For most ordinary folk (me included) the cash value of their personal belongings (‘chattels’) is modest and will form but a tiny part of the overall value of an estate on death.
But the sentimental value of specific items to individual family members, and the legal fees they might be prepared to spend haggling over who gets what, can be massive and wholly disproportionate. I’ve seen the child of a deceased parent prepared to spend vast sums of money trying to secure a tatty piece of furniture that you’d otherwise have to pay a house clearer to take away, on the basis that it was given to them during their lifetime or “promised” to them.
Where sibling relationships are fragile or strained, who gets which items from a parent’s estate can be the issue around which long held resentments are played out. When siblings fight, point scoring, ‘getting one over on’, making sure ‘he/she doesn’t get it’, proving a position at the top of the pecking order for parental affection and establishing a ‘matter of principle’ are often far more important than securing any monetary value. Siblings have often proved willing to see an entire estate lost in legal fees to achieve ‘justice’.
When considering your will, it’s therefore wise to pause and think carefully about personal chattels:
- Do I want to leave any specific items to named individuals in my will? Or
- Do I trust my executors to make a sensible distribution, perhaps in accordance, so far as possible, with a note of my wishes kept with my will?
- Am I happy for my personal possessions to fall into residue, to be sold or given to a charity shop as the case may be, and for my executors to let members of my family have the odd item or two if anybody particularly wants a keepsake?
Many wills contain specific gifts of particular items; often the gift by a mother of her jewellery to a daughter. Where there’s more than one daughter, the division of jewellery obviously needs more careful thought.
More common are clauses directing the executors to distribute personal belongings at their discretion. The expectation (without obligation) is expressed that they’ll divide them in accordance with any memorandum of wishes left with the will or otherwise in accordance with wishes made known to them.
The best advice is to make a list of items where possible. The list can be updated from time to time as your wishes change or as you acquire new items and dispose of others, without the need to change your will. And you’ll be doing your executors a favour if you leave a list for them to follow rather than simply leaving distribution to their discretion. They’re unlikely to be exposed to complaint if they simply follow a list .Otherwise, the executors run the risk of disappointing a family member who claims they were ‘promised’ a particular item and who argues that the executors are not exercising their discretion in ‘good faith’ in giving it to another or simply letting it drop into residue.
And where valuable items are listed, the executors have a point of reference if (as has been known!) listed items seem to have miraculously ‘disappeared’ (those empty spaces on the wall where pictures obviously used to hang); the executors can properly enquire of the family what’s happened to them. Were they sold? Were they gifted, and if so, within seven years of death so that Inheritance Tax (IHT) may be payable? As the movement/transfer of chattels is by simple ‘delivery’ with no paper trail, establishing what’s gone where and how can be tricky.
If the executors distribute within two years of death to individuals in accordance with wishes contained in a side letter/list, the deceased is treated, for IHT purposes, as having left the items directly to those persons. So, for example, if the executors hand an item to a widow or widower, the IHT ‘spouse exemption’ will apply and the value of that item will fall out of charge to IHT.
On death, chattels form part of the taxable estate and their value needs to be returned for IHT. HMRC have long since tired, and take a dim view, of IHT returns merely containing a nominal figure for ‘chattels and household goods’ without further explanation. This is particularly so where the estate is substantial and the deceased’s house was large. Substantial and valuable houses tend to contain more than two old sofas and a portable TV with nominal value.
In order to be likely accepted by HMRC without further enquiry, a chattels valuation need not, in all cases, be detailed or professional - but there needs to be evidence that the issue was carefully considered. A letter confirming that the contents have been sold to a house clearer with reasoned estimated values (even based simply on internet research or the going rate on eBay) of a number of specific items may suffice.
Chattels matter; not only to you, but to your family and, ultimately, to HMRC. Give big thought to small items.