

Warring over the sentimental items in an estate

I've come to realize over the years that a dispute over a parent's estate is more likely to break out over personal possessions than it is over money. Some of you might be skeptical, but I firmly believe this to be the case. A case where eleven siblings fought over one gold ring is an extreme case, and I've attached a link here for you to read a blog post by www.allaboutestates.ca summarizing the case and how it was resolved.

Clients often ask me how an executor will divide the household and personal goods among the children, and I'm always happy to give some suggestions on how to avoid a dispute. Depending on the number of children, the number and value of the items and the personalities involved, there are some options. I've listed a few below. You'll note that sticking a piece of masking tape on the bottom or back of items with someone's name on it is NOT on the list, as that is not legally effective.

1.  Give some items that you don't need to the children while you are alive.
2.  Hold a family meeting to talk about your estate plans and tell the children how you plan to divide up the items (followed by either #3 or #4 below). Give them a chance to provide you with some feedback that you might use to re-think your decision.
3.  Prepare a handwritten list of who is to get what and keep it with your will. It might be helpful to talk to your estate planning lawyer about this so that you get the right form for your list. Your lawyer can also give you some guidelines about doing the list properly. For example, a list like this should NOT include sums of money.
4.  Include some of the items in your will as specific gifts to certain people. Normally people would only include gifts that are important enough that they won't change their minds about them.
5.  In your will, give your executor the discretion to settle disputes about who gets the household items. This might seem unfair to the kids if one of the people fighting over an object is also the one who gets to settle the argument, but someone has to have the ability to put an end to it.
6.  In your will, direct that everything is to be sold and the money split equally. This is pretty drastic but sometimes parents feel it's the best way.

Most of my clients have told me that preventing disputes among the children is one of their main estate-planning goals. Thinking about the personal and household items and dealing with them clearly and thoroughly in your documents will help you reach that goal.

Dude, where's your stuff?

This article from lawyer Kyle Krull covers one of those completely practical questions that I love to see addressed, simply because most people don't think about them. If you die, how will your family know where your stuff (bank accounts, insurance policies, house title etc) is? Click here to read the article.

Note that in this article, the author says that "state treasuries" hold billions of dollars in unclaimed bank accounts. Our equivalent is the Bank of Canada.

Wondering what that stuff in the attic is worth?

This could be a very useful tool for executors who have to valuate household items for the inventory of an estate. Not everyone lives in a city full of experts, or has the time to take items around to those experts. This article from The Globe and Mail talks about a website called Value My Stuff and gives some really great examples of the items they've dealt with, the specific costs, etc. Click here to read the article.

Do household items belong to the surviving second wife or the step-kids?

This question from a reader addresses something that I think many families and executors have to deal with. My hope is that by reading these posts, you will become more aware of the need for your own wills to be thoughtfully prepared.

Here's the question:

"My husband recently passed away and his youngest son thinks all of his fathers belongings now belong to the estate. He wants to take furnishings and other stuff out of our matrimonial home. Is my stepson entitled to take whatever was his fathers?"

Always start first with the will itself. Many wills have a section that deals specifically with household and specific items (and for those of you reading this post, you can now see from this reader's question what can happen if your will doesn't touch on it). Because the reader is asking this specific question and I of course haven't seen the will, I'll have to assume that it doesn't cover it.

The title to the home can also affect this issue. Was the home jointly owned with a right of survivorship? Generally speaking the items in a home that are jointly used - furniture, linens, dishes, decorative items - are considered jointly owned. This means these items should stay with the surviving wife.

If the title was in the reader's husband's name only, I would check the will for any clause dealing with the home. Ideally, it would deal with the "house and contents" and not just the title to the home. As this is a second marriage, it's quite possible that the house was in one name only. That's not unusual in blended families. As the step-son is lobbying for all items to be in the estate, I'm making a leap of logic to assume that some assets are being left to the surviving wife and the residue of the estate is being left to the step-children.

Items that were personal to your husband such as jewelry and clothing are not considered jointly owned no matter what the title to the house, and would fall into the estate.

To clear up one common misconception, I'd like to point out that the fact that someone gave a gift to the deceased in no way means that the person gets that item back when the deceased dies. I don't know where that idea came from but I've heard it many times. Once you give something away, you have absolutely no right to get it back.

Also take any pre-nuptial agreement into consideration. Though an agreement is unlikely to specifically deal with furniture etc, it might make clarifying statements about items that belonged to the deceased before he was re-married.

The reader doesn't say who the executor is, but it sounds like it might be the step-son, as he is so actively involved in the estate.

My best advice to this reader is to consult an experienced wills and estates lawyer who can look at the will, ask questions and interpret the situation for the reader. I always feel very sorry for the second wife who is left stuck in the middle in these family situations, and I've seen the situation spiral into nasty confrontations. A lawyer can be someone to be on the wife's (or in other cases, the husband's) side.

Be aware that hiring a lawyer in an estate situation can be seen as an act of hostility as there is, sadly, some portion of the population who equates "lawyer" with "hired pit bull". But my feeling is that this reader is going to need some help, much beyond what I could offer in this blog.

How to make a plan for your personal effects

My experience over the years has been that more estate fights happen over personal items of the deceased than happen over money. Sure we all like money but it's the personal items that have the sentimental value. This article from About.com talks about ways to plan for the eventual division of your personal items. I really suggest that everyone read it because few people put enough thought into what will happen with their jewelry, photo albums and family heirlooms. Click here to read it.

Sibling battles brew over parental care

Well, it's true. Siblings certainly do fight over the possible care for a parent, for a hundred emotionally-laden reasons. This article from the Financial Post talks about what the parent can do to prevent it, and identifies some useful resources. Click here to read the article.

More on moving

This new article from the New York Times talks about why an aging parent who seems happy to move to a new home or retirement residence might balk at the last minute, and how you can help them. Click here to read the article.

For a Great Deal, Try an Estate Sale

If you've ever wanted to know more about estate sales, or are considering holding one, now is your chance to learn more. The link below goes to a blog post by Toronto lawyer Megan Connolly, and in it she references several websites and facts that you might find interesting. I've been to several estate sales around rural Alberta where farm equipment, tools, machinery and household items were sold. They are extremely well-attended sales, and they can work just as well in an urban setting.

For a Great Deal, Try an Estate Sale

When moving seems impossible

Have you or your parent considered hiring a professional "senior mover" to help with the sale of your parent's home and the move to a new place? This story from the New York Times describes one family's experience with doing so, and gives several interesting facts. Click here to read it. This is an American story and I've encountered several senior movers in the USA, but are there many in Canada? If so, I'd like to know about them, so hopefully they'll leave a comment here or send me an email.

Conducting an estate sale

Most executors have to deal with selling some personal or household items for an estate. As most executors are new at that  job, they may have questions about how to proceed. This post will explore ideas for selling those items properly, without short-changing the estate or getting the executor into trouble.

When talking about selling items, I'm assuming that the executor has already given away any specific items that were left to specific beneficiaries. Obviously if a Will or Memorandum of Personal Effects requests that an item be given to someone, that item isn't going to be sold unless the beneficiary has already passed away. Before you start selling anything, make sure that you have read the Will carefully, or your lawyer has done so on your behalf, so that you do not accidentally sell someone's inheritance.

The first step is to determine what you're dealing with. Is the deceased's home full of valuable artwork, antiques, jewelry or collections? Is it a rural property, with equipment, vehicles and tools? Is it your average home with regular furniture and possessions, but nothing of outstanding monetary value?

The majority of estates don't need a formal estate sale, and I'll get to more suitable options in a moment. For a home that is full of valuables, or a rural home with a lot of equipment, it just might be a good idea to hold an estate sale. The best way to do this is to contact an auction house in your province (look up "auction" on google or in the Yellow Pages). Try to give them an idea over the phone of what you're dealing with. For example, did the deceased leave a box full of antique jewelry? A set of eight original oil paintings? A rebuilt 1947 car?

If the auction house thinks that an estate sale is the way to go, they'll send someone out to take a look at the items. They will probably give you an estimate on what price could be expected, and set a general timeline for a sale. The sale might be conducted right from the deceased's home, or the items might be taken to the auction house for inclusion in a larger sale there. Make sure you get a detailed list and signed receipt for any items taken.

When using an auction house, be prepared for the fact that they will probably advertise the sale in the local paper (they don't use the deceased's name). Also, remember that they will take their pay out of the sale proceeds before handing the net amount to you.

As mentioned earlier, the majority of estates don't need to go through an estate sale. The executor will be responsible for finding other ways of selling the household and personal goods. Some common ways of doing this are:

- hold a garage sale
- sell goods privately to beneficiaries, family members, friends etc - remember to sell at fair market value
- advertise goods on eBay, in newspapers, etc.
- take unusual items (e.g. a hockey card collection) to a dealer
- sell to second-hand shops

There are always items that are not worth much money. These might be small appliances, used clothing, used books, used DVDs, etc. If family members don't want these items and the executor can't sell them, they can be donated to a charity such as Goodwill. If they are of little value, don't expect a charitable receipt.

The executor should keep careful records of items going out and money coming in. Remember that personal items are more likely to be the cause of a family fight than money or property. The executor should keep any bills of sale, receipts, inventories or charitable receipts.

All money generated from any of these sources should be deposited into the estate account. Rather than the executor taking out his expenses (such as shipping)  and depositing the rest, it is safer and more transparent to deposit all of the money and then make a separate payment to the executor for expenses.

Make sure your family knows who has been named to act

Earlier this week I met with a client to discuss estate planning, and as part of that process he let me know who he wanted to appoint as the executor under his Will, his attorney under his Power of Attorney and his agent under his Personal (health care) Directive. As the fellow doesn't have a wife or children, he chose a close friend to act as his health care representative.

The client said, "I suppose I should ask her whether she's ok with this". Yes! He should check, and so should everyone who makes legal documents naming someone who will be expected to take action when the situation calls for it.

It's dangerous to name someone as executor, or as a representative under any legal document, without their knowledge and consent. Don't just assume that your decision will be fine by them. If they don't know they've been named to the job, they aren't going to do anything to help you. They won't even know they are supposed to help. This could lead to you ending up with someone else in their place if your documents aren't found and your representative identified and located. At the very least, you could end up with delays and arguments while it's sorted out.

When you name someone as your executor, you should let them know. If they aren't happy with that, they should tell you that, so you can choose someone else. You should also tell your executor the following:
- whether there is a co-executor to work with them
- where you keep the original Will
- your wishes for burial/cremation, and any pre-arrangements you've made
- if you have minor children, tell your executor who's been named as guardian

Come right out and ask your chosen person how comfortable he or she is with looking after your estate. You might get an answer that surprises you. Sometimes a person will say that they don't want to do it alone and will only agree to the job if there is a co-executor. Sometimes people feel exactly the opposite way and fear that having a co-executor will lead to disputes. You won't know if you don't ask.

The same applies for anyone that you've named under a Power of Attorney or Health Care Directive. You must let them know they've been named. Either give them a copy of the document that names them, or tell them where the documents may be found. As these documents involve looking after you (either financially or medically) while you are still alive but incapable of making your own decisions, talk over any special wishes you have. Some of the special wishes I've seen are a wish to live in their own home as long as possible, a wish that if the person must live in long-term care it has to be a place where he might worship in his chosen religion, and a wish that college tuition for an adult child continue to be paid.

Your special wishes will be included in your document if you discuss them with your lawyer, but even if they are included, it's a good idea to talk them over with your representative under the documents.

It pays to take an inventory

This brief but interesting article from Toronto Estate Law Blog talks about executors finding "treasures" in attics full of stuff. It certainly does happen, though not regularly. So before you drag everything out of Grandma's attic or basement and toss it in the bin, read this.

How can I get rid of Grandma and Grandpa's stuff?

This link doesn't really go to an article or story. It's a question that someone posted online, and several people answered it. I found it interesting because it's the kind of question I hear a lot. It's really not unusual that a person is doing his or her best to be an executor but doesn't really know how to deal with specific situations. Click here to read it.

In this situation, the person is wondering how he can rid his home of tons of personal and household things that used to belong to his grandparents. He doesn't say that he's the executor, but I assume that he must be as he is in possession of all of the goods and seems to be reporting to the rest of the family about them. His real issue is that the other people in the family don't want the items but also don't want him to dispose of them.

If he is the executor, he should dispose of the items in the way that maximizes their value. Now, used furniture and household items don't have a lot of resale value. An estate sale or garage sale might gain a few dollars, which would go into the estate and be divided among the beneficiaries. Many of the items he mentions will end up being thrown away, as nobody is going to want second-hand bedding. The executor might donate items that are in good condition but that weren't sold at the estate sale to a charity, and may or not be able to get a small charitable receipt for them.

Documents such as tax returns were mentioned as well. He says that seven years have passed since his grandfather passed away, so on the face of it, it may seem that documents may be discarded. I'd want to make sure that any estate tax returns were completed and filed before I counselled anyone to shred the old documents.

This fellow has been brought to a halt by the self-interested objections of family members. I think he should give them one last chance to collect what they want, then get on with selling them.

Should the executor change the locks on the house?

One of the most common, and most upsetting, things that family members do once a parent has passed away is go into the deceased's home and take things they want. I'm not talking about an open, co-operative family visit where everyone agrees on who gets what; I'm talking about individuals letting themselves in while nobody is looking, sometimes even during the middle of the night. The other family members feel cheated and angry, at a time when emotions are already running close to the surface, and this is an abundant source of family disputes.

Part of the problem is that the executor doesn't change the locks on the deceased's house. This is usually because he or she trusts the other family members not to do anything underhanded. Other executors feel uneasy about changing the locks because they too are family members and they don't want to look as if they are trying to keep things for themselves. The majority of executors have never been an executor before and they don't really know what the detailed rules are. They don't want to upset anyone.

If you're the executor, change the locks on the deceased parent's home as soon as you possibly can.

If anyone in your family protests about this, you can explain that as executor, you are legally and financially responsible for every item in that house. You don't know who else has a key, such as neighbours, caregivers or service providers. Also, you want to make a fair distribution of household items based on what has been set out in the parent's Will. Anyone who still has trouble with these reasons deserves to be locked out as they are clearly not interested in having the estate carried out in a fair, smooth, logical way.

Often a distribution of personal effects takes place pretty quickly, as siblings and other family members who live far away are in town for the funeral and it's convenient and logical to deal with whatever you can while everyone is close by. If there are specific items that are left to certain people in the Will or in a Memorandum (list) separate those items from other household goods and keep them in a safe place until you can deliver them to the correct beneficiaries.

Arrange a day and time for everyone to come to the house together and make it clear that you will be in charge of the distribution process. Bring a friend or two to help organize and carry things, if you need it. When everyone arrives, read out the portion of the Will that deals with household and personal goods and explain how it's going to work. For example, will there be one person at a time choosing, and if so, who goes first? Be consistent, once you've set up your system.

Keep a list of who has received which items from the home.

This can be a really tough day for everyone, but by keeping the division of property calm and respectful to everyone, you will be helping matters quite a bit.

The vultures - how they prey

This article is the story of one man and what happened in his family when his mother died. When I tell people that the "vultures" live in EVERY family, they secretly think that their family is the exception, but I still think it's true and this fellow's story backs me up. It's sad, well-written and realistic. Considering they didn't have to fight it out in court, they got off lightly. Click here to read the story by Robert Miller in Senior Citizens Magazine. The attached photo is also from that article.