You need an estimate of an Estate’s value to find out if there’s Inheritance Tax to pay. While an Estate includes many kinds of asset – savings, shares, artworks, jewellery, etc – one of the key items is likely to be the deceased’s home.
House Valuations for Probate
How to define ‘house value’ for probate
To satisfy HMRC, house valuations for Probate have to reflect a ‘realistic selling price’ on the open market at the time the owner died. The valuation must be able to withstand scrutiny should its accuracy be called into question – whether by an Executor, a beneficiary or the Tax Office itself. While the Inheritance Tax threshold is currently £325,000 in the UK, it’s important to remember that the total reflects every part of the Estate – not just the property – and with pension and life insurance pay-outs included, the total can reach that threshold quickly.
What is the ‘Fair Market Value’ of an inherited property?
It’s tempting to rely on an estate agent’s view regarding the value of a house. However, you must bear in mind that when an agent is preparing a valuation, they are hoping to be instructed on the sale of the property and will almost always present an optimistic view of its worth. While most Executors will usually be expected to get the very best price for the beneficiaries, over-valuing the property could result in a higher tax bill.
Executor Solutions provides valuations are HMRC compliant. The fair and realistic value they present is the result of:
- extensive research
- taking into consideration the condition of the home, the local area and amenities
- looking at similar properties recently sold, currently on the market, and the records available from the Land Registry Office
- the opinions of up to three local estate agents
Our Property Valuation Appraisals prove to be, on average, 100.2% accurate when compared to the final selling price.
There is normally no Inheritance Tax (IHT) due if the total value on Estate is less than the threshold value of £325,000 or if everything is left to a spouse/civil partner or a charity. If the home is being inherited by your children or grandchildren, the residential nil rate band can also be claimed. The residential nil rate band is currently £150,000; this can be used against the property value in addition to the basic IHT threshold. Regardless of the circumstances, the value will still need to be reported to HMRC.
What Tax is paid on an inherited property?
Currently, Inheritance Tax is 40% and is only payable on the value of an Estate above the basic IHT threshold and the residential nil rate band; totalling £475,000. That means that if the total value is £600,000, tax is due on just £125,000 (£600k minus the tax-free threshold of £475k); that’s a tax bill of £50,000.
How long does probate valuation of property take?
Once we’ve been asked to produce a probate valuation, we instruct three local estate agents to visit the property to give their opinions on the value. We have established relationships with local agents across the UK and we can arrange the appointments at times that are convenient for you. The research we undertake from our office starts immediately, which usually means our complete Property Valuation Appraisal is ready within a day of the last agent visit.
What’s the cost of house valuation for probate?
We charge £249 plus vat (£299 including vat) for our probate valuation of property.
Professional Probate Estate Valuation
Executor Solutions valuations are produced by senior team members who have many years of experience within the property market.
Should you subsequently choose us to sell the house, our in-house sales negotiators and progressors will handle everything for you:
- marketing the property
- arranging viewings
- monitoring the chain of sales and taking care of every detail right up to completion
We may make recommendations on work that, upon completion, may increase the value of property and our Extra Solutions team is on-hand to organise that for you.
We can also take care of the home while it stands empty, arranging insurance, security and maintenance. Other services include house clearance, surveys and safety checks. All done for you by a dedicated team that want to make a stressful situation a little bit easier.
What is considered ‘personal property’?
Houses are considered to be assets rather than personal property or ‘chattels’. While the simplest description is the house contents – furniture, paintings, photographs, jewellery, collectibles etc – it can also include vehicles, garden effects and even pets. In many cases, the value in the deceased’s personal effects is largely sentimental and not monetary. However, it is worth seeking advice to ensure the correct items are included in the Estate.
Jointly owned assets
If a property is jointly owned, each person owns the whole of the property with the other. This means that if one co-owner dies, the surviving co-owner automatically inherits the deceased’s portion with no Inheritance Tax to pay. The same goes for joint bank accounts.
Probate Value vs. Market Value
What if the sale price is lower than the Probate value?
If a property sells for less than the value that was submitted in the Estate Accounts and Inheritance Tax was paid, you can apply for a rebate providing that the final selling price was agreed within four years of the date of death. You need to do this yourself – HMRC won’t volunteer the information! An accurate, well-prepared valuation should negate this situation from arising and promoting the property effectively will avoid it losing value by being on the market for too long.
What if the sale price is higher than the Probate value?
If the property ultimately sells for more than the value submitted as part of the Estate then, providing the Probate Valuation can be proved to be a fair and realistic market value at the time of death, then there will be no issues with HMRC. It’s not unusual for the value of a Probate property to increase between the time that the owner dies and the completion of the sale.
There may have been work done on the home to modernise, refurbish or improve it’s saleability; if it’s on the market for a long time, house prices may go up naturally; if you’re lucky enough to have more than one interested party bidding, the agreed selling price could be higher than expected. But the Probate Property Valuation must be accurate. Being found to under-value a property to avoid or reduce Inheritance Tax could be seen as fraud.
Calculating the value of contents
Sorting through the things that a family member chose to keep can be mystifying, heart-breaking and uplifting but, above all, it’s time-consuming. It can be emotionally difficult in many cases and, if the family members are unable to get involved, it will be easier to hand the job over to someone else.
At Executor Solutions, we can arrange for specialists to sort through a house, including the garage and shed, identifying what will have monetary or sentimental value, what has legal significance (paperwork), what could be donated and what is best disposed of. They’ll find any items listed in the Will so that they can get to the right beneficiary. All items can be valued before it is sold or passed on to ensure nothing is missed from the Estate Accounts.
Probate Valuation of Property
After everything has been valued and/or sold, it can be added to the Estate Accounts. When any debts, loans or expenses have been paid off, the remaining sum is used to calculate Inheritance Tax. Once that is paid, beneficiaries can then take ownership of the Estate, whether as cash proceeds from the sale of property or the property itself.
Acting as an Executor and dealing with Probate property is challenging, even in very straightforward cases where there is a valid Will, only one or two beneficiaries and simple finances to understand. It can be done by anyone and there is plenty of advice online. Most of the paperwork can be submitted electronically.
However, selling a house is a time-consuming activity at the best of times; many of our clients are professionals within the probate industry who use us to deal with property so that they can focus on the intricacies of the legal and tax elements. Whether you are a professional or a lay Executor, we are here to offer as much or as little as you need from a simple valuation to a full marketing and property management service.