Tangible vs. Intangible Assets: Understanding the Difference

Estate planning is essential for anyone looking to secure their assets and ensure that their wishes are carried out. One critical aspect of estate planning is understanding the types of property you own, especially concerning the difference between tangible and intangible property.

By categorizing these assets correctly, you can more effectively manage your estate and make informed decisions about how each asset will be distributed to your heirs. Below, we provide a guide to help you distinguish tangible vs. intangible property and discuss how each type of asset should be handled in your estate plan.

What Is Tangible Property?

Tangible property refers to physical assets, items you can touch and move. These are often the more straightforward assets to identify because they are real objects that you may use or interact with regularly. In addition to being touchable, these assets are also:

• Easier to value and identify because of their clearly defined value.
• Depreciable assets.
• Attributed residual value.
• Destroyable.
• Easier to sell and obtain cash payment for.

Common examples of tangible property include the following:

• Personal belongings: Items such as jewelry, artwork, clothing, and collectibles are tangible property examples.
• Vehicles: Cars, motorcycles, boats, and other modes of transportation are tangible.
• Real estate: Although this may feel intangible in some cases, real estate is considered a tangible asset because it is a physical piece of property and can include land or
• Furniture and household Items: This can range from appliances to antiques and other valuable household items.

In your estate plan, tangible property is often distributed through a will or a personal property memorandum, depending on its value and significance.

What Is Intangible Property?

Intangible property, on the other hand, refers to assets that lack a physical form but hold value. These assets may be more complex to manage and transfer, as they often require specific documentation or special handling. Other qualities of these assets include:

• Having detectable value.
• Being amortizable.
• Lacking residual value.
• Being longer-term investments.

Common types of intangible property include:

• Financial accounts, including bank accounts, retirement accounts, and investments.
• Stocks and bonds, including investments that may fluctuate in value over time.
• Intellectual property, including copyrights, patents, and trademarks.
• Digital assets, including cryptocurrency, domain names, social media accounts, and digital files.
• Insurance policies, including life insurance or annuities with designated beneficiaries.

Intangible property requires careful attention in an estate plan because it often involves legal and financial complexities. For instance, assets like stocks and retirement accounts may pass directly to named beneficiaries, bypassing the probate process.

How to Handle Tangible & Intangible Property in Your Estate Plan

When creating or updating your estate plan, it’s important to account for both tangible and intangible property. Consider the following steps you can take to protect both types of assets in your estate plan:

1. Inventory your assets. Start by making a comprehensive list of all tangible and intangible property you own. This will give you a clear picture of your estate and help you categorize each asset accordingly.
2. Assign value to your assets. Understanding the value of each asset can help you make more informed decisions about distribution. For tangible items like jewelry or collectibles, consider getting an appraisal. For intangible assets, consult financial statements or other relevant documents.
3. Designate beneficiaries. For both tangible and intangible property, make sure you specify who will inherit each asset. Some intangible assets, like retirement accounts or life insurance policies, allow you to directly name beneficiaries, which can simplify the process.
4. Consider tax implications. Different assets may have different tax implications, especially when it comes to intangible assets like stocks and investment accounts. Consulting a tax advisor can help you structure your estate to minimize the tax burden on your heirs.
5. Set up legal protections. To ensure your estate plan reflects your wishes, consider creating trusts or other legal arrangements. For example, a trust may allow for a smoother distribution of intangible assets, while a personal property memorandum can simplify the division of tangible property.
6. Keep your estate plan updated. Life changes such as marriage, divorce, or the acquisition of new assets should prompt a review and update of your estate plan to ensure that it accurately reflects your current circumstances.

Taking these steps will help safeguard your assets and ensure your estate plan accurately reflects your intentions.

Tangible vs. Intangible Assets: Why Categorizing Your Assets Matters

Properly categorizing your tangible and intangible assets not only helps you create a more organized estate plan but also simplifies the process for your loved ones after you pass away. By clearly defining each asset type and documenting your intentions, you reduce the risk of confusion, potential disputes among heirs, and legal complications that could delay the settlement of your estate.

Skilled Estate Planning Counsel

Categorizing and managing both tangible and intangible property is essential to creating a comprehensive estate plan that fully aligns with your goals for the future. Let our attorneys assist you in planning for the future and developing a comprehensive estate plan.

For answers to your questions about categorizing assets in your estate plan, contact Dorcey Law Firm, PLC at (239) 309-2870.