The Auctioneer and the Trash Man - The Essential Executor's Handbook: A Quick and Handy Resource for Dealing With Wills, Trusts, Benefits, and Probate (2016)

The Essential Executor's Handbook: A Quick and Handy Resource for Dealing With Wills, Trusts, Benefits, and Probate (2016)

Chapter 7

The Auctioneer and the Trash Man

As you recall from Chapter 1, every decedent leaves a Knick-Knack Estate. It encompasses furniture, jewelry, clothing, books, appliances, and, yes, even knick-knacks. Anything that has value in and of itself—no matter how little—is part of the Knick-Knack Estate. Almost always the least valuable estate, it is often the most challenging to administer, as you will see.

The technical term for knick-knacks is tangible personal property and is easily distinguished from intangible personal property, which merely represents value somewhere else. For example, cash, stocks, and bonds are, in and of themselves, worthless paper but have value as representations of currency, corporate assets, and debt.

The line between the two kinds of personal property is not always clear, however, and occasionally you will come across items that are both tangible and intangible. United States coins minted before 1965, for example. Before 1965, coins were made primarily from silver so that a quarter from 1964 is now worth more than a quarter. We will return to the issue of coins later in the chapter.

Your first task is to identify the tangible personal property, which is a rather simple matter. Your next task is a bit more difficult. You have to divide the tangible personal property into three groups. Think of them as three piles of stuff. The first pile consists of those items that are promised to or desired by someone; we will call these items the Heirloom Pile. The second pile is made up of items that nobody wants but which can be sold; we will call these items the Auctionables Pile. The third pile is everything that’s left over; the worthless and the unwanted, which we will call the Junk Pile. You will find that this last pile is usually the biggest one, but it is the easiest one to handle.

So, for example, let’s say that the decedent left some antique furniture, some valuable jewelry, some costume jewelry, and a safe filled with cash and stock certificates. The cash and stock certificates are intangible personal property and, therefore, not part of the Knick-Knack Estate. You will handle them differently as we shall see in a later chapter. The remaining items are tangible personal property. Let’s assume that the will left some of the valuable jewelry to the decedent’s child. It is your duty, of course, to distribute items in accordance with the will. Having done that, you may offer all of the remaining items to the beneficiaries of the Probate Estate. Let’s say they choose the remaining valuable jewelry, some of the furniture, and the safe but nothing else. This is the Heirloom Pile. After such heirlooms, keepsakes, and mementos are distributed, you will attempt to identify those items that can be sold, privately or at auction. To do that will most likely require the assistance of an auctioneer. (More about auctions and auctioneers later.) This is your Auctionables Pile. Now you are left with, say, the costume jewelry and the bulk of the furniture. That is your Junk Pile. Now let’s talk about how to dispense with each pile. After that, we will review your duties and costs associated with each pile.

Disposition

The Heirloom Pile

In theory, distributing items of personal property to people who want them should be simple. And sometimes it is, like when there is only one beneficiary or the will specifies which item goes to which beneficiary. Usually, that is not the case, however. You are most likely going to have to referee disputes between grown individuals—usually siblings—who cannot agree upon who is to get what. There are several methods you can suggest to them.

The most common method of distribution is having the beneficiaries take turns. You secure a pair of dice and have each interested person roll the dice. Whoever rolls the highest number goes first and may select one item. The person who rolls the second highest number goes next, and so forth. After everyone has made a selection, the process repeats until all items that are desired have been selected.

The problem with such a method of distribution should be obvious. The persons who selects first may choose the most valuable items. As a result, the distribution may be inherently unfair. Many times the inequity is not discovered until much, much later. For example, I know of two sisters who were dividing their mother’s jewelry. The older and more aggressive of the two declared that she should go first since she was older (a unique although arbitrary thought process). The more diminutive sister agreed. The older sister then selected a ring containing a 2-carat diamond. The younger sister selected a ring with a much smaller diamond. The value of the remaining jewelry wound up being divided roughly equally. Years passed and the older sister took her ring to a jeweler to have it reset. The jeweler asked why she would want to reset a worthless stone. As it turned out, the 2-carat diamond was actually a cubic zirconium. The irony was compounded when the younger sister had her ring appraised and found that the stone was flawless and quite valuable.

Another method of distribution is to poll the beneficiaries separately to find out what each would like to have. Frequently, each beneficiary wants something different and problems are avoided. The “taking turns” approach, on the other hand, seems to promote rivalry, with one person choosing an item for no other reason than that another person wants it. If, however, after polling each beneficiary, there is an item desired by more than one of them, you can broker a deal between them. Perhaps one will relinquish her claim in return for a little more cash. A deal can always be made. The obvious advantage to this method of distribution is that you keep conflict to a minimum rather than promote it.

There is yet another method of distribution that I hesitate to mention because it can lead to unexpected results. It is best demonstrated by an actual case that took place decades ago. The story goes that an elderly woman paid a visit to her lawyer. She told him that she wanted a will that said that every item in her home was to pass to her children “as it is tagged.” On her way home, will in hand, she stopped at an office supply store and bought a bag of little yellow tags. She then wrote the names of each child on the tags so that were was a pile of tags for each of her eight children. Then she hung the tags on everything in her home. It was a sea of yellow tags.

Now the reason she did this was because she fought with her children constantly. Being a frugal women, however, she did not want to have to pay her lawyer each time she wanted to disinherit one of the kids. But, with her tag system, after a falling out, she simply moved the tags around. As a result, at least one child was always “in the drawer.” The problem arose when she died. The child who was “in the drawer” at the time sued the estate on the grounds that the mother had revoked her will. The revocation took place the first time she attempted to amend her will without the benefit of witnesses and notary as the state required; that is, the first time she moved the tags. The court found in favor of the child, and the woman’s entire estate went into intestacy proceedings, giving the child a one-eighth share.

As a result of this case, many states passed legislation that allows for the will to reference a list or tag system that may be changed without revoking the will. Nonetheless, these laws vary from state to state and some states don’t have them at all. So, while a list or tag system is fine, if it is referenced in the will, you may be in for a fight.

If all else fails, you as the executor have the power to distribute items any way you see fit. Or, in the alternative, you may simply not distribute anything at all. The beneficiaries must know you have this authority from the outset. It is a sort of a “don’t make me turn this car around” kind of threat. It is also possible that the decedent left a list that sets forth who gets what although the list is not mentioned in the will. Such a list is not binding because it is not a will, but it serves to enhance your legal authority and spares you accusations of favoritism or arbitrary action.

Finally, you cannot sanction anyone’s claim that the decedent had “promised” them a particular item. Claims such as “Mother always wanted me to have her pearl necklace” or “Dad said I was getting the coin collection” are recited, repeated, and, I believe more often than not, fabricated on an annoyingly consistent basis. They have no legal merit.

The Auctionables Pile

Having dispensed with all of the wanted what-nots, you need to sell what you can. An executor’s duty includes maximizing the value of the estate by any prudent and legal means. This begins with hiring an auctioneer.

First, be certain that all of the remaining items are available for inspection. Empty safe deposit boxes, cabinets, and safes. The auctioneer will visit the location or locations where the items are located and begin to identify those things he thinks he can sell. It is not uncommon for this process to be pleasingly informal, with the auctioneer moving from room to room pointing to items as he says, “we can sell that, we can sell that, that’s junk, that’s crap, that’s totally worthless, we can sell that …” All the while, an assistant is labeling the items that have been selected for auction.

Once this process is complete, it will probably be your duty to arrange for transportation of the marked items to the auction house. Once there, these items may be sold at a live auction, an online auction, or both.

The auctioneer will take a percentage of the proceeds from the sale of each item. This is the auctioneer’s commission. The commission (i.e., the percentage) will vary depending on the nature of the item. Furnishings may be one rate while jewelry is another rate. The rates, as well as other terms of your agreement with the auctioneer, are established by contract prior to the auction. Items that do not sell may be returned to you or sent to the landfill. Again, your contract will specify the disposition of “leftovers.”

Of course, if you don’t want to pay commissions, you can sell these items yourself. One tried and true method to do this is to hold an estate sale at the decedent’s home. (An estate sale is a fancy term for a decedent’s yard sale.) You can apply price tags to each item or you can merely accept whatever is offered. What is unsold at the end of the day can be hauled off as junk.

This disadvantage of an estate sale is that you do so blindly since you may have no idea what the items are actually worth. I knew a woman and her mother who were the Genghis and Kubla Khans of estate sales. After a hard day of plundering, they would return home laden with such things as solid-silver trays and tea sets for which they had paid $25 at most. An auctioneer, on the other hand, experienced in the sale of estate property, will often start the bidding with a minimum price that is perhaps more reasonable—not to mention that bidding, in and of itself, can drive up the price.

Or imagine this: Your father is given a painting of some cows standing in a field. The painting itself appears to have water damage—as if someone had dusted it with a fire hose. The ornate frame is cracked in several places and it appears to be beyond repair. Your father puts this homage to heifers in the closet with plans of, someday, having it restored. Then your father dies. Nobody in the family wants the painting and it appears to you that nobody would ever actually pay good money for a bovine family portrait. So you throw it out.

The story is true; all except the part about throwing it out. Luckily, that didn’t happen. One Christmas, a friend of my father came to visit. As he was hanging his coat in the closet, he noticed the cow painting. He turned and said to my father, “Carl, I think this is a Bingham. And, if it is, it is worth a great deal of money.” My father’s friend just happened to be the curator of the Fine Arts Museum of Philadelphia. As it turned out, the painting was indeed genuine and one of three Binghams that had been missing for over 100 years. The museum agreed to restore the painting for free provided they could display it. It later appraised for $850,000. I often wake up in a sweat dreaming I put the Guernsey’s out with the trash one Monday morning. An auctioneer reduces the possibility of such a catastrophe.

Assuming I have not yet convinced you to use an auctioneer, you can always place ads online or in local newspapers listing the items and containing the phrase, “Best Offer.” This is not the most efficient method of sale, but it is usually quite cheap. The disadvantage to ads, however, is it could take days, weeks, or months before you sell what can be sold. All the while, you will be responsible for all of this stuff.

And this brings us to the issue of one of your most important fiduciary obligations, safekeeping. You have a duty to preserve the knick-knacks with the same fervor as you would a stock portfolio. When it comes to tangible personal property, you are expected to house it and insure it pending sale of it. Since you are most likely storing it in the decedent’s home, you will need to be certain that the home is secure. That means changing locks and installing a security system. Furthermore, so long as the home is housing all of this stuff, you can’t sell the home. For this reason, whichever method of sale is fastest is preferred. And the fastest method of sale is through the auctioneer.

The Junk Pile

Your journey through knick-knack land is coming to an end. All that’s left to do is dispose of the remaining tangible personal property—the things that nobody wanted and which could not be sold. Now is the time to call the trash man.

While it is possible to put a limited number of items out on trash day, it is probably impossible, impractical, or illegal to drag a house full of junk to the curb and expect the municipal trash collectors to dispose of it for you. No, you are going to have to hire someone who hauls junk. However, even though we are talking about trash, you want someone who is not going to take out a window while taking out the ottoman. It is therefore prudent to use a referral service such as Angie’s List or HomeAdvisor to find someone who is insured, bonded, and has positive reviews.

In the case of my own parents’ estates, with the aid of an online review service, I hired a local business that consisted of one man and his sweet and affable daughter—the strongest woman I have ever met. I was not disappointed. I watched the two of them hoist a baby grand piano on their shoulders and march it out the front door. Then went the complete contents of the rest of the house, including a 300-pound TV. They did it all in half a day. The house was empty, and I was able to begin the process of selling it.

Vehicles

Vehicles are a unique type of tangible personal property because they have been registered with the state. Unlike all of the other stuff you have to distribute, distributing a vehicle requires the assistance of a state agency. Variously known as the Department of Motor Vehicles, the Motor Vehicle Administration, or the Motor Vehicle Commission (to name just a few), this agency registers, licenses, and tracks all manner of things with wheels and/or motors. To distribute a car to a person, the executor is going to have to visit the local branch of this agency and present at least two things: (1) the executor’s certificate, and (2) the prospective new owner. It is not a complicated process, but it is richly bureaucratic. Each state has its forms and procedures. I strongly recommend that you go to the agency website or call them before you pay a visit. Although, even these proactive steps do not always make the process any smoother.

One way to avoid the problem is to convince the family that nobody really needs the decedent’s 1971 Plymouth Duster with 210,000 miles on it. If you can do that then you can donate the car to any number of charities that are more than happy to come and tow it away. All you need is the document that indicates that the decedent owned the car (i.e., the “title”), which you sign over to the charity. Don’t have that document? Well then, I’m sorry to say, it’s back to the Department of Motor Vehicles to get a replacement. Nothing simple is ever easy.

Of course it is possible that the decedent owned a very valuable vehicle. I’m not talking about your run-of-the-mill Mercedes or BMW. No, I’m referring to something more along the line of a Lamborghini Diablo or a McLaren Spider—cars that cost a quarter of a million dollars or more. In that case, you are most likely going to have to enlist the aid of the auctioneer to get as much money for the vehicle as possible. That is your job after all: to protect and preserve the estate. Unless such a car was specifically bequeathed to someone, simply giving it away is not an option.

Proceeds

So what do you do with the proceeds of auctions and sales? You are going to have to account for them, so you will need a bank account in which they can be deposited. You cannot use the decedent’s bank account. Any bank accountant that the decedent owned must be closed. Rather, you are going to have to open a new bank account in the name of the Probate Estate and use the estate’s newly acquired Federal ID Number to do so. Preferably, this should be a checking account since you will eventually need to distribute this money to the beneficiaries. In the good old days, you had an obligation to find a bank that payed the highest interest on checking accounts. These days, however, since checking accounts pay little or no interest, simply use the bank that is most convenient.

Summing Up

The Knick-Knack Estate is composed of the decedent’s tangible personal property. These are things that have value in and of themselves, however little value that may be. They can be thought of as fitting into one of three groups: The Heirloom Pile, The Auctionables Pile, and the Junk Pile. The Heirloom Pile is comprised of items that at least one of the beneficiaries wants. The Auctionables Pile consists of remaining items that an auctioneer feels can be sold at auction. What’s left is the Junk Pile. You will most likely need to employ someone who hauls junk for a living to dispose of the Junk Pile. Finally, the proceeds of any sale must be deposited into an estate checking account for later distribution.

Things to Do

1. Poll the beneficiaries to see who wants which item of personal property and then determine the best method of distribution to them.

2. Using a review and referral service, select the following members of your team: auctioneer, movers, and trash hauler.

3. Distribute the agreed personal property to the beneficiaries.

4. Use the movers to send the auctionables to your auctioneer.

5. Have the Junk Pile hauled away.

6. Open a checking account for the Probate Estate.

7. Plan your visit to the Department of Motor Vehicles if there are any vehicles.