In the administration of an estate, the valuation of the deceased’s personal property is a growing challenge for executors. In probate terminology, chattels refer to ‘everyday’ assets such as furniture and common possessions, as opposed to real estate and investments. These latter assets are relatively easy to value as estate agents and other specialist valuers can be called upon, and in the case of listed investments, their market values at any moment in time are readily available.
An increase in wealth and estate values has drawn a growing number of estates into the inheritance tax (IHT) net, which presents a challenge. Where the value of the estate is significantly less than the IHT threshold (£325,000 for 2016/17), even a relatively optimistic valuation of the chattels is unlikely to result in an IHT liability. However, when IHT must be paid, a reasonable and justifiable open market value must be determined.
A second aspect of the rise in living standards is that it is now more common for individuals to possess valuable personal property than it was in the past. Many households may have an insured value for ‘contents’ that is significantly lower than the actual value of their domestic contents.
When valuing assets for probate purposes, the appropriate valuation is the ‘open market value’—the p price at which they could be sold to a willing buyer or willing seller. If specialised assets, such as works of art, stamps, books, and coin collections, are likely to be of significant value, they should be appraised by a professional appraiser. Automobiles can be appraised using a trade guide, and vessels can be appraised by a yacht broker.
Any items specifically mentioned in the will should be valued separately, and as a general rule, items worth more than £500 should be evaluated separately. In some instances, the value of extensively traded items (such as musical instruments) can be determined by referencing the prices at Internet auctions.
When there are a number of chattels, some of which may be valuable and some of which are not, and it is difficult for the executors to determine the relative value of each, this is a growing issue. When the executor is likely to have the home’s contents removed, it is possible for valuable items to be sold for pennies on the dollar or even discarded.
When distributing personal property (e.g., when there are three children, each entitled to a third of the personal property), it is also essential to know the values, as the distributions must be equal unless the beneficiaries agree otherwise. Due to the fact that many assets are in the form of sets (such as China and furniture), horse-trading may be necessary, and knowing the values of the various chattels will be useful.
