Do you know what you own? Just as important, are others who need to know also in the picture – and up to date?
Our art and cultural property group is often confronted with a wide variety of problems that have arisen because not everyone who needed to know was clear about the ownership of a particular item. These can range from tax mistakes or disappointed expectations, to family disputes, to valuation and commercial questions. With goodwill on all sides problems can sometimes be settled amicably, but sometimes they can end up with litigation – particularly distressing where the parties in disagreement are members of the same family.
Personal possessions are often legitimately in the possession of someone who does not own them. Often a member of the older generation may 'house' a large item, such a vintage car or a big piece of furniture, that the younger generation cannot yet fit in. Likewise, if a large house and its chattels are held in trust, the member of the family living in the house will use those chattels pretty much as his or her own. It is easy for the occupant to get muddled and sell a disliked picture on the wall, or a car taking up space in the garage. When the true owner, be it trustees or another family member, comes later to claim what is theirs it may no longer be there. Equally, depending on the ownership, an item may or may not be taxable on the death of the occupant – it is important to know which!
Certain outstanding chattels may in the past have benefitted from 'conditional exemption' from inheritance tax. If an item is sold by mistake, not only has the item gone but the sale may have triggered a tax charge at up to 80%.
Professional trustees in particular will worry not only about the greater responsibility that their professional status places on them, but also that they lack the knowledge of family chattels that family members may have.
Suppose a Will leaves 'my grandfather's watercolours' to a particular beneficiary. Will the Executors and the family be able to agree on which of the watercolours in the house this means? The pictures may have financial value; they may have a greater sentimental value. Fertile ground for a dispute.
What can be done?
In most situations the twin answers are 'clarity and communication'. Good record-keeping and identification are vital, and may be a sufficient solution. Adding labels on the back or base may help where possible, though this should only be undertaken with professional advice if there is any risk of damage. If items cannot be labelled, then trustees may want a regular review and clarification in person with the beneficiary of the trust. Where high values or a specific difficulty is present (a dysfunctional relationship for example), trustees may want to consider registering with the Art Loss Register in the way James Ratcliffe outlines in the next article.
Our art and cultural property group integrates expertise from across the firm – trust, private client, tax, litigation, real estate, commercial and intellectual property. The group advises private individuals (be they collectors, philanthropists, artists, authors or other creative individuals as well as their Executors and Trustees); charities and not for profits; museums, galleries, and national art institutions; partnerships, corporate entities and online businesses operating in the arts, music industry and entertainment sectors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
