C#: Why does this strange jittering occur??

Hello! I have a scene in which the player can pick up and drop objects, as well as move and look around.

All player objects are children of an empty game object "MainCharacter":

MainCharacter > Capsule (With RigidBody and PlayerMoveScript)> PlayerBase (empty - used for checking if grounded) MainCamera> Hands(With PickUpDrop script)

The object I pick up Lerps to my Hands position, however after my capsule collides with any walls there is a strange jittering which I cannot work out how to fix!!

Heres the .exe:GameTest Heres the data folder : Data

If anyone can figure out how to stop this i would be very very grateful!

Thank you :)

Here are the scripts:

Pick Up and Drop Script:

 public bool handsFull = false;
     
     public float distanceMax = 20f;
 
     public Transform handPosition;
 
     public LayerMask canPickUp;
     
     public GameObject taggedGameObject;
 
     public bool colliderTriggered;
 
     public bool bounds;
 
     public PickedUpObject pickedUpScript;
 
     public Rigidbody player;
 
     // Use this for initialization
     void Start () {
 
         print(FindClosestPickup().name);
         handPosition = transform;
         pickedUpScript = null;
     
     }
     
     // Update is called once per frame
     void Update () {
 
 
                 if (Input.GetKeyDown (KeyCode.E) && !bounds) {
                         if (Physics.CheckSphere (handPosition.position, 2f, canPickUp)) {
 
                                 if (handsFull) {
                                         Drop ();
                                 }
 
                                 if (!handsFull) {
                                         PickedUp ();
                                 }
 
                 handsFull = !handsFull;
 
                         }
                 }
 
                 if (handsFull) {
                         RotateMovePickedUpObject();
                 }    
 
 
         }
 
 
 
     private void PickedUp(){
 
         //Closest object to top of list
         taggedGameObject = (GameObject)FindClosestPickup();
 
         taggedGameObject.collider.isTrigger = true;
 
 
 
         taggedGameObject.rigidbody.useGravity = false;
         taggedGameObject.rigidbody.isKinematic = true;
 
         pickedUpScript = taggedGameObject.GetComponent<PickedUpObject> ();
 
         Debug.Log ("Pick Up");
 
     
     }
 
     private void RotateMovePickedUpObject(){
 
         //Rotate
 
         if(Input.GetKeyDown(KeyCode.End)){
             taggedGameObject.transform.localRotation *= Quaternion.Euler(0, 0, 45);
         }
         if(Input.GetKeyDown(KeyCode.Delete)){
             taggedGameObject.transform.localRotation *= Quaternion.Euler(0, 45, 0);
         }
         if(Input.GetKeyDown(KeyCode.PageDown)){
             taggedGameObject.transform.localRotation *= Quaternion.Euler(0, -45, 0);
         }
         if(Input.GetKeyDown(KeyCode.Home)){
             taggedGameObject.transform.localRotation *= Quaternion.Euler(0, 0, -45);
         }
         if(Input.GetKeyDown(KeyCode.PageUp)){
             taggedGameObject.transform.localRotation *= Quaternion.Euler(-45, 0, 0);
         }
         if(Input.GetKeyDown(KeyCode.Insert)){
             taggedGameObject.transform.localRotation *= Quaternion.Euler(45, 0, 0);
         }
 
         taggedGameObject.transform.position = Vector3.Lerp(taggedGameObject.transform.position, handPosition.position, (1 - Mathf.Exp( -20 * Time.smoothDeltaTime )) * 10);
 
     }
 
     
     private void Drop(){
 
         taggedGameObject.collider.isTrigger = false;
 
         taggedGameObject.rigidbody.useGravity = true;
         taggedGameObject.rigidbody.isKinematic = false;
 
         taggedGameObject = null;
 
         Debug.Log ("Drop");
 
         pickedUpScript = null;
 
     }
 
     private GameObject FindClosestPickup() {
 
         //Find closest gameobject with tag
         GameObject[] gos;
         gos = GameObject.FindGameObjectsWithTag("pickup");
         GameObject closest = null;
         float distance = Mathf.Infinity;
         Vector3 position = transform.position;
 
         foreach (GameObject go in gos) {
             Vector3 diff = go.transform.position - position;
             float curDistance = diff.sqrMagnitude;
             if (curDistance < distance) {
                 closest = go;
                 distance = curDistance;
             }
         }
 
         return closest;
     }
 
 }

The Picked Up Objects Script:

 public PickUpDrop pickUpScript;
     public GameObject thisOne;
     public Color thecolor;
     public bool inObject;
 
     // Use this for initialization
     void Start () {
         thisOne = this.gameObject;
     }
     
     // Update is called once per frame
     void Update () 
     {
         thecolor = thisOne.renderer.material.color;
 
     if (pickUpScript.taggedGameObject != thisOne)
         {
             gameObject.renderer.material.color = Color.gray;
         }
 
     if (pickUpScript.taggedGameObject == thisOne)
         {
             Color color = renderer.material.color;
             color.a = 0.5f;
             renderer.material.color = color;
         }
     }
 
     void OnTriggerEnter ()
     {
         if (thisOne == pickUpScript.taggedGameObject)
         {
             inObject = true;
             pickUpScript.bounds = true;
             gameObject.renderer.material.color = Color.red;
 
         }
     }
 
     void OnTriggerExit()
     {
         if(thisOne == pickUpScript.taggedGameObject)
         {
             inObject = false;
             pickUpScript.bounds = false;
             gameObject.renderer.material.color = Color.gray;        
         }
     }
 
 }