For free initial advice and guidance call our Probate Advisors on 03306069584 or contact us online and we will help you.
Probate is the legal process of winding up a deceased person's affairs and distributing their money, assets and possessions after they die (known collectively as their Estate). Early on in the Probate process it will be necessary to calculate the total value of the Estate to establish whether Inheritance Tax will need to be paid.
Often, one of the biggest assets that a person will own is their home together with everything in it. So how do you calculate the value of a property and all of its contents for Probate?
Valuing a House and its Contents during Probate
Valuing the deceased's home and its contents is an important part of the Probate process. During the administration of the Estate, you'll need to keep a record of how much money comes into and out of the Estate so that you can settle outstanding debts and calculate how much inheritance the Beneficiaries are entitled to.
These valuations will also enable you to calculate whether the Estate is liable for Inheritance Tax and, if so, how much. This information will then need to be submitted to HM Revenue & Customs. The value placed both on the house and its contents will need to be reflective of their realistic selling price on the open market at the time of death.
Valuing a house and everything inside it is no mean feat, but there are set processes that you can follow to make it as straightforward as possible. By following these processes, you can also reduce the risk of HM Revenue & Customs disputing any of the valuations you provide to them.
How to Get a Probate Property Valuation
When calculating the value of a house, a flat or land for Probate, it's important to consider a number of factors that could affect how much it's worth. These might include development opportunities on the land, repairs required to the property and recent sales of similar properties in the area.
You might assume that the best place to go for a property valuation would be the local estate agents. However, if the Estate is liable for Inheritance Tax then it's a good idea to obtain a valuation from a Chartered Surveyor instead. A Surveyor will have the experience and knowledge required to provide a valuation specifically for Inheritance Tax purposes, so it is more likely this valuation will be accepted by HMRC.
The property valuation is potentially subject to examination by the District Valuer Services (DVS) of HMRC to ensure that it is accurate. If they feel that the valuation is not correct, they will challenge this and request evidence to support the valuation given. If HMRC believes that the Executors of an Estate have been 'negligent' in how they have obtained the property valuation, then they could impose financial penalties on them. If an Executor finds that the valuation they have provided to HMRC is too low, they will need to write to HMRC to inform them of the correct value.
If the deceased person's property was owned jointly with someone else as joint tenants, then the value of the property should normally be divided by two to calculate the true value owned by the deceased. If their home was owned jointly with someone else as tenants in common, then the value will need to be calculated based on the deceased person's share in the property.
If the deceased person owned land or property which was shared with other people, the value of this will need to be divided by the number of owners. In this instance, once the value of the deceased person's share has been calculated, 10% can usually be deducted from this amount.
Calculating the Value of the House Contents
It can be difficult to know where to start when trying to work out the value of everything that someone kept in their home. Some treasured items which cost a lot of money when new may no longer hold much value, while other items might be worth more than you expect. Sadly, in many cases, the vast majority of the contents of a house will not hold significant value.
The first step in valuing a house's contents is to identify and list out any items that you think might hold value. Common items that are likely to hold value include cars, jewellery or furniture. The internet can be an indispensable resource when trying to place a value on these items. The best approach is to research how much similar items are being sold for, taking into account how the age and condition compares. If there is expensive jewellery which is no longer fashionable then you might find that this is worth more as scrap than as jewellery, so look into this if you suspect it to be the case.
It's important to bear in mind that the amount that an item is valued at for insurance purposes will be reflective of its value when new. It's likely, therefore, that older possessions will be worth less than their insured value for the purpose of Probate.
For more specialist items, such as antiques, valuable artwork or other collectibles it would be best to obtain a professional valuation from someone who specialises in these items.
If you do not want to value the contents of the house yourself there are companies that can do this for you for a fee. Alternatively, if you believe that the contents of the house hold no value and you need to clear the house in preparation for it to be sold, then there are also house clearance companies which can provide this service.
Calculate the Value of the Estate for Inheritance Tax
You will need to calculate the value of the Estate accurately if there's a chance that Inheritance Tax may be payable. Inheritance Tax will only be payable if the value of the Estate exceeds the nil-rate band. Currently this is £325,000. If the Estate is worth less than £250,000, it's usually sufficient to estimate its value. If the Estate is worth more than £325,000, Inheritance Tax may be payable, although there are other exemptions that you may be able to apply to increase this threshold.
When valuing the Estate for Inheritance Tax purposes, it's important to note that you will need to calculate the 'gross' value of the taxable Estate. This includes all assets owned by the deceased as well as any gifts (either cash or items of substantial value) that they had given away in the 7 years before they died. There can be other matters that affect the taxable value of the estate as well, such as any trusts in which the deceased person had an interest.
In addition to the deceased's home and its contents, other assets that will need to be considered might include money in bank accounts, pensions, investments, shares and life insurance.
With our Probate Complete Service we take full responsibility for getting Grant of Probate and dealing with the Legal, Tax (excluding VAT), Property and Estate Administration affairs*.
*We can also pay all the costs of a Co-op Funeralcare funeral, providing the Estate owns sufficient assets which can be sold in due course to repay our costs.
To speak with a Co-op Probate Advisor call 03306069584 or contact us online and we will call you.