What do personal chattels mean to your client?

The Inheritance and Trustees' Powers Bill, presented in the Law Commission's report Intestacy and Family Provision Claims on Death proposes changes to two areas within trust and succession law.

As part of an exercise to simplify and to modernise, the drafters have set about disentangling a particularly iconic definition, refining and redefining the legal concept of the personal chattel in intestate estates and a term commonly invoked by wills.

Personal chattels, defined by the Administration of Estates Act 1925, refers to tangible personal effects that s55(1)(x) suggests could include "carriages, horses" and "scientific instruments and apparatus" among others. It is acknowledged that some of those itemised chattels are outmoded and the definition itself unnecessarily esoteric.

Carriages, horses and scientific instruments could be swept away by the more concise definition at s3(1) of the bill: "Personal chattels means tangible movable property, other than any such property which consists of money or securities or 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."

Personal chattels become tangible movable property with three defined exceptions. The first is found in the current definition, the second is the same apart from the inclusion of "solely or mainly". But of the three exceptions, the third is the most controversial.

Law Commissioner Professor Cooke described its intention as "a narrow exception for property which had no personal use at the date of the deceased's death". She suggested that "any personal use will be sufficient to ensure that they pass to the surviving spouse" and including the words "solely or mainly", as suggested by the Association of Corporate Trustees, would constitute "an invitation to litigate".

However, the committee and other professional bodies have raised concerns about deciphering the application of "solely as an investment". Lord Henley suggested that something outside the home, such as a wine cellar held in a storage facility, may appear to be held "solely as an investment" but, if an occasional bottle were taken for personal use, would this bring every bottle within the definition?

Lord Ahmad considered inherited jewellery submitting that a widow could not be holding her late husband's watch "solely as an investment", but what of a possession originally belonging to a distant relative with whom the deceased had little connection? The Society of Trust and Estate Practitioners in its response to the bill queried at what point a piece of art or a collection of stamps would no longer be perceived as being held for personal enjoyment but solely for investment purposes.

Litigation inevitable

Professor Cooke conceded that "there will be doubt and that occasionally litigation will arise, whatever definition is chosen to pick out investment property". She felt the risk of widespread litigation was low, however, given "there will be… few cases where an estate includes chattels of significant value held solely as an investment, and these estates are among those least likely to be intestate".

This is logical but, given that many wills expressly incorporate the statutory definition, the above questions may not prove to be so academic in practice. This is compounded by s3(2) which confirms that unless there is evidence of contrary intention, the definition of "personal chattels" used in wills and codicils executed prior to commencement will be taken to refer to s55(1)x regardless of the death date.

Presumably, therefore, the new definition will apply to all wills without any definition of "personal chattels" as well as those wills executed with the old definition after the commencement date.

Will drafters must consider whether incorporating this new definition benefits their clients. The committee intended it to be broad, to leave as much as possible to the surviving spouse of an intestate. Most testators will want a broad definition for their personal chattels legacy, but some might not, particularly if they also intend to bequeath investment-type assets elsewhere. Could carriages and scientific instruments be a safer bet after all?

Matthew Howson (pictured) and Katie Doyle are associates in the private client and tax team at Penningtons Manches

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