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Kevin Greenard: Using a memorandum to distribute personal and household effects

A Personal and Household Effects Memorandum is a more flexible alternative to itemizing every specific small asset in your will.
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A will is a document that specifies what to do with your assets after you pass away. In almost all cases it is recommended to have a will in place to ensure that your wishes are honoured and your assets are distributed in accordance with that.

“Asset” is really a broad term. It includes everything from your personal and household effects (“articles”), principal residence, investment accounts, to pensions and life insurance benefits.

The general structure of a will typically starts with leaving specific bequests. This can be very general where you simply state that you would like a specific item, or amount of money, to go to one or a number of specific individuals. This can also get more complex where you identify numerous bequests to kids, grandkids, nieces, nephews, charities and so on.

After the specific bequests, there is a statement that determines the division of the residual of the estate. Common examples of residuals could be to a spouse, siblings, children or charity.

I’ve had clients who wanted to make sure that certain personal and household effects (“articles”) were given to specific individuals. An example could be a special piece of jewelry that you want to go to your niece, or a collection of musical instruments to go to a nephew who shared your love of music.

After a lifetime of accumulating valuable and sentimental articles, you can imagine how long this list would get. While it is possible to put all the specific bequests in your will, your will could become very lengthy.

Additionally, if you want to add an item, change a bequest, or have disposed of one of the listed items, you will have to revise your will. Although this is possible, it can be a lot of trouble to go through for smaller articles and there may be a cost associated with these revisions.

An alternative to itemizing every specific small asset in your will is to have a separate document to deal with the articles. I call this document a Personal and Household Effects Memorandum (memorandum). One of the nice parts about using a memorandum is that it can be updated without having to update the will. The will would refer to the memorandum and exclude the small articles.

The memorandum approach is very flexible.For example, let’s say you had some expensive artwork that you wanted to give to a close friend and you put this specific bequest into your will. After speaking with your close friend, you learn that she doesn’t have room for it, or even want it.

If you want to change this bequest to someone else then you will need to update your will or have a codicil (an addition or supplement that explains, modifies, or revokes an entire will or part of one) — both of which come at a cost. With a side memorandum, you would simply just change the article bequest to another person.

Another scenario is if you dispose of some of your articles. In this case, the memorandum can be updated without having to update the entire will. Having a memorandum also enables your will to focus on the larger assets and enables your executor to have a clear understanding of how you would like some of the smaller articles with sentimental value to be distributed.

When I have discussed with clients about having a methodology to distribute the smaller articles in their house, I have heard different approaches. Many have not done anything the first time we talk about it. I’ve had clients tell me they have put stickers underneath or behind each item, with names of the individual to receive each item. Over time these stickers can fall off, causing confusion.

Other methods that I have seen work in some situations are to distribute items during your lifetime. In the most likely outcome, you may downsize or move into an assisted living accommodation. This may be the ideal opportunity to distribute some of your items early.

I also prefer the memorandum approach because it provides clarity for your executor by itemizing each article that you would like to be given to specific individuals. It can sometimes be the smaller items that family have disagreements with afterward.

The memorandum should hopefully minimize disagreements between family members over items of sentimental value and avoid unnecessary conflict. However, it is worth noting that the memorandum is not a legally binding document as it is separate to the will.

I’ve explained to clients how I use a memorandum and refer to it in my will.

My memorandum was created using a password-protected spreadsheet template. The columns are:

1) Item

2) Individual’s Name

3) Contact Address

4) Phone Number

5) Other Notes

Although you may know where all the individuals who are receiving your personal articles reside, your executor may not, so it is helpful to put the address and phone number down to assist your executor. The ‘Other Notes’ column is really for additional comments that may include logistics such as shipping or customs notes if the individuals are not nearby.

A benefit of the spreadsheet Personal and Household Effects Memorandum is that it can be easily edited when items are bought, sold, or disposed of without having to update the will. If your executor has the electronic copy as well, then the list can be sorted by individual to make organizing the distribution easier.

This comprehensive list of assets could be supplemented with photos/videos to add extra clarity for your executor and would also be useful to keep as a general record of all your assets for insurance purposes.

The spreadsheets should list all personal and household items of significance that are not specifically mentioned in the will. An up-to-date printed hard copy is always stored with my will and my will refers to this memorandum. I ensure the printed copy is signed, dated and also witnessed.

Just as I think it is important that a will be kept simple and straightforward, I think the memorandum should be kept to articles of importance, sentimental items, and other significant items.

Many household items have very little value and are not of any great significance. It is also possible that the individuals that you wish to come into possession of the articles do not want them. It could be that logistical issues or shipping costs of moving an item(s) to a named individual far exceeds the value of the article.

Your will should give the power to the executor to handle these potential outcomes.

Kevin Greenard CPA CA FMA CFP CIM is a Senior Wealth Advisor, Portfolio Manager, Wealth Management, with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138, email greenard.group@scotiawealth.com, and visit greenardgroup.com.