Thu 17 May 2018

Collectables, family heirlooms and dinner parties

At a recent dinner party, I was asked an age-old question.  What personal belonging or belongings would I save in a house fire?  The answer, I think, would be family photographs.  A cliché perhaps, but true nonetheless!

There were various answers around the table that night and they all had a similar sentimental theme.  Photographs were a popular choice, as were old family letters.  Jane mentioned her grandmother’s stamp collection and Tom said it would be the artwork which he had inherited from his late father.  I was also surprised to learn that for my friend, Lizzie, it would be a number of rare comic books. 

Like many solicitors, my friends love to ask me legal or planning type questions and that evening was no exception.  

Over the years, I have met many clients who are keen to protect or to pass on family heirlooms and treasured possessions.  Many are concerned about what might happen to these special items once they are no longer here.  The comics so treasured by my friend might not be so gratefully received by her children.  For Lizzie, one option might be to gift them during her lifetime to individuals or to organisations who would fully appreciate them.  She mentioned that she has no idea of the value of the items and she cannot therefore be sure what the implications of gifting them would be.  Depending on the value, Inheritance Tax and Capital Gains tax might be relevant, so she needs to be careful.  If she does decide to gift them in the future, then she needs to clearly document any lifetime gifts made.  This can avoid any confusion at the time of death, as well as any arguments over ownership or identification.

Jane said that her grandmother’s stamp collection had become so ingrained in her family life that her young children were already involved and loved adding to the countless albums.  Her fear is that she might have the opposite problem to Lizzie, as it is likely that all of her children would be keen to inherit.  She’s not sure how easy it would be to divide the collection and this worries her.  Given the emotional attachment, taking the time to discuss with her professional adviser, the extent of her collection and what she wants to achieve with it would be time well spent.  It may not be enough just to hope that her children will reach an amicable agreement, particularly when she is no longer there to keep the peace! 

The terms of any Will are important, and in particular, the choice of Executors.  A detailed Letter of Wishes is also a good starting point.  It might be prudent to appoint independent professional Executors who have detailed knowledge of the collection in question, and a full understanding of what the owner wants to achieve.  A good choice may be to appoint the experts or professional valuers who have been consulted by the owner during his or her lifetime.

Similar considerations would apply to the artwork.  Although Tom's collection is currently relatively modest, he hopes to grow this over a number of years.  In the case of more high value heirlooms, there may be the possibility for works of art or other “heritage assets” to be used to settle or defer an Inheritance Tax bill indefinitely.  Such objects can also be exempt from Capital Gains Tax when they pass to a new owner, provided certain qualifying conditions are met.  If Tom does decide to grow the collection during his lifetime then he should definitely consider exploring whether it would be possible for his estate to apply for these particular exemptions.

So, as the evening progressed and I was asked for my “legal opinion” on how best to protect these sentimental assets, my advice was simple: have the conversation, take the advice and make a plan.  Don’t leave things to chance!

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