People who ask this question are normally interested in knowing how family heirlooms will be divided among multiple heirs. To better illustrate the distribution of these items of personal property, the division of the entire intestate estate is addressed below.
Types of Property
There are generally three forms of property: Real estate, intangible personal property, and tangible personal property.
Real estate is comprised of the ground, as well as all property that is permanently attached to the ground, such as a house. Intangible personal property is basically cash and items that represent cash, such as stock certificates. Finally, all property that does not fall into either of the previous two categories is generally classified as tangible personal property.
In addition to common objects, such as clothing, household appliances, and furniture, tangible personal property will also include larger or more expensive items, such as all electronic equipment, jewelry, artwork, and vehicles.
Fair Market Value
‘Fair market value’ is the price that would be exchanged between willing and fully informed parties who are interested in transferring the ownership of specifically identified property from one party to the other.
Any item’s fair market value may be determined by having it appraised or, if the item is sold by the deceased’s estate, by the actual contract sale price obtained for the item.
Although the type of property can affect an item’s individual value, the type of property does not affect its division being determined upon the basis of its fair market value. A collection of rare silver coins is subject to the same rules of distribution as a collection of common beer bottles. Intestate Estate Value Every intestate estate is represented by the dollar amount that is equal to the combined total of the fair market value of all the deceased’s intestate property.
For example, suppose an intestate estate consists of the following property:
Item Value Certificate of deposit $20,000 Checking account $1,500 House $100,000 Vacant land $20,000 Piano $2,000 Stamp collection $500 Vehicle $6,000 Total Estate Value $150,000
Some of this property is cash (checking account balance), items that represent cash (CD), personal property (piano, stamps, vehicle), and real estate (house and vacant land). However, this mixture of property types does not have any affect upon the intestate estate value, which is simply the sum of the value of every type of property.
Estate Division
Although each heir is entitled to receive a specific dollar amount from the intestate estate, the actual form of each beneficiary’s payment will vary from estate to estate.
For instance, all of the deceased’s property can be sold so that every heir receives his or her share in the form of cash.
Depending upon how readily the property can be sold this may be the easiest method with respect to estate settlement, because the value of each item is simply the amount that it receives at sale, making it unnecessary to obtain an independent appraisal of the individual items.
When the sales are complete (and the estate is otherwise settled) each heir simply receives a check from the estate as payment of his or her share.
Selection of Personal Property
It is also possible for the heirs to elect to take items of tangible personal property rather than cash. When an item of tangible personal property is taken, it is considered a portion of that heir’s share of the intestate estate and its cash value will be subtracted from the total amount of that heir’s share.
For example, suppose there are three heirs of the $150,000 estate, with each individual heir being entitled to a $50,000 share. If one of these heirs elects to receive the stamp collection as part of his or her share, the collection’s $500 value will simply be applied to that heir’s $50,000 share. In addition to the $500 stamp collection, this heir will take a cash payment of $49,500 from the estate in order to receive the full $50,000 share.
Although any heir may request a specific item of personal property as part of his or her share, every heir is equally entitled to receive each individual item from the intestate estate. These equal rights may cause difficulty when more than one heir wishes to take the same item.
Division Among Multiple Heirs
Certain forms of personal property may be physically divided, but most cannot. (For instance, it is impossible to physically divide a piano with destroying it.) Even personal property that can be divided will frequently decrease in value as a result. For instance, two heirs may agree to share the stamp collection by choosing individual stamps that have a combined value of $250 for each heir.
However, the collection’s fair market value of $500 may have been based entirely upon the collection’s value as a single unit. Of course, in these situations the heirs are more interested in owing the actual property than in receiving its worth and will not be concerned with the reduced value.
This inability to divide most items of tangible personal property makes three options available to multiple heirs who wish to own the same item. When this occurs the heirs must agree to own that item jointly, agree that just one of them will own it, or sell the item so that its value can be divided.
Ultimate Distribution
Suppose the piano from the example estate had belonged to the heirs’ great-grandparents and each of them would like to own it. Although the piano’s value does not represent a significant portion of any individual share, these heirs may have stronger feelings about its possession than they have about receiving any money from the estate.
In these circumstances, there are a variety of factors that will influence the ultimate distribution and ownership of that family heirloom. The personal relationship of the heirs with one another may be the most important factor. If just one of the heirs does not get along with any one or all of the others, it is unlikely that he or she will agree to give ownership to any other heir. It will also be unlikely that the heirs will agree to take joint ownership in these circumstances, because only one heir will be able to take physical possession of the item.
When the heirs are unable to agree who will take ownership or possession of any item of personal property the personal representative may sell the item any simply divide the proceeds. The most important factor in determining who will own any item of personal property is the legal authority vested in the estate’s personal representative. Even where there isn’t a disagreement among the heirs, the personal representative has the authority to make the final decision about the disposition of any item of personal property within the intestate estate.