Tangible Personal Property: What Is It and the Role It Plays in Your Estate Plan

August 23, 2022
Alec Borenstein

Tangible personal property (TPP) refers to physical property that can be touched and moved from one location to another. Examples of tangible personal property include furniture, jewelry, art, vehicles, antiques, electronics, tools, and equipment. Tangible personal property does not include real property, such as land, buildings, or other real estate types. It is also distinguishable from intangible property, which includes stocks, bonds, bank accounts, or intellectual property, such as patents and copyrights. Allow our estate planning attorneys in New Jersey to explain what you need to know about tangible personal property.


What Is Tangible Personal Property?


Do you know what is tangible personal property? Obtaining appraisals on your tangible personal property is essential as it will help you consider important variables when planning your estate. Depending on your TPP’s worth, value assessments may also be required by the Internal Revenue Service to calculate income, estate, or gift taxes owed accurately. Conversely, the IRS may require an appraisal when taxpayers claim a charitable deduction upon donating a tangible asset to a charity. Additionally, tangible assets make up a significant portion of wealth for many due to their financial value and emotional significance.  

  • Knowing the value of your tangible items will help you decide how to plan your estate’s distributions to ensure all shares bestowed to your children are equal.
  • Values on items such as antiques and art that appraise higher than you may have anticipated may cause a shift in your planning strategy to avoid having your estate hit with an additional tax burden.

Once you determine your TPP’s financial value, it is also essential to consider the emotional value of each item, both to you and your beneficiaries. You will want your estate plan to reflect the sentimental value of your tangible personal property by bestowing the items thoughtfully to intended recipients who will greatly appreciate them. For example, your grandson may appreciate your antique violin because he studies music. Or your daughter may welcome your original Renoir painting that has been in your family for years because of her great love of impressionist art.


Tangible Personal Property: How is it Taxed?


Tangible personal property tax is collected by local governments but regulated at the state level, with a great deal of deviation from state to state. While the state structures classifications of property, assessment ratios, and exemptions, local governments choose how to tax TPP within state guidelines. Twenty-three states permit municipalities to reduce taxes owed on TPP, while twenty-seven states do not offer this option. Whilethere are limits on the growth of personal property tax, these limits are also instituted at the state level and vary. This creates a complicated process that changes across states, counties, and municipalities. Your estate planning attorney can navigate state and local laws to determine how your tangible personal property will be taxed. With this knowledge, your experienced estate planning attorney will determine the best strategy and estate planning tools to limit your estate’s tax liability.


Differences in Tangible Personal Property Requirements: New Jersey vs. New York

There are several differences when it comes to tangible personal property requirements in New Jersey and New York such as:

  • Residents of New York must list all tangible personal property in their will. However, this is not a requirement in the state of New Jersey.
  • A Personal Property Memorandum, which is a document used to list all tangible personal property and who will inherit each item, can be added to your will and is legally binding in New Jersey. This memorandum is convenient as it can be changed to add or remove items or heirs at any time instead of revising an entire will. New York does not recognize this memorandum as legally binding. However, the document may still be included with your will to avoid conflict among your heirs and so that your executor has clarification when carrying out your wishes.
  • In New Jersey, TPP is subject to inheritance tax depending on who the beneficiaries are and how they are classified in relation to the deceased. The state of New York does not impose an inheritance tax on tangible or intangible property passed down to beneficiaries.


Tangible Personal Property: Successful Estate Planning Requires a Trusted Professional


Although there are several myths about estate planning, an effective estate plan considers the emotional, financial, and tax implications of gifts and tangible personal property to ensure a streamlined distribution of assets that maximizes what your heirs will receive and minimizes your estate’s tax liabilities. BMC Estate Planning has skilled and knowledgeable estate planning attorneys that regularly assist clients in planning for all types of unique tangible assets, from treasured family heirlooms to priceless art collections. Learn more about our comprehensive wealth and estate planning services and call BMC Estate Planning to schedule a consultation. When you enlist BMC as your trusted partner, you can rest assured that your estate plan will be carefully structured to preserve your assets, your loved ones will be protected, and you will be prepared for the unexpected.

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Borenstein, McConnell & Calpin, P.C. is a Wills & Estate Planning law firm serving Central and Northern New Jersey, as well as New York City. We strive not only to give you a great client experience, but to become your trusted adviser for life. To reach Alec, please send an email to alec@bmcestateplanning.com.

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