How many of us know the value of our household goods and personal effects? How many of us simply estimate the contents value for our insurance and have no idea how much our home contents are worth? Do we ever get a formal valuation carried out? For most of us I suspect the answer would be no, we don’t have formal valuations and even if we did, there can be a disparity between insured value and realisable value.
In meetings with Executors I often comment on the fact that our household items are worth more to us during our lifetime than on our death, as that latest smart TV or brand new leather sofa will likely have negligible value on our death. However, is there going to be a changing approach to the valuation of our household goods and personal effects? In the past we might have only attributed value to the antique mahogany chest, Glasgow Boys’ art work, diamond jewellery or Rolex watches. Will we need to take a different view in the future?
When dealing with the administration of estates, generally the only time a formal Inventory and valuation is obtained is when a valuation is required for Inheritance Tax purposes or due to family circumstances, such as a potential Legal Rights Claim. Fortunately it is rare to have to address the issue of family squabbles over the deceased’s effects, which can lead to Inventories having to be made and valuations obtained. For solicitors to become involved in such aspects in my mind is always a last resort. It is always hoped that families will resolve such matters amongst themselves, bearing in mind the wishes of the deceased, and indeed any provisions they may have made in their Will, or instructions they had left with the family.
Whilst HMRC has in the past been in the habit of doing spot checks on items valued at less than £500 in Inheritance Tax accounts, their connect software, introduced in 2010, now allows HMRC to delve deep into the individual lives of tax payers, allowing HMRC to cross reference bank accounts, company ownership and property transactions. In particular it is being used to analyse the 300,000 people a year who claim that their inheritance falls into the Nil Rate Band and that HMRC has been adding to its existing data gathering powers by forcing apps and platforms such as PayPal, Apple and Amazon to make available data on business activities.
Up to date valuations can sometimes be required for insurance purposes. I wonder if we as solicitors will need to reconsider our approach regarding the valuation of a deceased’s household goods and personal effects in the future. Will this lead to more formal Inventories and valuations being instructed, even where the estate is not anticipated to be taxable, rather than using the Executors ‘reasonable’ estimate? How will the ‘reasonable estimate’ fly in the future if a modern times approach is employed and software is used to gather and indeed analyse information on the deceased’s known financial history? How do we value the deceased’s online purchases? If HMRC know from their connect software that the deceased was a regular online shopper through platforms such as PayPal and Amazon, what value do we place on collectables for instance? Of course, often the price paid may not reflect the resale value, and one person’s precious porcelain figurine collection may be something others would regard as of low value. Will your online spending on those irresistible bargains on Ebay and Amazon be translated to items of value, as personal effects? Something Executors and their professional advisors may have to be mindful of in the future?
Lynne Hopkins is an Associate in our Private Client Department. If you would like more information about how to value personal effects for the purposes of a Will or Executry, please contact Lynne on 01592 268608, by email firstname.lastname@example.org or alternatively contact a member of the Private Client team.