Property Valuation For Probate Purposes

Anyone can value the property for probate purposes but you should be careful because there are dire consequences if the valuation isn’t properly done. You may contact an estate agent for an estimate or ask around to get the value of properties in the same category before arriving at a number.

Working with estimates can be dangerous as over valuation may result increase the amount you will have to pay as inheritance tax while an undervaluation may result in you getting sanctioned by the HMRC.

HMRC “strongly recommends” that the services of a professional valuer be employed solely for this purpose. You may use an estate agent or a member of RICS to be certain that the figure arrived at is accurate.

How is the valuation of a property for probate purposes calculated?

Basically, the valuation of a property for probate purposes is calculated by using the open market value and comparing it with reasonable local sales evidence on the date of the transfer which is usually the date the deceased died. If the property was given as a gift by the deceased to a beneficiary seven years before the deceased died, the date the property was gifted will be regarded as the date of transfer.

You should also make proper notification to the mortgage lender and take into consideration the debt or unpaid mortgage on the property. You should also consider if there is life insurance policy that covers the remaining unpaid mortgage and whether the property is jointly owned or not. All these are necessary to get the actual value of the property.

Why is it important to get the actual property valuation for property purpose?

It is important for the valuation to be as accurate as it possibly can be and if you will be using an estate agent make sure to request that they do their best to make it as accurate as it can be because if the valuation you present is challenged by Inland Revenue, it may result in the Inland Revenue instructing the district valuer to redo the valuation. Understandably, most people dread this as it can likely mean a higher valuation. This may lead to you having to pay a penalty in addition to the tax.

What is the implication of a low property valuation for probate purposes?

A low valuation, which is mostly desired by beneficiaries means low or no inheritance tax will be due on the property.

However, be warned as the HMRC are out to get any beneficiary seeking low valuation for this purpose. Such beneficiaries will face fines of up to 100% of the extra tax liability, plus the cost of the extra tax.

What is the implication of a high property valuation for probate purposes?

A high property valuation generally means the property is worth more in the property market but a higher property valuation for probate purposes implies that the beneficiaries will most likely pay a higher inheritance tax.

No inheritance tax is payable on properties that are valued at 325,000 pounds or less. However, if your property is valued at over £325,000, you will be required to pay 40% of the additional amount as inheritance tax.

Do I need to get a valuation for my gift?

If the deceased gives out a gift and dies within seven years of giving out the gift, the gift will be treated as part of the estate of the deceased and would also be subject to tax.

What is Inheritance Tax and how is it calculated?

If the estate left behind by the deceased is worth more than 325,000 pounds at the date of transfer-the date deceased died, the beneficiaries will be required to pay an inheritance tax over any amount over the given 325,000pounds. This tax will not be imposed the estate is less than 325,000 pounds.

The estate taxed is inclusive of the deceased of landed property and other assets such as savings, personal effects. The part of the asset taxable is the value of all that is remaining after debts and funeral expenses has been taken care of.

What is the rate payable as inheritance tax?

Inheritance tax is 40% of whatever amount that is over 325,000 pounds.

Are there exceptions to the payment of inheritance tax?

Yes, there are. If the estate is inherited by the spouse or civic partner of the deceased, no inheritance tax is expected to be paid. Any amount after the 325,000 pounds Is referred to as the nil-rate band and the figure is attached to the estate of the deceased instead of adding it to that of the beneficiaries.

This nil rate band can be passed to a surviving civic partner or spouse to add to theirs, making it possible for such person to die and leave an estate worth 650,000 pounds that is free from inheritance tax.

Also, the percentage to be paid may be reduced to 36% if the deceased gave at least one tenth of his property to charity.

Who should pay the inheritance tax?

The inheritance tax is paid by the estate of the deceased however if the tax is due on a gift, it will be paid by beneficiaries of the gift but if they are unable to pay, money can be taken out of the deceased’s estate.

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Published on 1st June 2017

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