Probate practice (1)

Chattels and their dispersal are the assets that cause the most headaches for the executors of an estate. The same efforts deployed to find out about a client's property and investments should be made to find out about their chattels. This will include discussing the types of valuation and distribution issues that arise, and considering the taxation implications for practitioners. If we, as solicitors, devote enough time to this issue we can ensure that a testator's family and beneficiaries will be satisfied that the executors have carried out the interests of the testator, while at the same time having not left anything to chance or to the vagaries of statute. What then are the steps we should be taking to achieve this end?

Starting point

The starting point for a discussion of a client's chattels usually arises at the meeting to discuss the client's will. This is our opportunity to get to know the client, their family details and their estate. Unless there is something out of the ordinary '“ for example, a large family or a large property '“ we would usually limit the discussion of chattels to how they wish to dispose of the contents of their family home. However, this is not really satisfactory, if the intention is to achieve the goal of constructing a testamentary document that leaves nothing to chance. How many times have solicitors gone to a deceased's house after a death and found unexpected surprises? A few golden rules should be applied at the outset to make sure that all chattels are accounted for and that your client understands the implications.

Checklist: ensuring all chattels are accounted for:

• What does the client understand about the contents of their home?
• Are you able to visit the home if there is a question mark over this?
• Do any items have intrinsic monetary or family value?
• Does the client want the family to keep items in the family for future generations?
• Does the client intend to make any gifts of items before they die?
• How much detail should go into the will?
• Is your client a collector or is there something of historic value that needs further investigation and for which a conditional exemption undertaking may already be in place?

Once you have established these facts, you can then proceed to a detailed discussion about how to frame the chattels clauses in the will. You will then need to discuss with the client whether they want to devise a scheme for division of the chattels and set this out in the will. Alternatively, do they want to leave the distribution of chattels to their family or executors in the knowledge that they know their intentions and will carry these out?

Definition

There is no doubt that the most common method of disposal of chattels is by gift of personal chattels as defined by the Administration of Estates Act 1925. This is defined as follows:

Personal chattels means:

Carriages, horses, stable furniture and effects (not used for business purposes), motor cars and accessories (not used for business purposes), garden effects, domestic animals, plated articles, linen, china, glass, books, pictures, prints, furniture, jewellery, articles of household or personal use or ornament, musical and scientific instruments and apparatus, wines, liquors and consumable stores but does not include any chattels at the death of the intestate for business purposes nor money or securities for money.

This remains the definition of personal chattels and applies to all contents of the home owned by the deceased with the exception of chattels used in business or cash or securities for money. For most purposes, this is more than adequate. Please note though this also includes the gift of domestic animals whereas the client may have preferred these to be left to a trusted friend. You should consider whether the statutory definition is wide enough to include all the items you wish to include. Does it for example include any aeroplane or boat owned by the client? You should consider whether this 1925 definition is now adequate. Would it not be sensible to expand the definition to include for example, video or audio reproductive and other electrical equipment?

Will clauses

In a straightforward case, the usual bequest would be of an absolute gift to an individual worded in terms such as:

'I give to A absolutely if he survives me all my personal chattels as defined in the Administration of Estates Act 1925 other than any that I may have given away by any other bequest and I request him to distribute them in accordance with any note found with this Will or amongst my papers at my death.'

However, if the testator feels that a dispute may ensue or if there are several beneficiaries who need to be considered, then the following provision may be more appropriate:

'I give to my Trustees all my personal chattels as defined in the Administration of Estates Act 1925 other than any that I may have given away by any other bequest upon trust to distribute them among my children as equally as possible by value (having regard to but not being bound by their wishes) in such manner as they consider appropriate and for that purpose they may sell any of my chattels and distribute the proceeds.'

If there are a number of children in the family, then one of the formulas adopted is a framework whereby the beneficiaries take it in turns to choose items. This may be appropriate in cases where the executors are not familiar with the family and therefore it is preferable for the children themselves (if over 18 years) to make the choice themselves. The oldest child usually chooses first and then each other takes it in turns to choose
one item, until all items to be distributed are chosen.

Letter of wishes

It is much more convenient to provide for a distribution in accordance with a note of wishes that is separate from the will. Practitioners will be all too well aware that clients who insist on listing all their chattels in the body of the will are causing additional expense to themselves. Every time the gift of chattels is changed, a codicil will be required to put this into effect. A note of wishes has the advantage that the client can simply change the note at any time. It is therefore important that any such note is signed and dated by the client, that descriptions of property are as accurate as possible and that a copy or the original note is placed with the client's will.

A note of wishes will certainly assist the executors in dealing with the distribution of chattels. However, it should be explained to the client that such a note is not legally binding on the executors and are they certain that the executors will carry out those wishes. It would be useful for the testator to have explained their wishes to the executors so that they have a clear understanding as to what is involved before the testator dies and they take up their appointment.

Trusts

A client may want you to include a provision in the will whereby the spouse has a life interest in the chattels. This usually arises where there are children from a first marriage whose ultimate interest the client wants to protect. There are of course dangers in this. The surviving spouse will be the effective custodian of these items and the will should provide for an inventory to be taken at the outset. The inventory should also state the condition of the items so that a full account of this can be taken on the survivor's death. Consideration must be given to the question of insurance. Discuss with the client whether the executors must retain responsibility for this or whether he or she is content for the spouse to arrange this and pay the premium. Trustees should call for sight of the insurance schedule on an annual basis.

Specialist items

Finally, you should make enquiries of the client to ascertain whether there are any particular items that require specialist attention. Is the client a collector and if so what do they want to do with the collection? Is the client an artist or a sculptor and if so do you know whether the particular bequests will involve any wasting assets that require immediate attention to prevent any deterioration in their condition? Has the client any heritage items that may attract conditional exemption for inheritance tax? Has the client any items that are on loan to another individual perhaps to a museum, and therefore their identity, conditions of that loan and the valuation/insurance details must all be considered. Does the client have a safe in the house and if so who will have access to this on their death? What about that personalised number plate on the car, would you simply sell it with the car or find a specialist market for this? Would you know that such plates can sell for up to £15,000 and that the DVLA holds auctions of these? Unless you make the right enquiries you may well miss important details and leave beneficiaries disappointed and executors with an unexpected tax liability.

• The next article will discuss the issues of valuation and distribution of chattels and how to avoid common pitfalls.