Planning for and Disposing of Difficult and Dangerous Tangibles

Written by Samantha Anderson, JD, and Kelly Zerillo, JD

Estate planners may encounter clients with tangible assets that present unique and sometimes difficult planning issues. These items range from the unusual to the downright dangerous. This article provides a broad overview of difficult tangibles, including restricted materials and firearms. Although this article is not comprehensive, it highlights some of the necessary tools and analyses to deploy when confronted with such items. 

Restricted Materials

Estates may include tangible personal property containing illegal or highly regulated materials. Restricted materials are highly regulated substances or materials, such as ivory, rosewood, certain types of coral, certain types of feathers, or other organic or animal matter, and items made partially or entirely from them. In some instances, the items are not just restricted but are actually illegal to own. It is often a surprise to the executor or beneficiaries to learn that the estate includes such items or that ownership of them is actually illegal. Knowing how to identify these restricted materials and being aware of the applicable rules during the planning phase is the best way to avoid any unpleasant surprises. 

Market Background 

Instruments with ivory components, silver services with ivory components, furniture with finials or decorative elements of ivory or rosewood, ceremonial objects or pieces including certain feathers, decorative boxes, items inlaid with certain corals, and handbags or furniture upholstered in exotic skins are some of the most common items that planners should be on the alert for. Some of the more conspicuous objects that may be subject to legal restrictions include tusks, taxidermied animals, loose feathers, scrimshaw, or other decorative items made entirely of bone. 

Although there is greater awareness of the legal restrictions on these items, there is still a limited market for them. The legal restrictions on highly regulated materials have had their intended effect, that is, they have dampened the demand for these items and depressed their market value. It is important to note that some items that may initially seem suspect may be legitimate and legal, such as antique scrimshaw found in New England whaling communities or antiquities that include feathers or animal skins from unrestricted species such as hawks or ravens. 

Despite the limited market for tangible personal property containing restricted materials, some dealers and galleries maintain an active business trading in them, either because they are ignorant of the governing law or are intentionally uninterested in complying with it. It is essential to counsel clients to conduct appropriate due diligence when purchasing items that may include restricted or illegal materials.

Legal Background

Various laws govern the trade in restricted materials, and multiple agencies are responsible for enforcement. 

The Convention on International Trade in Endangered Species of Wild Flora and Fauna 

The Convention on International Trade in Endangered Species of Wild Flora and Fauna (CITES) is a global treaty that ensures that international trade in wild plants and animals is legal, traceable, and biologically sustainable. 

The International Affairs program of the US Fish and Wildlife Service (FWS) coordinates domestic and international efforts to focus on domestic and foreign species of international concern. Under the Endangered Species Act (ESA), FWS carries out the provisions of CITES. 

The Endangered Species Act

The US regulates the importation of endangered species under the ESA. There is no legal importation of certain species, for example, African elephants, for any commercial purposes. If an item is imported into the US for noncommercial purposes, the importation is legal provided that the endangered material was removed from the wild prior to 1976, was otherwise legally acquired, and meets other enumerated criteria under the ESA. 

For an object subject to the ESA to be sold in interstate commerce, the item must satisfy the laws of the states it is moving between and must be either (1) an antique as defined by the ESA or (2) legally imported into the US prior to 1990 and satisfy the de minimis exception. 

To fall within the ESA’s definition of an antique, the following criteria must be met: (1) the item has not been repaired or modified with ivory or any other part of a federally protected species since 1973; (2) the item is at least 100 years old; and (3) the item was either imported prior to 1982, imported after 1982 through one of the specifically designated ports for antiques, or  manufactured in the US from legally imported ivory. 

The de minimis exception requires, among other things, that the item must have been legally imported into the US prior to 1990 and contain less than 50 percent ivory by volume or no more than 200 grams of ivory. For intrastate commerce, federal law permits sale of an item within a state if the item was lawfully imported prior to 1990 or if it was imported with a “CITES pre-convention certificate,” provided the sale complies with the relevant state and local laws. 

Each state has rules governing restricted materials, particularly ivory, and many states that have enacted laws have written them to closely mirror the federal laws. For example, under New York law, the sale of ivory is prohibited without a Department of Environmental Conservation permit. To obtain a permit to sell, the item must be at least 100 years old and comprise less than 20 percent ivory for intrastate sale or 50 percent for interstate sale. Alternatively, a permit can be issued if the sale or distribution will be for educational or scientific purposes, through an estate, or if it is a musical instrument manufactured no later than 1975. 

The Canyon Case

The most common questions planners and advisors face when handling an estate with restricted materials are what to do with them and how to value them. The above discussion of federal and state law provides guidance on the first question. The question of how to value restricted materials is more nuanced. 

This issue arose in the . . . 

Continue reading the full article for free by subscribing to the WealthCounsel Quarterly, the legal magazine for estate planning and elder law professionals.