Sum of the parts

On 1 October 2014, one of the more quaintly old-fashioned provisions of private client legislation was brought into the 21st century, when the 1925 definition of personal chattels was updated. Gone are references to "stable furniture", "plated articles" and "carriages". Personal chattels are now defined as: "Tangible moveable property other than any such property which consists of money or securities for money, or was used at the death of the intestate solely or mainly for business purposes, or was held at the death of the intestate solely as an investment." Is this just an overdue update to archaic terminology, or should advisers be thinking more carefully about what this means for clients?

Discussions over personal chattels usually crop up when taking will instructions. Some advisers will also have been involved with chattels lease arrangements or perhaps negotiations with HMRC, in respect of items which are considered to be ‘heritage property’. But for most clients, personal chattels are the possessions which they have accumulated over the years; things with a bit of history and sentimental value, but not much more than that. Sometimes clients will agonise over who to leave these personal treasures to, often delaying the completion of a will. Here, a bequest to executors coupled with a letter of wishes, which can be updated any time before death, proves invaluable.

However, advisers do need to be alive to the issues which can arise over personal chattels. Assuming that they are just personal effects which don’t need much thought or planning could lead to disastrous consequences. Most advisers might think to ask about jewellery. However, generally the value of jewellery will be pretty low, calculated by reference to the weight of the precious metal and the size and quality of the stones. Similarly, antique furniture tends to have a disappointing value. Provenance is the real key where many such chattels are concerned. A diamond brooch proven to have belonged to the Duchess of Windsor will be worth more than the sum of its parts.

The same goes for works of art. I have a client who has a painting which some experts consider might be the work of a famous Dutch master, though others do not. Attempts to authenticate the painting are ongoing and could take some time. In the meantime, my client has included a specific provision in his will and a letter to his executors with detailed instructions as to how the painting should be dealt with after his death, who should be instructed to handle the sale, and between whom the sale proceeds should be divided. This is important as an unknowing executor could simply dispose of it with a batch of other paintings, at great potential loss to the estate. Advisers need to make sure they ask the right questions; specifically whether there is anything which an individual owns which might be of special interest.

Understanding what a client’s chattels comprise of is one thing, but the change to the definition has highlighted another concern for advisers; whether an item actually falls within the definition or not. Getting this wrong could have serious consequences. Practitioners have already raised concerns over whether and when something which might otherwise be considered a chattel is in fact treated ‘solely’ as an investment. If an item has some personal use (e.g. a valuable painting hanging on the wall at home) then it will be treated as a chattel. But what if it’s stored in a bank vault for security purposes?

The significance is that under the intestacy rules, personal chattels pass to the surviving spouse or civil partner, and the new definition will also apply to personal chattels clauses in wills made after 1 October (unless a contrary intention is expressed). Thus if the personal chattels are left to one beneficiary and the residue to another, you can see that there could be an argument over which beneficiary inherits the item in question. Inevitably the items over which such discrepancies arise will be valuable ones.

Difficulties over the interpretation of “personal chattels” are not new, but this change to the definition is an opportunity for advisers to remind themselves of the importance of taking clear instructions, and ensuring that they fully understand what chattels their clients own before advising on planning.

Fay Copeland is partner and head of private client at Wedlake Bell

She writes the regular comment on inheritance in Private Client Adviser

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