TANGIBLE PERSONAL PROBATE PROPERTY- The Car, the Kitsch, the Couch, and the Cat

If you are the personal representative of a loved-one’s estate, there are generally three types of property that you’ll encounter during estate administration: real property (homes and land), intellectual (intangible) property, and tangible personal property. This post deals with the last category, tangible personal property, which I will shorten to “TPP” from here on out.

TPP can pose some very interesting questions and, as you might imagine, lead to squabbles among family members. As personal representative, you will almost certainly encounter one or more of the following TPP classifications: exempt property, property named in a separate writing, jointly-owned property, allegedly gifted property, and items that are not considered “probate property” for the purpose of administration. Since it will be your responsibility to gather and protect the estate’s TPP (called “marshaling” the property), you may encounter people who don’t want to give up possession of certain items. You’ll need to figure out the best way to assign value to TPP, since things like tax liability and the estate’s inventory depend on your valuation of the property in the estate. And then, eventually, you’ll need to figure out how to distribute the property to heirs and beneficiaries in a way that respects the decedent’s will and the requirements of Florida law.

Obviously, you will have an attorney whose responsibility it is to guide you through all of these issues. In fact, having an attorney is required by Florida law (except in very rare instances), since probate administration is a legally complex task even in relatively simply cases. But it certainly helps to understand the basic property-related issues that occur during the process. Hopefully this will provide you with some answers to the questions & difficulties that you have encountered or might face when trying to deal with your loved one’s “stuff.” This article is divided into the following five broad questions:

1. What is tangible personal property?
2. How do you determine ownership of TPP?
3. How do you take possession of TPP?
4. How do you assign value to TPP?
5. How do you distribute TPP?

WHAT IS TANGIBLE PERSONAL PROPERTY?

There is no technical definition of “tangible personal property” in the Florida Probate Code. “Stuff” is probably the best general description of what falls into this classification of property, although there are some surprising things that Florida law deems to be TPP. With some notable exceptions that I will explain below, TPP is all of those things, other than real property, that can be touched – in other words, things that are corporeal. The following are considered TPP for the purpose of estate administration (and equitable distribution during divorce, for that matter):

• Cars, boats, motorcycles, motor homes (not to be confused with mobile homes that are affixed to a parcel of land; if a mobile home is affixed to land, it’s considered real property);
• Furniture, appliances, dishware, rugs;
• Artwork – paintings, sculptures, tapestries;
• Jewelry & clothing;
• Pets (!) [Bennet v. Bennett, 655 So. 2d 109, 111 (Fla. 1^stDCA 1995)].

A side note about pets: because they are considered personal property, there is no such thing as court-ordered “time sharing” of pets in the context of a divorce settlement. The court must determine which party gets the animal, and it’s up to the two parties to privately work out an acceptable living and/or visiting arrangement. (When you think about it, this makes the most sense. Courts and judges are busy enough without having to enforce “pet parenting plans.”In Bennett, cited above, a lower court had created a time sharing order for the family’s dog. As you can imagine, one of the parties accused the other of failing to abide by the order and took the ex-spouse to court. The appellate court overturned the lower court’s time sharing order, explaining that while the trial court was trying to be sympathetic and compassionate, this type of court-ordered plan was simply unworkable. Courts don’t have the time for it.)

The following things are NOT TPP:

• Cash money;
• Items used in business or trade, like work machines and inventory [see 732.515, Fla. Stat. & Baldwin v. Estate of Winters, 944 So. 2d 437 (Fla. 4^thDCA 2006)];
• Wild animals that happen to be on a person’s land [Tomblin v. State, 616 So. 2d 1209 (Fla. 2d DCA 1993)];
• Human bodies and remains/cremains [Wilson v. Wilson, 138 So. 3d 1176 9Fla. 4^thDCA 2014)].

Human remains pose an interesting problem and, not surprisingly, disputes often arise in the context of people who don’t agree on where a body should be buried, who gets a decedent’s ashes, or where the ashes should be spread or kept. Since human remains are not considered property, they are not subject to court-ordered division – meaning the court cannot order cremains divvied up between two or more people (which was the question explored in Wilson, cited above). The person who had legal authority to order/direct the cremation has the right of possession and the right to determine disposition of the remains – but this right of possession is not a property right.

This principle was very recently codified at § 497.607(2), Fla Stat. (2016), which states:

“Cremated remains are not property, as defined in s. 731.201(32), and are not subject to partition for purposes of distribution under s. 733.814. A division of cremated remains requires the consent of the legally authorized person who approved the cremation or, if the legally authorized person is the decedent, the next legally authorized person pursuant to 497.005(43). A dispute regarding the division of cremated remains shall be resolved by a court of competent jurisdiction.”

WHO OWNS TPP?

1. General Provisions
2. Separate Writings
3. Exempt Property
4. Community Property
5. Joint Ownership
   • Join Safe Deposit Boxes
   • Jointly-Owned Automobile
6. Lost, Abandoned, and Mislaid Property

General Provisions

Determining ownership can be a difficult task. For certain items like cars, there will usually be a title that creates a presumption of ownership, although title is only evidence of ownership and not required to prove it. See In re: Kalter, 292 F. 3d 1350 (11^th Cir. 2002). Note, however, that a title only creates a presumption; a title can be rebutted, such as by the testimony of a witness who saw a later sale take place. What’s more, most items don’t have a title. Perhaps the dog has registration papers, but otherwise, there is no piece of paper saying “Jim Bob hereby owns this Dogs Playing Poker crushed velvet tapestry.”

In situations where ownership may be unclear, it is helpful to remember the old adage about possession being 9/10 of the law. Possession is prima facie evidence of ownership, although this, like title, can be rebutted with evidence demonstrating otherwise. The burden of proof is on the person attacking the apparent title or ownership.

Separate Writings

Florida law (§ 732.515, Fla. Stat.) allows an individual to have what is called a “separate writing” along with his or her will. The separate writing is a list, referenced in the will, that leaves specific TPP to named individuals.The language of the will that refers to the separate writing usually looks something like this: “From time to time I may prepare a written memorandum regarding the disposition of all or part of my tangible personal property that I might own at the time of my death…”

The reason separate writings are allowed is because the process for creating and amending a will is very strict and formal, and the law recognizes that it would be too burdensome to create an official amendment (called a codicil) to a will each time the testator decides to change his or her mind about specific personal items. In other words, Uncle Jimmy doesn’t have to go through the formal will amendment process when he decides he would rather give his old watch to his nephew Bob instead of his brother Billy; he can just change his separate writing. This writing can be prepared before or after the creation of the will, so most wills will have a separate writing provision whether one exists or not – just in case the testator decides to make a separate writing later.

There are certain rules, however, about whether separate writings (or the specific provisions contained within them) are valid. A separate writing:

• Must be specifically referenced in the decedent’s will (see above language);
• Cannot dispose of property used in a trade or business;
• Is ineffective with respect to property that is specifically devised within the will;
• Must be signed by the testator and describe the items and the people who get them with reasonable clarity.

Note that if there is more than one separate writing, and they are in conflict with one another, the one that was written last controls. You can imagine how this may create problems if the testator failed to date the writings or made amendments to items within the writing. If you have a will, it is well worth it to go through your separate writing each year to make sure it still reflects your wishes and is up-to-date with respect to the items you own.

Exempt Property

Florida law (§ 732.402, Fla. Stat.) creates exemptions for certain types of TPP, meaning that creditors cannot pursue the property to pay debts, and the property doesn’t go through estate administration. These exemptions only apply if there is a surviving spouse or, if no surviving spouse, children of the decedent. (In other words, If there is no surviving spouse and the decedent left no children, the following exemptions don’t apply. There are other types of exempt property that are not TPP, like prepaid tuition plans, and these won’t be discussed here).

• Household furniture, furnishings, and appliances in the decedent’s primary residence, up to a net value of $20,000 at the date of death;
• Two motor vehicles registered in the decedent’s name and regularly used by the decedent or his/her immediate family as personal vehicles. Note that there is a weight limit: 15,000 pounds per vehicle. The language requiring that the vehicle be used “regularly” means that things like recreational vehicles that are used only on trips and vacations would not fall into this exemption. See In re Estate of Corbin, 603 So. 2d 127 (Fla. 1^st DCA 1992)..

Exemptions don’t apply to any property that is specifically devised in the decedent’s will, even if the property would otherwise fall into the statutory category. For example, furniture that is specifically devised in the will to the decedent’s son is not exempt from creditor claims. See Babcock v. Estate of Babcock, 995 So. 2d 1044 (Fla. 4^th DCA 2008). However, the law has been updated so that if the person (in the referenced case, the son) appropriately petitions the court to have the property deemed exempt, the court may apply the exemption.

In any case, spouses and children who are entitled to exempt property must petition the court to make a determination on the exemptions, and this petition must be made within a certain time frame (your attorney can explain those details) or else the exemptions are waived.

Unlike the exempt property listed above, there are two other types of exempt property that inure to a decedent’s heirs at law – and not just the decedent’s surviving spouse and/or children. One is an exemption found in the Florida Constitution, which protects up to $1,000 of personal property (Article X, Section 4(a)(2)). In addition, up to $1000 of the value of an automobile is protected from creditors under Section 222.25, Fla. Stat. Again, these two exemptions do not only apply to spouses and children; they also apply to the decedent’s heirs generally.

Community Property

Community property (“CP”) is a type of joint ownership that exists in a handful of states other than Florida (see list below). CP status transfers even when a person moves out of the community property state. When property is determined to be CP, it passes pursuant to § 732.219, Fla. Stat.: one half to the decedent’s spouse (if there is a surviving spouse), and one-half to the decedent’s estate. For the purpose of estate administration, you as the personal representative should be vigilant and notify your attorney if the decedent or the decedent’s spouse lived in a community property state at any point. These include: Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin.

It’s very important that your attorney know about the decedent’s time in a community property state, because this can drastically affect how the decedent’s property is handled and whether devises in the decedent’s will are valid and enforceable. When it comes to TPP, any TPP that was purchased with funds that came from the sale of community property real estate counts as community property for the purpose of division and distribution.

Joint Ownership

The concept of “tenancy by the entireties” or “right of survivorship” is important to know. For this article, I will use the terms interchangeably. Very broadly, they mean that property owned “by the entireties” or with a “right of survivorship” automatically passes by operation of the law to the co-owner after a person’s death; the property is not subject to probate administration.

Both real property and TPP can be owned by the entireties (or with rights of survivorship). Joint bank accounts between spouses are presumed under § 655.79, Fla. Stat., to be owned by the entireties, meaning that when one spouse dies, the rest of the funds automatically pass to the surviving spouse.

However, pursuant to § 689.15, Fla. Stat., TPP is not presumed to be owned by the entireties unless the document creating ownership clearly states that survivorship is intended. In other words, TPP does not automatically pass to a joint owner – it must go through the estate probate process – unless the document showing title or ownership explicitly states that there is a right of survivorship.

Joint Safe Deposit Boxes

There are two laws that come into play when it comes to opening safe deposit boxes after a person’s death: Sections 655.937 and 733.6065, Fla. Stat. For our purposes, it is only important to note that there is no presumption that property in a safe deposit box that is held in the names of two or more people creates joint ownership (or survivorship) between them. Thus it is often a race between the joint owner of the deposit box and the personal representative of the estate to get to the box first and ensure that the property inside is obtained. If the joint owner gets to it first, there is really no way for the personal representative to even know or prove that it was ever there (in order to include it in the estate property). If the joint owner gets there first, there is nothing stopping him or her from removing the property inside, despite that there is no automatic presumption under the law that the property in the box belonged jointly to the box holders.

Jointly-Owned Automobiles

Chapter 319 of the Florida Statutes governs co-ownership of cars. This is a somewhat tricky area of the law and depends on the precise wording of the registration. The following rules apply even if the co-owners are husband and wife.

If the registration separates the two (or more) names of the co-owners with the word “or” – as in, “This car is registered to Betty Boop or Charlie Chaplin” – then either party acting alone can transfer or dispose of the vehicle. Thus, after one of them dies, the other gets ownership by operation of law; the car isn’t probate property, and ownership doesn’t need to be determined in probate proceedings.

If the registration separates the names of the co-owners with the word “and” – as in, this car is registered to Betty Boop and Charlie Chaplin” – then both parties’ signatures are needed to transfer or dispose of the vehicle. See § 319.22(2)(a)2., Fla. Stat. After one co-owner dies, the car is probate property, and the co-owner must demonstrate proof of ownership and right to possession. Section 319.28, Fla. Stat., provides the rules for transferring title of the vehicle in this situation:

• If the party died testate (with a will), leaving the vehicle to the co-owner, then the co-owner must provide the Department of Motor Vehicles with a copy of the will and an affidavit stating that the estate is solvent and has adequate funds to pay all of the creditors; or
• If the party died intestate (without a will), the DMV will transfer title to the co-owner without an order from the probate court if the co-owner provides and affidavit stating that the estate is not indebted and that the surviving spouse and heirs have amicably agreed to a division of the estate.

Lost, Abandoned, and Mislaid Property; Gifts

Loss, Abandoned, And Mislaid Property

When a person comes across property that appears to be lost or misplaced – or when someone alleges that property that was in the possession of the deceased, or in his or her home, is not actually the deceased’s property – the law divides such items into four basic categories: lost, abandoned, mislaid, and “treasure trove.” For these purposes, we will skip the fourth category; broadly speaking, treasure trove is buried or hidden coin (gold or silver, generally) that has been buried or hidden long enough that the owner is unlikely to come back and claim it. The finder owns it except in certain cases of trespass.

Without getting into the nitty gritty of the law as it applies to lost, misplaced, and abandoned property (which can get pretty complicated), keep in mind that as noted above in the section on title, the burden of proof is on the person who is challenging the presumptive ownership of the individual who has possession of the item. In the context of probate administration, this means that the burden of proof is on the person who is challenging you, the personal representative, by claiming that the item did not actually belong to the decedent.

The critical element that defines abandoned property is that the former owner intended to give up possession of the item. Obviously, when it comes to lost and misplaced items, they are not characterized by any intent to relinquish the property. To avoid a situation in which the title of property stays in a a perpetual state of uncertainty after it is lost or misplaced, Florida law has put a statutory time limit on an owner’s ability to claim lost or misplaced property: six months from the time it is found (not the time it is lost, mind you). If six months passes after it is found, and the true owner does not claim the property, it belongs to the finder.

While issues surrounding lost, mislaid, and abandoned property do not come up frequently, they do come up. For example, a somewhat recent case concerned an individual who had a habit of hiding things of value around his house and property. After he died, his daughter took possession of his home and eventually sold it. Later, a contractor working on the home for the new owner found several boxes containing items of considerable value. The question was whether the original owner (the man who died) intended to give up possession of the boxes. The court found that he did not – that they were lost rather than abandoned (or treasure trove) property. Keep in mind when it comes to that case that this was a jurisdiction that didn’t have Florida’s six-month time limit on claiming lost or mislaid property.

Gifts

Sometimes during the process of administration, a person will come forward and claim that property that was in the decedent’s possession had actually been gifted to them before the decedent’s death. It is a critical question that must be answered; if the property had properly been given as a gift during the decedent’s lifetime, then it passes by operation of law to the person to whom it was given. If it was not found to be gifted, then the property is part of the decedent’s estate and must be taken through the probate process. See the section on alleged gifts below.

HOW DOES THE PERSONAL REPRESENTATIVE TAKE POSSESSION OF TPP?

1. General Issues
2. Cost of Marshaling and Storage
3. Disputed Property
4. Gifts (alleged)
5. Inventory

General Issues

Section 733.607(1), Fla. Stat., gives the personal representative express authority to take possession and control of the decedent’s property (except the protected homestead). It’s best to do this ASAP, and to take pictures of everything, before items start walking off. However, you can leave it to those who are presumptively entitled to it as beneficiaries or heirs, as long as the property is not needed for administration – as when it needs to be sold order to make the estate liquid to pay debts. If you do leave property with the presumptive beneficiary or heir, you want to have a signed, written agreement with them in order to avoid personal liability for damage or loss. See § 733.812, Fla. Stat.

Costs of Marshaling and Storage

Some personal representatives get worried about the expense of taking over all of the decedent’s property. Section 733.801, Fla. Stat. states that the storage, sale, and inventory of TPP can be charged to the estate as an expense of the administration (and this is in addition to the 3% that the personal representative gets paid from the estate for his or her time and effort).

Disputed Property

Sometimes it is not enough for the personal representative to request that a person turn over property. As you can imagine, there may be disputes as to whether they are required to give up the property, or whether the property actually belongs to the estate or is perhaps exempt from administration. If a person refuses to relinquish control and possession to the personal representative, the PR must file an action before the court to determine whether the property must be given up to the PR, per § 733.607, Fla. Stat. If the person who refuses to turn over property damages or loses it, that person is liable to the personal representative for the value lost but only as long as the PR made a request to obtain possession, and the request was denied. This is another reason why it’s important to start marshaling assets as quickly as possible and to document what happens as thoroughly as possible – to avoid liability issues.

Unfortunately, litigation over disputed property can take a long time. One can petition the court to freeze the estate’s assets under these circumstance. This is also a good situation in which to get a curator to take over and safeguard the property; a curator is an independent third party who is appointed by the court for the express purpose of taking care of estate property when there are disputes as to its legal status (i.e., who owns it) vis a vis the estate.

Alleged Gifts

Some people will refuse to give up property by alleging that the property had been gifted to them by the decedent prior to death. These can be difficult situations, but essentially, the person who is alleging the gift has the burden of proof to prove that all of the legal elements of a gift were in place: 1.) Intent to give/donate; 2.) Delivery of the gift to the recipient; and 3.) Acceptance of the gift by the recipient. As you can see, it can often be difficult for a person to prove that the decedent intended to give the property as a gift, or that the gift was “delivered” in a legal sense, particularly when the dispute arises in the context of family members who live together. The status of the property matters a great deal, however, because if it is determined that the property was a gift, it does not go through estate administration.

Inventory

Personal representatives are required to file an inventory that lists the estimated fair market value of each item of property at the time of death. Section 733.604, Fla. Stat. The inventory must be updated whenever a new item is discovered or it becomes clear that the originally listed value is incorrect or misleading. The inventory must be served on all interested persons (e.g., beneficiaries, heirs, and creditors). It is almost always advisable to hire appraisers and experts for items of TPP that are particularly valuable, or when they are works of art or something for which the value would not be evident without the help of an expert. Florida law explicitly allows the PR to hire such people, and doing so shields the PR from any liability when it comes to disputes or issues about items’ value that may arise down the road.

As you will see when it comes to distributing TPP, when you are drafting the inventory, it is important to adequately identify the item that you are listing. If the list contains jewelry, for example, then each piece of jewelry must be described in enough detail to ensure that the item on the inventory can be identified when it is time to distribute.

HOW DOES THE PERSONAL REPRESENTATIVE DISTRIBUTE TPP?

1. Valuation generally
2. Fair Market Value
3. Artwork
4. Cars

Valuation Generally

The value that is assigned to property is of critical importance, as it determines how items are sold, distributed, and assigned to individuals later in the administration. The value also determines ultimate tax liabilities. The following is a very broad overview; since valuation issues can be (and usually are) intricate and complicated, based on the Internal Revenue Code and state laws, you will need to work closely with your attorney and a CPA or tax professional in order to ensure that valuation is accurate and doesn’t expose you to any liabilities later.

The IRS can impose penalties on people for mis-valuing items (yet another reason for hiring qualified appraisers and experts), such as when value is substantially understated or there is a total disregard for the IRS rules and regulations pertaining to valuation (usually a 20% penalty).

As it pertains to Florida law, it is always important to remember that the personal representative is a fiduciary with a responsibility to appropriately safeguard, value, and distribute items for the benefit of the estate and its distributees. This means there may be liability or a surcharge imposed on a PR who fails in his or her fiduciary duties.

Generally, estate taxes are based on fair market value (FMV). Transfer taxes are based on the price at which the item would be freely sold (that is, the price at which it would be sold assuming no duress or compulsion, and assuming that the buyer and seller are aware of all relevant facts).

Fair Market Value

There are three methods of determining FMV:

1. The Market Approach
2. The Income Approach
3. The Cost Approach

Market Approach

This method determines FMV based on actual sale prices or comparable sale prices. This is the most common method for valuing TPP.

Income Approach

– This method of valuation determines FMV based on how much income the property produces or can be expected to produce. As you might imagine, this is a rare form of valuation for TPP.

Cost Approach

This method determines FMV based on how much it would cost to either reproduce or replace the item. This is also an unusual form of valuation for most TPP.

Artwork

Courts will look to the type of market in which the particular artwork would be sold. There is a primary market like a gallery or dealer; a secondary market, like an auction; and the broad market (a little difficult to explain here, but this market might be considered a sort of Craigslist for artists). For artwork that is valued at $3000 or more, the IRS requires that there be an appraisal filed with a tax return. For returns that are selected for audit, if the artwork value in the return exceeds $20,000, the auditor must refer the return to the Office of Art Appraisal Services of the IRS. This Office puts together an Advisory Panel of prominent artists, appraisers, and curators to determine the value of artwork that is the subject of an audit; they make recommendations regarding the reasonableness and acceptability of valuations that were made for the return.

Cars

Cars and other automobiles are valued at the price they could be sold in the public retail market – not how much a used car dealer would sell them for.

HOW IS TPP DISTRIBUTED?

There is a general rule under the Florida Probate Code that TPP be distributed “in kind” – that is to say, in its original form as opposed to being sold/liquidated and distributed as cash – unless this is impractical. You can imagine that there are situations where this is not so straightforward. For example, if the will leaves “my art collection to my two children,” and there are many pieces of art, this can create a sticky circumstance where valuation and taxation issues come into play.

There are two principles to keep in mind here when trying to distribute TPP in kind:

1. Items may be distributed in kind non-pro-rata if any inequality produced can be evened out via distribution of other property; or
2. Property can be sold and distributed pro rata as cash if inequities can’t be otherwise resolved.

In the event a person gets a fractional interest in property that is maintained in kind, then he or she must have a right of possession for an amount of time that is commensurate with that person’s fractional interest. For a person who has a 50% interest in property, as in the event of the two children and artwork listed above, each one must be given a right to possession for half of the year.

In sum, I hope this has cleared up some questions that may have arisen or that may soon arise during estate administration. As always, consult with your attorney on any matters that are unclear. If you are searching for an attorney in Florida, my office deals with both summary and formal administration in all Florida counties.

If you need assistance in estate administration, creating or reviewing your will, trust, or other estate document), please contact Parris Law, P.A. at (407) 706-3967 or info@parrislaw.org. We’ll be happy to help you out.

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