Probate is the legal process where you manage a deceased person’s possessions and allocate their money, assets and belongings once they have passed away – this is known as their ‘Estate’.
From the outset of probate it will be essential to calculate the total value of the Estate to find out if inheritance Tax is required to be paid.
More often than not, one of the largest assets that a person will own is their home and all their belongings inside. So, how do you work out how much everything is worth in readiness for probate?
One of the most crucial parts of the Probate process is valuing the deceased’s home and possessions. Throughout the administration of the Estate, you will need to keep a log of how much money is being transferred into and going out of the Estate in order that you can pay in total remaining debts owed and work out how much inheritance remains to give to the beneficiaries who are entitled to it.
When making these calculations it makes it clearer in terms of inheritance tax (IHT) and whether the Estate is liable for it or not. If the estate is accountable for tax, you will be able to calculate how much. You will then need to pass all the information to HM Revenue & Customs.
Valuing a house and its contents can be a difficult task but there are processes in which you can follow to make it easier. Following processes will help you in the long run as it lessens the risk of a dispute with HM Revenue & Customs.
It is important to remember when calculating the value of a property or land that there are various factors impacting the price of it. These factors include development land opportunities, remedial maintenance needed to the property and sales of properties alike in the surrounding area.
If the Estate is liable for IHT, it would be prudent to seek a valuation from a Chartered Surveyor as they are skilled and experienced in providing valuations specifically for IHT so are much more likely to be approved and acknowledged by the HMRC.
To ensure the accuracy of a property valuation, the District Valuer Service (DVS) of HMRC would need to check and examine the valuation presented to them. If the DVS think the valuation is wrong, they will contest it and ask for additional evidence to back up the valuation given. If Executor(s) of an Estate negligently obtain a property valuation they could be at risk of being fined. Equally, if Executor(s) found the valuation sent to HMRC was too low, they will have to contact the HMRC in writing to advise them of the correct value.
If the deceased person’s property was jointly owned with someone else, known as ‘Joint Tenants’, then the property value will need to be split down the middle to find out what the deceased owned. However, if the property was owned jointly with someone else as what is known as ‘tenants in common’, then the value will need to be worked out along the lines of what proportion of the property the deceased owned e.g. 60/40 split between owners.
The first stage when valuing the contents of a house is to make a list of items which you think might be worth something e.g. cars, jewellery and furniture. Next, do some research on the internet to find out how much the items are worth or sold for, taking into consideration their age and condition. For specialist antique items it is advisable to seek a professional valuation who have the expertise and specialise in valuing these items.
IHT will only need to be paid if the value of the Estate surpasses the nil-rate band. At the moment, the nil-rate band is £325,000. If the Estate is worth less than £250,000, HMRC will probably be happy with an estimated value. However, if the estate is worth more than £325,000, it will be obligatory to pay IHT, although there are some exceptions whereby you could end up paying less IHT by increasing the threshold due to certain factors.
It is crucial to understand that when valuing the Estate for IHT that you calculate the ‘gross’ value of the taxable Estate. The taxable estate includes all assets which are owned by the deceased, plus any gifts too in the 7 years before they passed away.
Apart from the deceased’s home and contents, other assets will need to be looked into such as bank accounts, pensions, investments, shares and life insurance.
Cornerstone Wills are here to help with getting property valued for probate. Speak to our experts today, call us on 01276 415835/6/7.