In this guest blog post, Elaine Roche from JMW Solicitors, Manchester, outlines some of the pitfalls people succumb to when applying for a grant of probate. In particular Elaine outlines some of the items you might not be aware needed to be declared, and some chattels that are completely free from Inheritance Tax.
If you would like to speak to Elaine directly about any matters of probate you can contact her directly via email: [email protected]
What chattels do you need to declare for probate?
People are often surprised when dealing with the administration of the estate of a loved one when the solicitor starts to ask about personal possessions, or chattels, to give them their legal name.
When someone dies and before the grant of probate is applied for, the first role of the executors is to find out exactly what the deceased owned when they died so they can complete the Inheritance Tax (IHT) forms that let HMRC know to ensure that the correct amount of IHT is paid.
What to declare and what values to use
The value of an estate, includes the value of all the personal possessions that a deceased person owned, so the executors have a duty to ensure that they know the value of all the household contents, as well as any vehicles.
So what value should be used? HMRC guidance explains that it should be an open market value of the item on the date of death. This could be very different from the amount paid for an item, or even the insurance value, especially if the insurance is on a new for old basis.
For example, a very common item seen in estates is Waterford Crystal. Often bought as a wedding present, a single, brand new glass costs around £100. However, you can pick up 4 second hand glasses for the price of 1 new one.
Another issue to be aware of is whether an item can legally be sold. If an item cannot be sold then it will not have an open market value. Sofas and chairs cannot be offered for sale unless they have the correct fire safety mark. Items made from Ivory can only be sold if they were made before 1947 and if they meet certain criteria. The law with regards to ivory will soon be changing too, with a total ban expected to come into place in 2020.
But there are also items that people tend to overlook, as they think they are of little or no value. I’ve dealt with several estates where the deceased picked things up at car boot sales for a couple of pounds that have turned out to be worth a couple of hundred pounds. And then there are things that increase in value with age, such as whisky or wine. It was recently reported in The Times that someone inherited 11 bottles of rum and sold 10 of them for £12,000!
Given that it is difficult to know what items might have gone up or down in value, and executors can be personally liable if they don’t correctly declare the value of an estate, we always advise getting a professional opinion – even if it is just to say that there is no value. If there are any specialist items it’s really important to get a specialist to value the items, and if they are to be sold, for items to be placed in a specialist auction so they achieve their true value.
There are also various exemptions available for personal possessions depending on the person who is inheriting or what the items actually is – for example military medals and awards pass completely free of Inheritance Tax, so it’s also important to get professional advice in preparing the forms for HMRC so that you don’t pay too much tax.
How to get expert help
At Mark Littler LTD we provide specialist house contents valuations for Inhertitance Tax purposes. You can learn more about our services and those of JMW using the links below.